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How China's “debt traps” work

noahpinion.blog

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Re: How China's “debt traps” work

#131

Post by eunos »

csomar wrote: post #48

I've recently rode through a Belt&Road project: The Lao high-speed train. In my opinion, it shows the complete failure of the Chinese government. The high-speed train is a reasonably great train that goes through dozens (hundreds?) of mountains and rivers (through tunnels and bridges). It does that while enabling you to work from the comfort of your chair. And while it's not high-speed (as in 300Km/h), it is reasonab…

Nah it is intended.

They built the terminus in far away place for cheap land costs and easy acquisition. Now the expectation is that there will be further developments over there including folks moving nearby. It'll be huge win for the train company since they can starts charging very high land rent compared to their purchasing price.

Re: How China's “debt traps” work

#132

Post by littlestymaar »

davidsawyer wrote: post #115
littlestymaar wrote: post #71

Earlier quoted context omitted.

> listening to economists Noah Smith isn't even an economist, he's just some know-it-all internet pundit who happened to have graduated in economics a decade ago.

Not sure where you're getting this. He has a PhD in Econ...

Having a Math degree doesn't make you a mathematician if you've stopped doing Math since then… That's even more true if, as Noah Smith, you got your diploma in order to become a pundit.

From his own words[1]:

> Back in 2006, the original reason I thought of getting an econ PhD was actually to become an econ pundit and writer.

If anything, he's a former economist (until 2016) who's now a pundit discussing many topics going way beyond his academic expertise (hence my “know-it all” moniker above).

[1]: http://noahpinionblog.blogspot.com/2016/04/life-update-leavi...

Re: How China's “debt traps” work

#133

Post by sokoloff »

eunos wrote: post #131
csomar wrote: post #48

I've recently rode through a Belt&Road project: The Lao high-speed train. In my opinion, it shows the complete failure of the Chinese government. The high-speed train is a reasonably great train that goes through dozens (hundreds?) of mountains and rivers (through tunnels and bridges). It does that while enabling you to work from the comfort of your chair. And while it's not high-speed (as in 300Km/h), it is reasonab…

Nah it is intended. They built the terminus in far away place for cheap land costs and easy acquisition. Now the expectation is that there will be further developments over there including folks moving nearby. It'll be huge win for the train company since they can starts charging very high land rent compared to their purchasing price.

This seems fine. It'd be like buying a bunch of desert in Clark County in the early 1950s and then building Las Vegas. They're creating value for the land that they bought.

Re: How China's “debt traps” work

#134

Post by throwaway50600 »

wheelerof4te wrote: post #106
seanmcdirmid wrote: post #101

Earlier quoted context omitted.

Nothing you stated in your comment contradicts the statement from CNN that you are quoting. I'm guessing this is about CNN describing to its American readers what you take as a natural harmonious fact?

I am commenting because CNN portraits this as something negative when it comes to China. When in fact, it's fairly normal situation almost anywhere in the world.

I am in EU, own an unfinished - actually not even started yet - apartment. Can confirm, absolutely normal.

Re: How China's “debt traps” work

#135

Post by aleph_minus_one »

callalex wrote: post #89
reisse wrote: post #34

Earlier quoted context omitted.

> 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…

Why don’t poor people just get more money? It would solve most of their problems.

> Why don’t poor people just get more money? It would solve most of their problems.

Well, every clever businessman will simply increase the prices in such a situation since more people can now afford to pay more. Problem solved *not*. Markets are self-calibrating.

Re: How China's “debt traps” work

#136

Post by petre »

beebeepka wrote: post #72
0xDEF wrote: post #40

Earlier quoted context omitted.

There is no multipolar world. It's just the US and China. Their combined GDP is bigger than the next 33 countries combined. As a Danish person I wish the EU had actual hard power but in the end of the day Denmark doesn't have the same geopolitical interests as Hungary, Bulgaria, and Slovakia. In fact their views are the polar opposite of ours.

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…

The US is much more cohesive than the EU, they all speak English and bear firearms.

Of course Danish interests are not aligned with the rest of the EU. They live in a hygge bubble, not having been under Russia's boot. Their worst problems are immigration and Islam. Denmark has the most opt-outs compared to any EU state: Euro, EU Blue Card, Europol. It took a second referendum this year to abolish their defense opt-out. And of course this is bad for all of us.

https://en.m.wikipedia.org/wiki/Danish_opt-outs_from_the_Eur...

Re: How China's “debt traps” work

#137

Post by throwaway50600 »

vondur wrote: post #102
26fingies wrote: post #82

Earlier quoted context omitted.

i was gonna say - a lot of places you can put a bunch of cash down for an apartment that only exists as a picture on a sign somewhere.

Other countries have the rule of law and you can sue a developer. That’s not possible in China. I did read where disgruntled Chinese are withholding payments on these unfinished buildings. Not sure what the repercussions could be for those who do it.

Lots of people lost a lot of money on never finished apartments in my (EU) country. Suing doesn't help you when there's no money left to distribute.

Re: How China's “debt traps” work

#138

Post by anon84873628 »

nradov wrote: post #35
neilwilson wrote: post #32

The problem with listening to economists is that if your only tool is interest rates everything looks like a loan. No sovereign nation should be borrowing from anywhere other than itself. Instead firms should be selling equity denominated in the local currency for foreign currency - where they need foreign imported capital equipment. If nobody wants to invest on those terms then you have to build the equipment yourse…

Small, poor countries have no practical way to bootstrap and build equipment themselves. That might have worked in the 18th century but not today. Loans are patient money. As long as the borrower pays as agreed then they can do as they please. Whether the original lender holds the asset to maturity or sells it on to another investor makes no difference. Most of the high profile failures with foreign investment stem f…

>Most of the high profile failures with foreign investment stem from corruption and incompetence. Switching from debt to equity won't cure that.

It could change who gets left holding the bag, though.

Presumably if Chinese firms held equity in the hydroelectric plants, they would care about whether they were built correctly and won't collapse. As it stands they get paid either way (according to the article).

Re: How China's “debt traps” work

#139

Post by acyou »

anon84873628 wrote: post #125
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.

I'm surprised to see this level of confusion on what "investment" means, on a venture capital related forum of all places.

If financing by providing loans is not investment, well, then we are saying that it's something like the article seems to imply, which is that you have to end up with an ownership stake in order for something to be an investment?

If you were buying government bonds, would you not consider that to be an investment?

Non-equity lending is definitely still investment, and is probably less predatory...

Re: How China's “debt traps” work

#140

Post by slantedview »

throwaway29812 wrote: post #122
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?

Leveraging aid packages for UN votes and political concessions is standard geopolitics. For example, just a few weeks ago, it was discovered that the US leveraged an IMF deal to get Pakistan to back the war in Ukraine:

https://theintercept.com/2023/09/17/pakistan-ukraine-arms-im...

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