So if this is all accurate we should see a decline in new BRI projects and a preference for IMF and World Bank financing over institutions where China plays a larger role like the NDB. Let’s wait and see.
That's already noticable... why wait?
How China's “debt traps” work
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Re: How China's “debt traps” work
#22So if this is all accurate we should see a decline in new BRI projects and a preference for IMF and World Bank financing over institutions where China plays a larger role like the NDB. Let’s wait and see.
Because it's mostly distressed lending, the preference is almost entirely on the lender not the borrower. IMF loans are required to be fairly transparent, while B&RI have so far been opaque (not clear what the terms, payment priority, or valuation of projects as collateral). The IMF won't even lend to countries where the lending would be used to pay off other creditors (since that's a transfer between creditors). It's unclear what China's response will be if the projects they claim are then nationalized (dams, ports and railroads are likely to be considered national infrastructure). Decisions to accept loans aren't made by the population that will pay and when governments change so do priorities.
Since there's already a China debt problem (and ROI problem) though, it's more likely the loans just dry up. That already started in 2017 (see graph in article).
Re: How China's “debt traps” work
#23It's not just internationally. China has done that to its own people. Or worse. Look at Evergrand and Sunac.
The government of China let developers sell un-built apartments to future residents. The residents not only paid down payments, but took on a mortgage obligation for an un-built building. "The majority of new properties in China — about 90% — are sold before being completed." - CNN. This produced a terrible incentive for developers to do huge numbers of housing starts and then not finish the building.
In most of the rest of the world, developers have to finance construction with their own money or a high-interest construction loan, then sell the completed building. This gives developers a strong incentive to finish the job. Building quality control is often a problem, but unfinished projects less so.
Re: How China's “debt traps” work
#24"David Graeber: Oh, absolutely. After all, the alter-globalization movement grew out of a broad global reaction to the Washington consensus, which was never any sort of consensus, but rather, a vision of the world forcibly imposed on the global South through the third world debt crisis. I was involved in “drop the debt” campaigns of various sorts since at least 2000. What got me interested in some of the philosophica…
Of course, the US is widely known for repossessing airports[1], seaports[2], and railways[3], then displacing local workers by flying in your own people. That totally happens all the time - its just that US biased media hiding it from you. The era of this kind of lazy anti-Westernism is over, China is only out for itself, and it will drag countries into its sphere of influence any way it can. "But what about this ame…
I share your animus against China, and, lacking the original context, I can see why the post you replied to looks like a defense of China, but I did not interpret it as such. Simply a correction of the too-often-ignorance of the IMF.
Re: How China's “debt traps” work
#25For those who are curious about a serious analysis of China's foreign development policies, rather than a misinformational blog post:
https://www.chathamhouse.org/2020/08/debunking-myth-debt-tra...
That one is from 2020 but there are a lot of serious people looking at these complex issues.
Re: How China's “debt traps” work
#26I guess the Chinese also read Confessions of an Economic Hitman by John Perkins.
Except if you read the article it's arguing that the opposite happened. >Note that although this is a debt trap, it isn’t really a case of “debt-trap diplomacy”, as some people accuse. Debt-trap diplomacy is where you get a country to owe you money, and you force it to make geopolitical concessions in exchange for loan forbearance. China doesn’t appear to be doing that; instead it appears to simply be walking away wi…
Hmm perhaps they should ready it more carefully then, like they did with 1984.
Re: How China's “debt traps” work
#27For those who are curious about a serious analysis of China's foreign development policies, rather than a misinformational blog post: https://www.chathamhouse.org/2020/08/debunking-myth-debt-tra... That one is from 2020 but there are a lot of serious people looking at these complex issues.
“As a Kenyan official put it: Every time China visits we get a hospital, every time Britain visits we get a lecture.”
Re: How China's “debt traps” work
#28It's not just internationally. China has done that to its own people. Or worse. Look at Evergrand and Sunac. The government of China let developers sell un-built apartments to future residents. The residents not only paid down payments, but took on a mortgage obligation for an un-built building . "The majority of new properties in China — about 90% — are sold before being completed." - CNN. This produced a terrible i…
Not in India, developers can sell before building but the money is in an escrow and released as the construction progresses. Also penalties and interest on any delays. I don't think selling unbuilt buildings is the bad thing, it's having no regulations or protections alongside that.
https://en.m.wikipedia.org/wiki/Real_Estate_(Regulation_and_...
Re: How China's “debt traps” work
#29It's worth pointing out that debt trap diplomacy was pioneered by the US backed IMF. While China has been exploitative, it goes without saying, that the US has been even moreso.
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The article is about "global leadership". There has been 1 example of true global leadership so far in human history, based in Washington DC. To judge the flaws of a prospective new global leadership without reflecting on how they relate to the flaws of the only precedent is absurd.
What is the point of reference???
"This car sucks because it doesn't fly"
"My new MacBook sucks because it can't run local GPT-4 inference"
Re: How China's “debt traps” work
#30It's not just internationally. China has done that to its own people. Or worse. Look at Evergrand and Sunac. The government of China let developers sell un-built apartments to future residents. The residents not only paid down payments, but took on a mortgage obligation for an un-built building . "The majority of new properties in China — about 90% — are sold before being completed." - CNN. This produced a terrible i…
There's something very powerful behind incentives level thinking, it really does push you into second and third order effects and meta level interactions to think "if this then what next". I've been wanting to step up my level of engaging and contemplating incentives in the generic.