After Doling Out Loans, China Is Now Bailing Out Countries | Hacker News Reader

After Doling Out Loans, China Is Now Bailing Out Countries

nytimes.com

29 pointslxm28 comments

China already earned these loans back, because most of it was used for ... Chinese workers and not local ones. ( Exporting excess Chinese building capacity, because the internal market struggled).

Most of these infrastructure projects weren't needed in the first place and just didn't generate any revenue for those countries.

Those workers still needed to be paid and supplies needed to be procured. They could have used those resources else where, except construction in China is a huge jobs program for the lower middle class and isn’t really run very efficiently to begin with.

Those countries actually do need infrastructure, but not necessarily prestige projects like a new fancy airport that no one wants to use.

China picks which loans to give based on geopolitical importance. This is a fantastic way to wield soft power of the US, India, and other Eurasian countries. Moreover, it also reduces reliance on the dollar.

While increasing reliance on authoritarian countries?

This is the basis of "debt trap diplomacy" and was predicted a good ten years (more?) ago when China started with the "global silk belt road" program.

China is gaining 100 year (at least) leases on ports and ground stations around the planet, supplanting the UK as an empire on which the sun never sets.

Supplantinf the UK? I think you mean US?

The UK's time has has set long ago, and Brexit seems to make sure it will it won't prosper again soon.

I meant the British Empire upon which the sun never set .. except, of course, it did post WWII which is relatively recent history in the arc of world history and empires.

The connection here, of course, is Hong Kong - the thorn in China's side for a century and the blueprint for long term lease | treaty agreements over territory abroad nailed to China after foreign meddling and Opium Wars, etc.

As for the US, sure, they have a global span of ports, ground stations and 'temporary' military occupations | bases as yet not given back - but they and China will be co-existing as globe spanning world powers for some decades to come, much to the chagrin of the "We're Number One" crowd.

How are they going to deal with their demographic collapse?

This is the McKinsey strategy in action. That consulting company laid out how to do it, then seeded all their other consultation gigs with "you've got to outsource to China."

We tend to think of "soft power" as "They watch our TV and eat our fast-food franchises, so they'll implicity love us." Did we underestimate the soft power of actual wads of limited-strings-attached cash?

This is a pretty obvious and direct way to buy friends, and it seems odd the West can't figure out how to execute it just as efficiently. Maybe it's not considered an option because it provides neither a punitive angle nor a lever to demand privatization and austerity measures. Maybe the state can't lean hard enough on the bankers to get them to cooperate with the plan.

It costs money? Most democratic countries have issues giving away too much money in foreign aid, especially given the budgetary deficits the vast majority of countries are running nowadays.

China doesn’t have to deal with any of that, the government can spend money with very little oversight.

If we didn't have such siloed mindsets, you'd expect that foreign aid would come right out of the limitless "national security" spigot.

How many incredibly expensive "peacekeeping" and "regime change" adventures could have been prevented by removing debt burdens that were preventing countries from stabilizing and advancing up the economic food chain 5-10-20 years prior?

Pretty much all of them.

The US doesn't have a great record on use of diplomatic soft power, it appears from afar that military hardware lobbyists achieve their goal of getting at least a factor of 10x more spent on war toys than on diplomatic programs that would circumvent the need to use said toys.

( I suspect the overspend factor on hardware Vs HR approaches is way more than 10 )

I'm remembering the literal pallets of cash that were flown into Iraq and then vanished.

But Afghanistan shows the problem with buying loyalty and the impression of stability: as soon as you stop paying, it evaporates overnight.

The deeper problem is that the US isn't actually all that good at institution-building, rule-of-law, dealing with ethnic conflict, etc. within the US.

Well the suspicion a few years ago was that China was loaning out money to developing countries for infra projects hoping to get them over a barrel down the road. Super high repayment costs seized assets perhaps.

Much was written about this and the western governments even sounded the alarm on taking Chinese loans.

https://archive.is/WL692

As the saying goes:

If you owe someone $100 l, that is your problem. If you owe someone $100 Billion, that is their problem.

My guess is that the Chinese economy cannot afford to have those loans go bad so they need to do a bailout. This is a move of desperation, not a move of dominance.

China bet Africa was the future, and while China might be early, early is the same as wrong if you can’t stay solvent until your investment is liquid (China economy slowing, manufacturing moving elsewhere, rapidly aging population, etc).

The Chinese banks that made the loans can’t take the losses on their balances sheets, even if they are state owned their shares are traded on the market (and SOE debt is technically not counted as national debt), so a bail out has to occur at least on paper.

Doubt that public traded banks made these kind of loans. Policy banks are not public traded.

? That share market in china is a inhouse market, and completely state-controlled. There is no "free" market as in its public and free of influence. It already collapsed once and was propped up.

not the point. just like svb, ownership is only relevant to how management is incentivized by how compensation (monetary and otherwise) is structured.

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