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How China's “debt traps” work

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Re: How China's “debt traps” work

#181

Post by disgruntledphd2 »

keeety_ wrote: post #118
disgruntledphd2 wrote: post #93

Earlier quoted context omitted.

I don't mean to be hyperbolic, but that's how you get people (mostly children and old people) starving in the streets. That's what those entitlements pay for. Maybe you think that's not worthwhile, fair enough. Unfortunately for you, many of your fellow citizens and taxpayers disagree.

It's quite possible taxation results in more starvation than it prevents. Particularly when used to incentive low income fertility and dis-incintivize production and labor.

Huh?

Like, that is an extremely strong claim and I'd appreciate if you could provide some evidence for it.

Re: How China's “debt traps” work

#182

Post by buttercraft »

wheelerof4te wrote: post #177
seanmcdirmid wrote: post #149

Earlier quoted context omitted.

CNN is addressing its American audience to a practice that is not familiar in the USA. Yes, CNN is USA-centric, because...it is an American news company with a primary user base in America. That other countries mortgage unbuilt homes is more a "what about" rather than "facts needed for reader to understand."

"American news company with a primary user base in America." And it's infamous for misrepresenting the other parts of the world to better suit USA's interests. Cases of outright lying and negative propaganda that they know is a lie abound.

What was the lie in this case?

Re: How China's “debt traps” work

#183

Post by neilwilson »

dash2 wrote: post #49
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…

The problem with not listening to economists is that you then suggest policies which economic history reveals are seriously flawed. Why are foreign investors likely to accept shares in your business denominated in, say, Rupiyah? Especially if it can't be "hot money", which implies they won't be able to resell it. As for building the equipment yourself: are you kidding? This kind of import-substitution failed spectacu…

"Why are foreign investors likely to accept shares in your business denominated in, say, Rupiyah?"

Because if that country wants to sell their stuff to you, that would their only option - other than taking Rupiyah directly.

And if your country doesn't do it, then some other country will - because new sources of demand don't come by every day.

That's how you avoid a 'debt trap' and the debt prison that comes from countries not being able to go bankrupt.

And as Steve Keen regularly says you are better off studying System Dynamics than economics. It has more application to the real world.

Re: How China's “debt traps” work

#184

Post by neilwilson »

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…

"As long as the borrower pays as agreed then they can do as they please. "

That's not patient money then is it. That's money that requires regular service - mostly in a foreign currency.

Patient money gets paid as and when there is profit to service it.

Re: How China's “debt traps” work

#185

Post by AtlasBarfed »

hakfoo wrote: post #170
hackandthink wrote: post #70

Earlier quoted context omitted.

It is a hard problem. Poor countries need a lot of investment (0). Historically many investments failed and creditors ruined the country and made live of the involved people even more miserable. My gut feeling is that chinese investors are a little bit smarter but there are obviously problems as well. (another gut feeling: china has too much money, they can't invest in US treasuries anymore) (1) This US/China conflic…

Part of the reason that developing-world investment has traditionally been hard is because it likely requires a longer perspective than most investors have. Build a decent rail network in Laos and it might take 75 years for them to leverage it to a level of development that pays it back, which gives you 75 years of risk it might all come crashing down. You can't float that meaningfully on the public markets, but a st…

It also requires something that western capitalism doesn't really structure itself around: an actual moral compass that isn't just shadow imperialism which is what "confessions of an economic hitman" involves.

You'd want to genuinely want improvement for the people. Not for enriching a new set of brutal and corrupt elites that will do the bidding of the CIA/IMF/whatever, but actually want the people's lives improved in living standards, education, economic independence, etc.

Kind of like how China fast-forwarded themselves. In rose tinted glasses, I can see the Belt and Road kinda being like that, but of course it left out the development of manufacturing / stealing of technology that really underpinned China's rise.

Re: How China's “debt traps” work

#186

Post by antifa »

nonethewiser wrote: post #144
dexwiz wrote: post #113

Earlier quoted context omitted.

It does have a propaganda feeling to it. I went thru the top 25 YouTube videos for tofu dreg recently, and they had that undertone of hoping for China to collapse. There are crappy building practices in any country. The real question is prevalence, which I can’t seem to answer.

Then where are the videos of western tofu dreg? China has a literal army of propaganda posters. Am I supposed to believe such problems exist and it never occurred to them to push it?

> Then where are the videos of western tofu dreg?

I'm not totally sure I understood what tofu dregging was, but there's no shortage of low quality construction, collapsing bridges, unmaintained infrastructure, etc. in the US.

Re: How China's “debt traps” work

#188

Post by seanmcdirmid »

wheelerof4te wrote: post #177
seanmcdirmid wrote: post #149

Earlier quoted context omitted.

CNN is addressing its American audience to a practice that is not familiar in the USA. Yes, CNN is USA-centric, because...it is an American news company with a primary user base in America. That other countries mortgage unbuilt homes is more a "what about" rather than "facts needed for reader to understand."

"American news company with a primary user base in America." And it's infamous for misrepresenting the other parts of the world to better suit USA's interests. Cases of outright lying and negative propaganda that they know is a lie abound.

There was no lie here, just a fact that wasn’t disputed. If you want to complain about CNN lying, find a lie in the article rather than a fact.

Re: How China's “debt traps” work

#189

Post by rfoo »

eklavya wrote: post #28
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…

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_...

China has

> the money is in an escrow and released as the construction progresses.

too.

The problem is it doesn't work: the fund release schedule can't be perfectly aligned with each stage of the constitution on a cost basis. There's a large amount of unfinished buildings (rather than not started at all) at a certain stage - it's the point when the_amount_of_fund_released - the_construction_cost_so_far is maxed.

I like the USA solution more - no mortgage for unfinished buildings. Developers can still sell it, but good luck.

Re: How China's “debt traps” work

#190

Post by nradov »

neilwilson wrote: post #184
nradov wrote: post #35

Earlier quoted context omitted.

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…

"As long as the borrower pays as agreed then they can do as they please. " That's not patient money then is it. That's money that requires regular service - mostly in a foreign currency. Patient money gets paid as and when there is profit to service it.

That's meaningless. No capitalist is so patient as to wait indefinitely. The time value of money is key here. What you're talking about essentially amounts to a donation, not a real investment.
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