Add thelocalreport.in As A Trusted Source
Despite Washington’s long-standing warnings to other countries against accepting loans from Chinese state banks, the United States has emerged as the largest recipient of such financing, a new report shows. The security and technology implications of this widespread financial entanglement are not yet fully understood.
Over the past quarter-century, Chinese state lenders have invested an estimated $200 billion in American businesses. However, many of these loans were kept secret, their origins deliberately obscured through shell companies in the Cayman Islands, Bermuda and Delaware, according to AidData, a research laboratory at the College of William & Mary in Virginia.
More worryingly, a significant portion of this loan helped Chinese companies acquire stakes in American enterprises. These acquisitions often target critical national security and technology sectors, including robotics manufacturers, semiconductor firms, and biotechnology companies.
The report reveals a far more extensive and sophisticated global credit network than previously thought. This web of financial obligations extends beyond developing countries, to rich countries such as the UK, Germany, Australia, the Netherlands and other key US allies.
“China was playing chess while the rest of us were playing checkers,” said William Henagan, a former White House investment adviser, who worries that the hidden loans have blocked China’s access to technologies. “Wars will be won or lost based on whether you can control the products critical to driving the economy.”
While the US still welcomes most foreign investment – and the President donald trump This has fueled – Money from China has drawn particular scrutiny as the world’s two largest economies fight for global dominance with opposite ideologies.
Deals financed by China’s state-owned banks, studied in the EdData report, are particularly problematic. The lenders are regulated by China’s central government and the Central Financial Commission of the Communist Party, and are directed to pursue China’s strategic goals.
Overall, the AdData report found that China contributed more than $2 trillion in loans worldwide from 2000 to 2023, double previous estimates and a surprise even to longtime analysts of China’s rise. And most of the loans to wealthy countries focused on critical minerals and high-tech assets – the rare earths and semiconductors needed for fighter jets, submarines, radar systems, precision-guided missiles and telecommunications networks.
“The US, under both (former President Joe) Biden and Trump, has been beating the drum for more than a decade that Beijing is a predatory lender,” said Brad Parks, executive director of AidData. “The irony is so rich.”
Until now, a full accounting of China’s state debt has never been published because most of the financing is hidden under layers of secrecy, hidden by Western-sounding shell companies and mislabeled as ordinary private financing by international databases.
Scott Nathan, the former head of the US International Development Finance Corp., an agency established in Trump’s first term to invest in overseas projects deemed to be in America’s national interest, said, “There is a complete lack of transparency that explains the extent to which China goes, whether it’s through shell companies or confidentiality agreements or curtailments, that makes it extremely difficult to come up with the full picture.”
Since the last documented debt reported in 2023, US investigations have improved. Screening mechanisms to protect sensitive sectors in the economy, such as the Interagency Committee on Foreign Investment in the US, were strengthened in 2020.
But China has also gotten better at setting up banks and branches abroad – more than 100 in recent years – which then lend to offshore entities, making the origins of the money even more murky.
“In places where there are more cops on the beat,” Parks said, “he has found ways to remove barriers to entry.”
Chinese state bank financing has influenced projects across the US, particularly in the Northeast, the Great Lakes region, the West Coast and the Gulf of Mexico, which Trump has dubbed America’s Gulf. According to the report, many of the loans targeted important high-tech industries.
– For example, in 2015, Chinese state-owned banks lent $1.2 billion to a private Chinese business to buy an 80% stake in Ironshore, a U.S. insurer whose clients included Central Intelligence Agency and Federal Bureau of Investigation officials and undercover agents who might need help paying legal bills if they got into trouble with their jobs.
According to the report, US regulators were unaware of the Chinese government’s involvement because the financing was conducted through a Cayman Islands business that had no apparent ties to China. US officials later realized that the Chinese government could access the information and ordered the Chinese buyer to divest.
– That same year, the Chinese government published “Made in China 2025”, a list of 10 high-tech sectors such as semiconductors, biotechnology and robotics, where it wanted to reach 70% self-sufficiency within a decade. The following year, in 2016, the Export-Import Bank of China, a policy bank, provided a $150 million loan to a Chinese company to help it buy a robotics equipment company in Michigan.
According to AdData, after China adopted the Manufacturing Master Plan, the percentage of projects targeting sensitive sectors such as robotics, defense, quantum computing and biotechnology in China’s portfolio for cross-border acquisition loans increased from 46% to 88%.
– In 2017, a Delaware private equity firm tried to buy a US chip maker using a Cayman Islands company; The deal was blocked when investigators discovered that both companies were owned by a Chinese state-owned enterprise. The same Delaware company had successfully bought a British semiconductor manufacturing company, which it had to sell when British authorities found out.
– And in 2022, the UK forced a Chinese company to sell another sensitive British firm in the industry, the designer of chips in Apple phones but potentially adaptable to military systems. The Chinese company bought it through a Netherlands company that they owned. That Dutch firm has now been accused of blocking semiconductors vital to automakers in the US-China trade war.
after money
To uncover China’s hidden debt, AdData examined regulatory filings, private contracts and stock exchange disclosures written in multiple languages in more than 200 countries.
Efforts to track China’s government lending and investment began more than a decade ago when Beijing launched its Belt and Road Initiative to build infrastructure in developing countries. The project expanded rapidly three years ago when the AidData team, which eventually grew to 140 researchers, realized that many of the loans were coming to advanced economies such as the US, Australia, the Netherlands and Portugal, where acquisitions could allow it to access the technology that Beijing sees as essential to its global rise.
The report said the findings show a shift in the use of state debt from promoting economic growth and social welfare to achieving geo-economic benefits.
“There is global concern that this is part of a concerted effort to gain control of the economic chokepoint and use this leverage,” said Brad Setser, an adviser to the US trade representative in the Biden administration. “It’s important that we understand what they’re going through, and they don’t make it easy.”