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How China's “debt traps” work

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Re: How China's “debt traps” work

#31

Post by dopeboy »

jxramos wrote: post #30
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…

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.

Same here. If you find some literature about it that you're willing to share, would love to read and swap notes.

Re: How China's “debt traps” work

#32

Post by neilwilson »

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 yourself.

For a nation to develop successfully it needs patient money, not hot money.

Re: How China's “debt traps” work

#33

Post by bpolverini »

hackandthink wrote: post #10

"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…

The Government already has a monopoly on force and steals our money under the threat of imprisonment in the form of taxation: Now that money is supposed to be allocated into risky investments for abstract, unmeasureable benefits like "soft power," for the benefit of people somewhere else? That creates resentment here. It also infantilizes the Global South.

How much better would it be if we eliminated the IMF, shrank government, and lowered taxes so individuals could freely choose how to benefit the Global South via nonprofit giving? If people don't give voluntarily, why should they be compelled to give in the form of taxation?

I feel like Graeber, an anarchist, would appreciate a decentralized solution like that instead of trying to handle this from the top down.

Re: How China's “debt traps” work

#34

Post by reisse »

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 developers are not liable for the failure of the company. The law usually (don't know exactly about China) skews the balance in favour of property buyers.

> 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.

And the cost of that high-interest construction loan is paid by the future residents. Not something you want when your goal is to give most of the population cheap housing.

Re: How China's “debt traps” work

#35

Post by nradov »

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 from corruption and incompetence. Switching from debt to equity won't cure that.

Re: How China's “debt traps” work

#36

Post by nradov »

hackandthink wrote: post #10

"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…

Sovereign borrowers are free to default on their debts. This is just a business decision, not a moral failing. But once they default they shouldn't expect more loans from the IMF or anyone else. The IMF was never intended to be a charity, and there are other international programs for distributing food aid to countries experiencing famine.

Re: How China's “debt traps” work

#37

Post by andrepd »

bpolverini wrote: post #33
hackandthink wrote: post #10

"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…

The Government already has a monopoly on force and steals our money under the threat of imprisonment in the form of taxation: Now that money is supposed to be allocated into risky investments for abstract, unmeasureable benefits like "soft power," for the benefit of people somewhere else? That creates resentment here. It also infantilizes the Global South. How much better would it be if we eliminated the IMF, shrank…

The view that "you have _your_ money and then the government takes it away from you" ignores that without the society that you are inserted in, the very concept of money would be meaningless. More accurate to say is that part of the social contract for participating in a society that enables you to """make""" that money is that you have a pay a "fee", i.e. taxes (among other things, e.g. abiding by laws which are democratically decided, etc).

Society is a mutually beneficial arrangement. I agree that you should be able to "opt out" and live in a homestead way out in the forest, and that if you do so you should be exempt of taxes. But unless you live in a Kazynscki cabin, that view makes no sense.

Re: How China's “debt traps” work

#38

Post by mplewis »

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…

When everyone else is growing faster than you are, patient money is losing money.

Re: How China's “debt traps” work

#39

Post by havetocharge »

NicoJuicy wrote: post #19
gruez wrote: post #12

Earlier quoted context omitted.

The part you're missing is that they poured millions/billions into said projects. Taking those outlays into account it's very reasonable to conclude that they lost, even if they got some money/land.

? China won, all that money invested was almost all to Chinese construction overcapacity. So that capacity was exported to useless prestige projects. Poor countries paid the bill ( mostly) and China is paid twice (foreign loans going to Chinese workers is a double win).

I mean.. they did loan the money, with all the associated responsibilities and risks of loaning money. And they did do the work. All the agreements were entered voluntarily, so what's the fault here?

Re: How China's “debt traps” work

#40

Post by 0xDEF »

3seashells wrote: post #18

The multipolar World looks like the uni polar, it's just more of its crap.

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.

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