Developing countries owe Chinese lenders at least $1.1 trillion, according to a new data analysis published Monday, which says more than half of the thousands of loans China has doled out over two decades are due as many borrowers struggle financially.
Overdue loan repayments to Chinese lenders are soaring, according to AidData, a university research lab at William & Mary in Virginia, which found that nearly 80% of China’s lending portfolio in the developing world is currently supporting countries in financial distress.
For years, Beijing marshalled its finances toward funding infrastructure across poorer countries – including under an effort that Chinese leader Xi Jinping branded as his flagship “Belt and Road Initiative,” which launched a decade ago this fall.
That funding flowed liberally into roads, airports, railways and power plants from Latin America to Southeast Asia and helped power economic growth among borrowing countries. Along the way, it drew many governments closer to Beijing and made China the world’s largest creditor, while also sparking accusations of irresponsible lending.
If you owe the bank $100, that’s your problem. If you owe the bank $1.1 trillion, that’s the bank’s problem.
Except this bank has an army
Which they are more then free to deploy… at a cost.
Sadly any country is going to have to weigh the cost of war, the cost of losing that war, the cost of losing personnel/equipment in that war, and the cost of basically ruining the physical assets they are trying to collect due to sabotage, collateral damage, misfires, and “misappropriation.”
Sadly by the time they are done, the market value of those assets would be purely theoretical at best, if any value at all.
So it doesn’t make sense for a country like China to invade the greater portion of Africa. But they might try sting operations, or devaluing of African assets within their own market to put pressure.
The risks being that the “belt and road” initiative might fall through too whatever the choice.
China don’t need to deploy their army. They can simply threaten to cease all trades. No countries can afford to stop trading with China since practically everything are manufactured there. Even Taiwan, China’s mortal enemy, still trades with China.
You make a good point. Everyone likes to think they can just switch production to India or Vietnam but they have no idea how large the manufacturing industry is there. No other country could replace it or match their speed. All those quality items you like have components or are entirely made in China.
doesn’t make sense for a country like China to invade the greater portion of Africa
No, so they just appropriate the places they cared about with their investments from the start, such as rare earth mines.
You can fight and win wars without ever setting foot in another country.
Except this bank has an army
And likes to claim territory that isn’t theirs.
More like if you owe the mob $100 and you fail to pay, you might get a broken finger. If you owe the mob $1 million and fail to pay they will gift you cement boots.
Is this actually true. The more someone owes the less likely you are to outright kill them cause that’s a 100% loss on your investment. Brutal torture or kidnappings seem more likely to me. After that organ harvesting or forfitting assets.
It’s more about sending a message to everyone else.
Outside of the movies? Not really. Not actually sure of the change in death rates in owing a small amount vs a large amount but loan sharks breaking limbs borrowers’ or offing was actually pretty rare from what Steven Dubner or Leavitt found (can’t remember which). Although my great uncle Michael might disagree with that finding. But nobody has seen him since he did not pay back that large loan he took from the mob in the 70s.
That said, there are other ways to put pressure on a borrower that do not permanently decrease productivity. A borrower has a bigger incentive to pay things back if a loved one’s life is on the line. That might explain great uncle Michael’s disappearance since he was pretty much disowned by the rest of the family.
Those are expensive cement boots for both the mob and that poor dude.
Well the accusations of irresponsible lending are just American fud… that money was a diplomatic expenditure.
But China seeking to aggressively recoup it does speak of economic desperation.
I don’t know whether this should be hastily dismissed as “FUD”: Do you want to live in a world where all of your country’s critical infrastructure is owned by Chinese state-owned corporations as soon as your government can no longer service its loans to Beijing?
… The situation is certainly not entirely comparable, but since the start of the Russian war of aggression against Ukraine, we have seen the problems Germany has had with the fact that its gas storage facilities belong to Gazprom…
I mean… Is it somehow better to not have that critical infrastructure?
China doesn’t really want to integrate new territories. They’re basically just trying to reclaim the territorial lines from the Qing Dynasty (which China sees as “rightfully Chinese” and which was “stolen from China by the British and the Japanese during the century of humiliation”).
Remember that neither China was invited to discussions on the Treaty of San Francisco for Japanese war reparations…
Aggressively recouping your over leveraged junk loans is indication of economic health?
laughs in wells fargo
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Gonna see Chinese junk bonds hitting the shelves at Walmart… Lol
Hey! Thats the IMF’s job :(
Yes that’s why it strange that a communist county is doing it, no?
The PRC isn’t a communist country at this point. Clearly. Like, by virtue of this article existing in the first place. Debt is a capitalist concept.
They’re just using our own capitalism against us (by us I mean “the West”).
Not really. “Transition state” stuff aside there’s nothing inherently wrong with loaning resources for infrastructure programs.
Where it goes sticky is the interest rates and defaults.
People have largely assumed China was just doing the same neo-colonialism the West was, because they just can’t fathom the idea of not exploiting the vulnerable.
Now we will see if they’re right. And even then it’s perfectly Marxist…
Remembering that Marxism explicitly allows conquest as “liberation of the proletariat,” which can easily include American-style permanently leased foreign ports.
Better then borrowing from the IMF
This is the part where the liberals assure me China’s evil plan of checks notes helping build infrastructure in the areas of the world ruined by colonialism while using a more generous lending scheme than the competition leads to them annexing half of Africa, somehow.
Is there a list with the amount these developing countries owe to China? edit: found it https://docs.aiddata.org/reports/how-china-lends.html#appendix
I always find it odd that in these reports, nobody writing them is Chinese.
There’s a lot of subtlety in Chinese language and culture that gets completely missed in these studies by someone who isn’t native.
What happens if countries just default? Do non-Chinese lenders care? Does it trash bond ratings across the board?
I think in many cases China takes control of the infrastructure they built since the countries miss payments.
This was widely predicted to be the Chinese strategy: make loans to countries they knew could not pay with favorable terms for China when the country defaults.
That would involve these nations honoring their business dealings, which they don’t seem willing to do.
Is China going to invade and occupy nations who don’t comply?
I guess we’ll see. Might not be a bad result for the nations, honestly. Supporting Chinese military bases might stimulate their economies.
Lmao the delusions. You can’t not commerce with China if you are a developing country. Not honoring the contracts would mean an absolute destroy of any of the developing countries economies. Don’t give opinions on shit you don’t know about.
Calm down. Your argument looks weaker when you fill it with insults.
Gonna block you now. Learn to conduct yourself in a respectful manner.
If you aren’t capable of understanding the context of different words thats on you buddy. Good luck creating your own little eco-chamber.
It’s obviously been a debt trap from the start. Is anyone really naive enough to think China was building up Africa’s infrastructure out of the kindness of their hearts?
Infrastructure often isn’t very profitable directly - the benefits of infrastructure are mostly in the second and third order effects.
If I could build a subway in my country without using my own money, of course I would. They can take the fare revenue.
It happened in Sri Lanka a while ago. China financed the construction of a new deep water port. The port is finished, but Sri Lanka can’t service the debt so the new port is now under China’s control (99 years lease agreement).
Oof. I wonder how that will work in the case of infrastructure like roads and bridges–long term tolls? At some point it has to eat away at whatever good will the Chinese were trying to buy.
If you let them build military bases and run dubious assorted operations they are actually quite reasonable with repayment plans.
Source: am Australian
Honestly, sounds like a pretty good deal? You now get access to a port and all the economic advantages that provides, but you don’t have to actually fund operations for it.
That’s a fucking bargain. If I could build a subway with someone else’s money in exchange for them taking all fare revenue, sign me the fuck up.
The thing is, Sri Lanka already have a deep water port before building the new one. They expected the new port would bring extra revenue, but turns out it’s not the case. The amount of ship docking in Sri Lanka doesn’t increase and they mostly use the old port. If the amount of ship docking in Sri Lanka stay stagnant and China managed to convince them to use the new port instead of the old one, then Sri Lanka may actually got even more fucked than currently is.
Then it literally doesn’t matter? China takes over the new port, nothing changes essentially.
It does matter for two reasons: if ships traffics stay stagnant but they prefer to dock in the new ports, Sri Lanka will get less money from port fees even though the transfer of goods stay the same. Also, China is known to employ their own people, bringing them over from the mainland, even for menial low wage jobs. This means less job opportunities for the locals around the new port.
The Port of Colombo is already operating at it’s 7m TEU capacity: 6.84m in 2020, 7.25m in 2021 and 6.86m in 2022. All this during a global recession and as the appreciating USD basically exports inflation abroad.
If your operating under the assumption that Sri Lankan growth is doomed, no wonder you’re so negative. It’s frankly a silly way to look at things: if a New York subway is operating at capacity and not seeing growth in ridership, do you just say “well, ridership is staying stagnant so adding a new subway line is just going to shift riders around and thus is not worth it.”
It’s a bad perspective for a developed country, but it’s even worse for a developing country that’s relying on increased trade to pull people out of poverty and improve quality of life. Those are the factors that matter. If Sri Lanka can’t increase trade volume, they’re super fucked and having one less port leaves them still super fucked. If Sri Lanka CAN increase trade volume, having one more port is obviously massively beneficial regardless of where the money goes (nevermind that port fees for the first decades of operation are often used to offset the capital cost of construction). Essentially, you’re picking up pennies in front of a freight train.
Well, every news piece I read about this seems to paint Sri Lanka economy as doomed. It’s good if they’re actually growing and the deal won’t negatively affect their growth in the long run.
China now has a Hong Kong in Sri Lanka? Weird
There is bad imperialism :C
And good imperialism :D
Lemmy knows which one to defend ;D
When the US builds an oil export terminal in Nigeria, the location is fully privatized and administered by western nationals. There’s no path from the dockyard to the manager’s office. There’s no state interest in the facilities, save some meager tax revenue that’s shaved to the bone by accounting tricks. There’s no Nigerian retirees who get to profit off the dockyard’s operations through pensions or 401ks. The ports are export-oriented, with the intention of taking Nigerian natural resources out.
When a Chinese state enterprise builds a dockyard in Kenya, there’s shared ownership out of the gate. Kenyans share managerial roles. Kenyans share equity. The Kenyan state government gets a huge boost in revenues. And the ports are bidirectional, with Kenyan locals getting to benefit from cheap Chinese imports - particularly high tech imports like electronics and motor vehicles - as Chinese firms export Kenyan minerals.
Bi-directional trade is how the old English colonies worked, too. And that trade made English colonial enclaves incredibly prosperous both for the old world mercantilists and the new world plantation bosses. Its a lucrative model for everyone on the inside track.
The worst thing you can say about China is that they’re simply doing imperialism better than the Americans.
Wait until I tell you that the US is indebted to Japan for that same amount ($1.1T) and to China for nearly that amount ($0.9T). Sure it’s a bigger portion of the available funds in the developing world, but on the scale of superpowers, it’s not so much.
The difference is leverage. Having $0.9T of US treasury bonds does not give China much leverage over the US because those would likely be absorbed by other countries fairly easily. Yeah, the dollar’s value would likely dip a tiny bit but nothing catastrophic. That is much different than China having a large chunk of a developing nation’s debt. Developing nations constantly have issues getting decent terms on their loans so if China up and says they will not roll the loans over into a new one, the country likely has to try to finance the debt at a much higher interest rate or have lots of strings attached. China has much more leverage in these cases.
China loans out USD because they have a USD surplus. USD is pretty fucking liquid lol
