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China is calling in loans to dozens of countries from Pakistan to Kenya

fortune.com

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Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#11

Post by George83728 »

missedthecue wrote: post #10

What a weird headline. China isn't "calling in" the loans. Nothing sudden is happening here. They are following their preset repayment schedule. The author is upset that China isn't willingly choosing to forgive billions in loans.

The important context is that these loans were given with the expectation that the recipient would eventually default. These loans are backed by resource rights, and would also giving China considerable leverage to demand the right to create ports / military bases, etc. Anybody paying attention has seen this coming miles away (example: https://doi.org/10.1016/j.resourpol.2018.04.014), but such loans are too tempting for borderline dysfunctional governments with short-sighted politicians to pass up.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#12

Post by worrycue »

freitzkriesler2 wrote: post #9
ajross wrote: post #3

There's a weird frame to this article that seems to be painting China as a "loan shark" villain pressuring the poor debtor countries. But that's not the way loans work at this scale. If this debt is bad, it's bad, and pressure isn't going to get those RMB back. China is on the hook here, and that's extremely bad for China . At the end of the day Kenya or Zambia can just refuse to pay (it's not like their credit is gr…

Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you. However, the west knows that these countries notoriously never pay back the loans so the investment is made back by operating this infrastructure for the benefit of western firms. It appears China has made a strategic error in not doing the same OR China is in a far worse economic condition tha…

> Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you.

If they refuse to hand over the collateral?

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#13

Post by cpursley »

ignormies wrote: post #6
ajross wrote: post #3

There's a weird frame to this article that seems to be painting China as a "loan shark" villain pressuring the poor debtor countries. But that's not the way loans work at this scale. If this debt is bad, it's bad, and pressure isn't going to get those RMB back. China is on the hook here, and that's extremely bad for China . At the end of the day Kenya or Zambia can just refuse to pay (it's not like their credit is gr…

China's primary goal here isn't to make money -- it's political and economic leverage in emerging economies. https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

The very purpose of political and economic leverage is to make money, even if not from those you are leveraging. Otherwise, what’s the point?

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#14

Post by George83728 »

ajross wrote: post #3

There's a weird frame to this article that seems to be painting China as a "loan shark" villain pressuring the poor debtor countries. But that's not the way loans work at this scale. If this debt is bad, it's bad, and pressure isn't going to get those RMB back. China is on the hook here, and that's extremely bad for China . At the end of the day Kenya or Zambia can just refuse to pay (it's not like their credit is gr…

These countries defaulting is precisely what China intended from the start. The loans are backed by mineral rights, and refusal to honor those agreements would give China all the excuse it needs to back coups, or even resort to military intervention (particularly if the RBIO falls apart, probably due to domestic political strife in America.)

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#15

Post by freitzkriesler2 »

worrycue wrote: post #12
freitzkriesler2 wrote: post #9

Earlier quoted context omitted.

Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you. However, the west knows that these countries notoriously never pay back the loans so the investment is made back by operating this infrastructure for the benefit of western firms. It appears China has made a strategic error in not doing the same OR China is in a far worse economic condition tha…

> Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you. If they refuse to hand over the collateral?

The collateral is already handed over. It's mostly western firms operating the infrastructure which you can see is where the money is made.

Countries can and do nationalize this infrastructure kicking out the western firms, this typically makes the debtor angry which leads to the classic intelligence over throw ops we see.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#16

Post by George83728 »

cpursley wrote: post #13
ignormies wrote: post #6

Earlier quoted context omitted.

China's primary goal here isn't to make money -- it's political and economic leverage in emerging economies. https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

The very purpose of political and economic leverage is to make money, even if not from those you are leveraging. Otherwise, what’s the point?

They give loans backed by resource rights to build up some infrastructure, roads and ports particularly, then wait for them to default. Now they have resource extraction rights as well as the infrastructure needed to extract those resources. Cash is less important than power, China means to reshape the international order because they're tired of being a second class player in global affairs.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#17

Post by ricardobeat »

cpursley wrote: post #13
ignormies wrote: post #6

Earlier quoted context omitted.

China's primary goal here isn't to make money -- it's political and economic leverage in emerging economies. https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

The very purpose of political and economic leverage is to make money, even if not from those you are leveraging. Otherwise, what’s the point?

See the other comments regarding resource rights.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#18

Post by rektide »

cpursley wrote: post #13
ignormies wrote: post #6

Earlier quoted context omitted.

China's primary goal here isn't to make money -- it's political and economic leverage in emerging economies. https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

The very purpose of political and economic leverage is to make money, even if not from those you are leveraging. Otherwise, what’s the point?

Money is one compelling form of power, sure. And one a regular citizen also sort of understands, albeit not at scale.

But being able to takeover ports, build bases, make claims on other nations is a way to extend sovereignty far outside your borders, that is power that sometimes yes will be used to make money. But sometimes there are indeed other more direct interests that need serving, that these debts will lever them access to.

Overall I think it's more harmful than useful to flatten the interests down to being all about money. States have other things they must also do & maintain, and not all of them are easily buyable.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#19

Post by wonderwonder »

Thats the thing I don't get about countries turning to China. America does things for itself but also does things just to advance democracy. China's only interest is China. If your choice is a semi-friendly loan shark or a smash your kneecaps loan shark, I have no idea why countries are choosing the latter.

Re: China is calling in loans to dozens of countries from Pakistan to Kenya

#20

Post by coldtea »

missedthecue wrote: post #10

What a weird headline. China isn't "calling in" the loans. Nothing sudden is happening here. They are following their preset repayment schedule. The author is upset that China isn't willingly choosing to forgive billions in loans.

Meanwhile the IMF, used as tool by western capitalism, has drove countries to the ground, using its loans to pressure for all kind of unpopular ultra-neoliberal reforms that destabilized countries, driving people to extreme poverty, and shredding their social safety nets.

Then there are the direct loans from those "forgiving" debtors (as per the article) which always come with all kinds of strings attached, political pressure to act as satellites, and policy change instructions.

China learned from the best.

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