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How China's “debt traps” work

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Re: How China's “debt traps” work

#121

Post by georgeecollins »

wheelerof4te wrote: post #75
Animats wrote: post #23

It'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…

"The majority of new properties in China — about 90% — are sold before being completed." - CNN" Not sure if this is some kind of joke. Many countries have laws that permit selling appartments when they are about 80% complete. Some have lower, some higher percentages. Just your average low-tier negative CNN propaganda, I guess.

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing the developer. That may also be the case in China. I don't know.

Re: How China's “debt traps” work

#122

Post by throwaway29812 »

slantedview wrote: post #2

It'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.

Really? What record does the US have leveraging aid for UN votes, political concessions, or just seizing ports and land?

Re: How China's “debt traps” work

#123

Post by georgeecollins »

creato wrote: post #88
kridsdale3 wrote: post #74

Earlier quoted context omitted.

It seems like everything you said applies to Airports as well. Hardly any of them are anywhere near where you'd actually want to be (city center). Over the decades, the infrastructure will build up to connect the airport to the city. In my home (Vancouver) they weren't connected by a train for 73 years. Airports of course also have enormous 'processing' time. It's normal to arrive 2 hours early.

Airports often replace multiple days of travel via other means though. In that context, 1-2 hours isn’t a big difference.

Also, airports are really loud and smoggy. They depress real estate prices near by. In California there are lots of small airports that could have been turned into bigger ones but the neighborhoods don't want it.

Re: How China's “debt traps” work

#124

Post by jorts »

acyou wrote: post #98

Our USA global empire from 1945 to present invests mostly in resource extraction in poor and underdeveloped countries. Aid comes in the form of providing food and medicine, probably the worst help that could be given to countries with virtually no infrastructure. China pays for infrastructure to be built of the type and scale in countries that haven't seen this type of investment since their respective post-war expan…

The US is clearly investing in its infrastructure [1]. [1] https://www.whitehouse.gov/build/

Re: How China's “debt traps” work

#125

Post by anon84873628 »

acyou wrote: post #98

Our USA global empire from 1945 to present invests mostly in resource extraction in poor and underdeveloped countries. Aid comes in the form of providing food and medicine, probably the worst help that could be given to countries with virtually no infrastructure. China pays for infrastructure to be built of the type and scale in countries that haven't seen this type of investment since their respective post-war expan…

As the article states, China does not actually invest in these projects. It simply finances them by providing loans.

Re: How China's “debt traps” work

#126

Post by georgeecollins »

pphysch wrote: post #25

For 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.

I think it is true of Chinese development and western aid as well that the rich country gets the blame. The poor country is sometimes corrupt or ineffective. They could also say no.

Re: How China's “debt traps” work

#127

Post by seanmcdirmid »

georgeecollins wrote: post #121
wheelerof4te wrote: post #75

Earlier quoted context omitted.

"The majority of new properties in China — about 90% — are sold before being completed." - CNN" Not sure if this is some kind of joke. Many countries have laws that permit selling appartments when they are about 80% complete. Some have lower, some higher percentages. Just your average low-tier negative CNN propaganda, I guess.

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing the developer. That may also be the case in China. I don't know.

You can sign a contract to buy a house from a developer before it is built. No bank will give you a mortgage before the house is built (even if they give you pre-approval), but of course you could pay in cash if you had that and wanted to (taking risk that the builder might go out of business and you will be SOL).

Since most people buy homes with mortgages, most homes in the USA aren't bought before they are built.

Re: How China's “debt traps” work

#128

Post by xenadu02 »

georgeecollins wrote: post #121
wheelerof4te wrote: post #75

Earlier quoted context omitted.

"The majority of new properties in China — about 90% — are sold before being completed." - CNN" Not sure if this is some kind of joke. Many countries have laws that permit selling appartments when they are about 80% complete. Some have lower, some higher percentages. Just your average low-tier negative CNN propaganda, I guess.

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing the developer. That may also be the case in China. I don't know.

For US residential homes the bank has set milestones where they release funds. If the developer leaves the house half-built they only get half-paid (give or take). A similar thing applies to renovations.

Banks can and do refuse to pay until things are completed and city inspections pass the work. Could a city inspector collude with a bank and developer to rip off customers? Sure... but even if that happens it can only be small scale. The odds of the scheme collapsing increases exponentially with every additional city/bank/developer participating.

Politically China works differently. I'm sure there are plenty of developers doing good work. That clearly must be the case - not every building is a pile of garbage. But being a more centralized single-party state with state-owned banks the opportunities for shenanigans is obviously higher. It may also be driven by how much local budgets are influenced by new projects rather than ongoing property taxes. There is an incentive to approve projects and it is embarrassing to admit we should be tearing down the new building because everyone involved cut massive corners... that might also scare off new customers for the next project. Better to cover everything up and keep the scam going.

For that matter state owned banks from any country are well-known for perpetually extending loans rather than admitting the loan is garbage. This is not unique to China nor news to anyone.

Re: How China's “debt traps” work

#129

Post by beebeepka »

0xDEF wrote: post #116
beebeepka wrote: post #72

Earlier quoted context omitted.

What do you mean our views are opposite? I am Bulgarian and I very much agree with you that we need an actual European army. Now, you can always assume I only say this because I live in a poor country that everyone pushes around. But when we zoom out a bit, the same could soon apply to the entire continent. We are not united and that's bad for all of us because our competitors are more much bigger and better integrat…

I was thinking in terms of Ukraine, Russia etc. Hungary, Bulgaria, and Slovakia have very pro-Russian populations according to opinion polls.

Well, I don't know about the others in your list but russian propaganda is very strong here but even those who "support" them wouldn't want to live there, if you know what I mean. It's more of anti US thing than pro-Russia things.

I guess people don't like hegemonies unless they greatly benefit from them. Go figure.

Re: How China's “debt traps” work

#130

Post by jncfhnb »

reisse wrote: post #34
Animats wrote: post #23

It'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…

> The residents not only paid down payments, but took on a mortgage obligation for an un-built building. So what? They had a choice between paying more money for already built house now or paying less money but accepting the risks of developer's failure. > This produced a terrible incentive for developers to do huge numbers of housing starts and then not finish the building. Ugh, it's not like venture investing when…

The construction companies promised to build houses and funded the construction with sales of promises to build more houses. Now real estate is crashing, and the construction company is going bankrupt, and you’ve got home buyers who are underwater on a mortgage for a house that is not built. The construction company has billions in unearned revenue that it cannot afford to deliver on.

This is an absolute nightmare. Hundreds of billions of dollars in liability. And somehow getting the funding to complete these works will not improve their financial standing because they already took all the money for it.

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