Panda Bonds: New Foreign Debt from China’s Dangerous Source

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The Egyptian Minister of Finance, Mohamed Maait, said that the government is issuing Chinese Panda bonds, allocated to the government and Chinese investors, after completing the process of offering “samurai” bonds given to the Japanese market, in an attempt to expand debt sources, despite the high risks that accompany bad reputation Chinese debt.

The Ministry of Finance revealed that it is currently in talks with Chinese officials to issue “panda bonds”, which are bonds denominated in the Chinese yuan. Its purchase is limited to the Beijing government and local investors, and interest rates are currently between 4 and 5%, as it is the second largest bond market in the world. The ministry indicated that the issuance of these bonds is intended to finance initiatives with a social dimension, on top of which is the initiative for a decent life, explaining that it has completed most of the procedures and is awaiting the conclusion of negotiations on the size of the issuance “soon.” This announcement comes amid local and international warnings of the so-called “Chinese debt trap” after Beijing seized many strategic and sovereign assets of countries that failed to pay their debts.

Mohamed Abdel Ghaffar, an economic researcher, explains, in an interview with (Egypt Watch), saying, “There are several proven facts that China has used the debt weapon to seize ports, airports, or strategic infrastructure, or at least take a right to benefit from them for an extended period, sometimes reaching up to 99 years, and that of the stumbled countries.

“Beijing’s strategy became clear after it seized the port of Hambantota in Sri Lanka after the government was late in paying its debts, as well as Kenya, China’s largest trading partner in Africa, which owes it about $6.5 billion, which represents 22 per cent of the total external debt,” Abdul Ghaffar added. When it defaulted on payment, the Kenyan government mortgaged Mombasa, the country’s largest port, to the Chinese executing company. Beijing had also loaned Djibouti an amount of 600 million dollars annually to develop the infrastructure, in return for total control of the Doraleh port for containers and goods, in addition to obtaining the privilege of establishing the first military base abroad, as well as Pakistan, where China acquired one of its strategic ports, The port has been called “Gwadar”, for 40 years, in addition to the company owning 85 per cent of the port’s revenues during this period.

Earlier this year, the Egyptian government issued “samurai” bonds allocated to the Japanese market, with a value of 60 billion Japanese yen, equivalent to about half a billion dollars, amid a severe debt expansion policy that made the importance of foreign debts jump to 165 billion dollars.