China's investment strategy of throwing money at developing countries appears to have hit a snag in the Republic of Congo as the central African nation is seeking an IMF bailout.
While the funding it provided to Congo wasn't part of the Belt and Road Initiative (BRI), which China was promoting this week, it serves as a cautionary tale of the trouble Beijing could face with its plan for massive investments in maritime, road and rail projects across 65 countries from Asia to Europe and Africa.
When the plunge of global oil prices in 2014 blew a hole in the Congolese government's finances, it was China that stepped in to help.
But despite the recovery of oil prices, the country, also known as Congo-Brazzaville, has had trouble getting back on top of its finances and has asked the International Monetary Fund for help.
The IMF places conditions on its loans to force governments to take measures to boost their finances. In addition, as the IMF can only lend if it judges that a country's debt load is sustainable, a bailout may be accompanied by a restructuring of government debt.
"It's certainly the first time China has found itself confronted with this kind of situation," said a specialist in relations between China and Africa who asked her name not be used as the discussions with IMF were still underway.
"The Republic of Congo is seeking IMF protection in order to avoid a possible default on its payments," she added.
"China, which holds more than a third of its foreign debt, is not really comfortable with that."
China lending full-tilt
Julien Marcilly, chief economist at Coface, a firm that provides payment insurance for French companies, said that China "went full-tilt on lending in recent years, often to countries which produce and export raw materials, in particular oil."
It is only now that "Beijing is beginning to realise that problems can build up", in particular after Venezuela defaulted.
The situation is all the more worrying as the Republic of Congo in 2005 was one of the countries that benefited from an international debt relief initiative for the world's poorest countries.
Its foreign debt was bought down from 119 per cent of annual economic output to just 33 per cent.
But like other oil-producing nations, Congo-Brazzaville took a beating from the 2014 plunge in oil prices.
"It was an expected and very brutal drop in prices, which was ironically linked to a slowdown in China," noted Marcilly.
The drop in oil prices meant the nation's economic output dropped by 50 percent. As a consequence, its debt as a percentage of GDP soared to 110 percent in 2017.
About one-third of the country's debt is in Chinese hands, or about $2 billion, said the specialist in relations between China and Africa.
The Congolese government reached an agreement with IMF negotiators a year ago, but the terms need to be approved by the IMF's governing board.
One year later, the deal has yet to be approved.
A French source confirmed that the IMF programme is contingent on Congo-Brazzaville's debt becoming sustainable, which means that a deal has to be reached with China on cutting the amount owed or pushing back payments.
However it would be unusual for Beijing to do this. When Sri Lanka was unable to repay its loans it was forced to turn over a deep-sea port to China for 99 years.
The IMF and China both declined to comment when contacted by AFP.
IMF hemmed in
It will be tricky for the IMF to find a compromise.
Last year a group of US lawmakers urged treasury secretary Steven Mnuchin to use his influence at the IMF -- where the United States holds the most voting rights of any nation -- to block bailouts of countries that were too heavily indebted to China.
"For the United States it out of the question that the IMF rescues a country that is in debt to China," the specialist said.
With the IMF sticking to its long-held position that debt must be sustainable at the end of a rescue programme so it gets repaid, the situation was blocked.
Until a mid-April meeting of IMF leaders, the question of Congo's debt to China was only being discussed between the two nations.
A Congolese source told AFP on the margins of the meeting that "China made efforts, we're making progress."
She added it was hoped the rescue programme could be approved at an IMF board meeting in June.
"We understand that things are moving along a good path, but it hasn't been signed yet," a French source said.
France has prioritised increased transparency on lending to developing countries during its G7 presidency, particularly those in Africa where France still backs the CFA franc.