China Seeks Security Measures Amid $12 Billion Venezuela Loan Portfolio

China has initiated new negotiations with Venezuelan authorities to secure stronger repayment guarantees on its $12 billion in outstanding loans, according to regional financial sources. The loans, disbursed over the past decade, were primarily tied to infrastructure projects and oil-backed financing agreements. With Venezuela’s economy still under severe strain from sanctions and declining oil output, Beijing is now pushing for tangible collateral, including future oil shipments and state-owned asset pledges. The move underscores Beijing’s increasing caution in high-risk lending, particularly in nations with unstable fiscal frameworks. Reports indicate that the renegotiation includes a proposed escrow arrangement for 30% of Venezuela’s crude exports, to be held in a third-party account until debt servicing is verified. This mechanism would allow China to directly benefit from export revenues, reducing the risk of default. Loan servicing has been inconsistent, with Venezuela defaulting on multiple installments since 2022. The country’s oil production remains below 1.5 million barrels per day—less than half its peak levels—limiting its ability to generate foreign exchange. Analysts estimate that over $3.2 billion in principal and interest is overdue across the portfolio, representing nearly 27% of the total loan value. Market observers note that China’s demand for collateral could influence future lending behavior across emerging markets. If successful, the new structure may be replicated in other high-risk jurisdictions, signaling a shift toward more secured financing. However, the initiative faces political hurdles, as Venezuela’s government resists asset seizures and views the demands as a form of economic coercion.