What a weird headline. China isn't "calling in" the loans. Nothing sudden is happening here. They are following their preset repayment schedule.
The author is upset that China isn't willingly choosing to forgive billions in loans.
The author is upset that China isn't willingly choosing to forgive billions in loans.
Why would any country do that?
Needless to say, China is not exactly a pioneer in this space...
https://www.nytimes.com/2018/06/25/world/asia/china-sri-lank...
But basically because it’s not “those countries” giving those things away, it’s the corrupt kleptocrats who represent those countries which are giving them away in exchange for some personal gain. They don’t care about what it does the country because they can take their personal wealth and family to London or Miami and forget about it
It is a kind of economic warfare, you could say, except it’s completely legal to bet on some country lending and defaulting.
The loans were not made by special investment banks but regular banks of China, if they are not repayed it will be havoc.
They expect the loans to be repaid, and are definitely in trouble now that there are defaults.
Also the terms were less generous than IMF etc..
Also, everyone is aware that this could be the reality and of the outcomes.
In reality - China's loans were regular commercial loans made by regular commercial banks (don't get me wrong, at the behest of the CCP).
The amount of $ lent out is staggering and it's not going to come back and it's yet another gigantic problem for China.
And yes, in the end, 'ports will be seized' etc..
Also I think we should be cynical in that China has zero goodwill whatsoever, unlike I think the duplicitous goodwill of the West they don't care one bit and will absolutely dig their tentacles into poor countries in an attempt to control them.
Unlike Soviet policy which was based on defence and handouts, China is based on deeper economic integration and they uses their 'very cheap labour and zero regard for anything' to build a lot of stuff. Africa is getting roads and airports which will go a long way to providing cover for the local regimes.
It remains to be seen if they can keep this up, but I don't see it subsiding - China is in a very good position to provide 'very cheap stuff' to 'very poor countries' and lever that economic clout. India also uses it's 'serf population' as a form of geopolitical leverage, if you were wondering 'who build the Qatar stadiums' ... it was that.
It's right for us to be cynical but we can't be arbitrarily cynical, it's generally a bit more complicated, and unfortunately there is zero public discussion or anything in the media in North America, and not enough in Europe either.
Then there are the direct loans from those "forgiving" debtors (as per the article) which always come with all kinds of strings attached, political pressure to act as satellites, and policy change instructions.
China learned from the best.
They also force target countries to grow cash crops instead of wheat, for example. This forces the client country to become dependent on food imports, usually from the US.
I suggest you look up the IMF's track record. India had to use the IMF in the early 90s due to decades of "socialism."
We are long past that point, forex reserves were close to USD 600 billion last time I checked.
So there's no question of "cope."
For the same reason people get loans from the mafia and loan sharks: they are desperate.
Also because the political personel is encouraged (with "gifts") to go that way (as the loans come with strings that enable the plundering of the country's resources, which they supervise).
The IMF is a lender of last resort. Countries only go to it to borrow when they absolutely need money and have nowhere else to go. And for obvious reasons, when countries are in such desperate straits that literally no private or public entity will lend money to them, the IMF requires fairly stringent rules so their leaders don’t just pocket the money and run away, or don’t spend it on buying elections, as opposed to rebuilding the economy. The reason the IMF has refused to allow Pakistan to draw down money from its IMF loans is because under the Imran Khan govt they spent it on oil subsidies and allowing arbitrage on the Pakistani currency (interesting that if as you say the IMF is a tool used by the west to control countries, they are the ones saying no to a country borrowing from the country, while the country is going out of its way to get money from the IMF).
It’s not a surprise that countries that can literally not raise funds from any private or public entities are expected to endure financial restraint (since it was the lack of restraint that brought them there in the first place).
But the Belt and Road loans were not to desperate countries desperately looking for funds. The Belt and Road initiative was for countries, which at the time were financially stable. Their leaders figured that getting sparkly Chinese infrastructure investment would boost their re-election chances. And as a bonus, unlike the World Bank funds (which is the correct equivalent to the BRI loans), the Chinese didn’t require you to prove the economic viability of the projects, they didn’t require you to raise additional private capital for the project, and most importantly, the Chinese had absolutely no qualms about their companies personally bribing the leaders of the recipient companies tens of millions of dollars.
In return, all these countries’ leaders had to agree to was paying higher interest rates, not creating local jobs because the Chinese would export their own workers, and not building local businesses because Chinese companies would get all the contracts. But that was a future leader and citizens’ problem, while they could stash the cool Chinese payoffs in London and Dubai.
The BRI is sort of like a hybrid merger of the World Bank and the Asian Development Bank (in reality controlled and managed by Japan) aimed at LDCs in Asia+Africa which Japan+SK wouldn't touch (either because it's not within Asia, or it's not financially viable).
The same way the ADB would subcontract with Japanese corporations, you'd see BRI contract to Chinese corporations.
That said, the ADB tended to train+hire local staff, while BRI projects tended to mainly hire solely Chinese. And conversely, the ADB would add additional regulations+scrutiny into potential malpractices, malfeasance, and financial viability while BRI financed projects were much more lax with such compliance.
This is why JP+SK's FDI has been aimed at more mature markets like India, Indonesia, PH, VN, TH, MY, MX, BR while Chinese FDI is aimed at Laos, Cambodia, Central Africa, Central America, South Asia.
This is irrelevant.
> And as a bonus, unlike the World Bank funds (which is the correct equivalent to the BRI loans), the Chinese didn’t require you to prove the economic viability of the projects, they didn’t require you to raise additional private capital for the project, and most importantly, the Chinese had absolutely no qualms about their companies personally bribing the leaders of the recipient companies tens of millions of dollars.
May I ask, what is exactly your source for this? This really feels narrated. For one, IMF doesn't really invest in specific projects: https://www.imf.org/en/About/Factsheets/IMF-Lending
Neither does the parent poster claim they do. If I read the quoted part correctly, it only talks about the World Bank funds.
You'd be surprised.
>They always have the option of living within their means.
Yeah, if only their means weren't plundered for centuries by people from countries calling them to do so. Including their countries supporting the most corrupt (but friendly to their companies) politicians to get power there.
Was anyone forcing countries to take Chinese loans?