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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

#41

Post by nradov »

George83728 wrote: post #14
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.)

China still doesn't have an expeditionary military. They have very little capability for direct military intervention in any country farther away than Vietnam or India. Even sustaining a small naval flotilla in the Persian Gulf was a major stretch for them.

They are working on building up such a capability and the situation may be different in 10 years. But as of today, they really can't.

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

#42

Post by coldtea »

nonethewiser wrote: post #25
coldtea wrote: post #20

Earlier quoted context omitted.

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…

What kind of reforms? Like labor laws, worker protections?

Yes, to be precise, the destruction of labor laws...

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

#43

Post by coldtea »

rhaway84773 wrote: post #33
SanjayMehta wrote: post #28

Earlier quoted context omitted.

The IMF has a history of releasing loans to clear interest payments on older loans. They also force target countries to grow cash crops instead of wheat, for example. This forces the client country to become dependent on food imports, usually from the US.

Here’s a simple question. If the IMF loans are so terrible, why do countries apply for them? And if giving out loans to countries is such an awesome tool for the IMF, why is it refusing to allow Pakistan to draw down already approved loans?

>Here’s a simple question. If the IMF loans are so terrible, why do countries apply for them?

For the same reason people get loans from the mafia and loan sharks: they are desperate.

Also because the political personel is encouraged (with "gifts") to go that way (as the loans come with strings that enable the plundering of the country's resources, which they supervise).

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

#44

Post by coldtea »

boeingUH60 wrote: post #38
rhaway84773 wrote: post #33

Earlier quoted context omitted.

Here’s a simple question. If the IMF loans are so terrible, why do countries apply for them? And if giving out loans to countries is such an awesome tool for the IMF, why is it refusing to allow Pakistan to draw down already approved loans?

The comment you're responding to is typical cope from corrupt, inept, and poorly-run countries looking for excuses on why they remain poor. I see this in my country (Nigeria) too...that somehow it's the IMF keeping us poor, not our stupid leaders and an equally stupid populace voting them in.

And the comment above is typical gaslighting from neo-colonialist countries (as often internalized by local people benefiting from the above, or having studied abroad and learned to blame their own) getting the benefits or such deals, "why dont you live within your means" etc (often after centuries of the same countries calling the shots and plundering the means, supporting the most corrupt politicians to get office and punishing said countries when they opted for others, and of course, doing the bribing).

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

#45

Post by coldtea »

nradov wrote: post #39
coldtea wrote: post #20

Earlier quoted context omitted.

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…

Every loan comes with conditions. No one is forcing countries to take those IMF loans. They always have the option of living within their means.

>No one is forcing countries to take those IMF loans

You'd be surprised.

>They always have the option of living within their means.

Yeah, if only their means weren't plundered for centuries by people from countries calling them to do so. Including their countries supporting the most corrupt (but friendly to their companies) politicians to get power there.

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

#46

Post by alephnerd »

rhaway84773 wrote: post #31
coldtea wrote: post #20

Earlier quoted context omitted.

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…

This is a completely false narrative. The IMF is a lender of last resort. Countries only go to it to borrow when they absolutely need money and have nowhere else to go. And for obvious reasons, when countries are in such desperate straits that literally no private or public entity will lend money to them, the IMF requires fairly stringent rules so their leaders don’t just pocket the money and run away, or don’t spend…

This guy's right.

The BRI is sort of like a hybrid merger of the World Bank and the Asian Development Bank (in reality controlled and managed by Japan) aimed at LDCs in Asia+Africa which Japan+SK wouldn't touch (either because it's not within Asia, or it's not financially viable).

The same way the ADB would subcontract with Japanese corporations, you'd see BRI contract to Chinese corporations.

That said, the ADB tended to train+hire local staff, while BRI projects tended to mainly hire solely Chinese. And conversely, the ADB would add additional regulations+scrutiny into potential malpractices, malfeasance, and financial viability while BRI financed projects were much more lax with such compliance.

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

#47

Post by nradov »

coldtea wrote: post #45
nradov wrote: post #39

Earlier quoted context omitted.

Every loan comes with conditions. No one is forcing countries to take those IMF loans. They always have the option of living within their means.

> No one is forcing countries to take those IMF loans You'd be surprised. > They always have the option of living within their means. Yeah, if only their means weren't plundered for centuries by people from countries calling them to do so. Including their countries supporting the most corrupt (but friendly to their companies) politicians to get power there.

Do you mean like how the UK was plundered by Scandanavians and Frenchmen for centuries?

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

#48

Post by [deleted] »

boeingUH60 wrote: post #37
bequanna wrote: post #27

Earlier quoted context omitted.

Sure, but wouldn’t China be relying on those countries willingly giving those things (ports, resources, etc) to them? Why would any country do that?

Sri Lanka handed over a port to China to pay off debt.. https://www.nytimes.com/2018/06/25/world/asia/china-sri-lank...

[deleted]

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

#49

Post by nonethewiser »

jasmer wrote: post #36
George83728 wrote: post #11

Earlier quoted context omitted.

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…

No, this is not true. The loans were not made by special investment banks but regular banks of China, if they are not repayed it will be havoc. They expect the loans to be repaid, and are definitely in trouble now that there are defaults. Also the terms were less generous than IMF etc..

Regular banks or not, the Congo's Sicomines agreement (linked above) and Sri Lankan port seizure make it pretty clear - China stands to achieve strategic goals when countries default on loans.

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

#50

Post by arein3 »

Reubend wrote: post #7
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…

I don't know what's going on behind the scenes, but if I were to speculate, they probably have a contingency plan for this scenario which involves concessions from those countries if they default. Maybe land or mineral rights, maybe something more complicated. That's just a guess from my side though.

I suppose the "contingency plan" was the main plan all along.

It is easy to bribe or to force governments in poor countries to take a loan in disadvantageous terms. Public servants easily do actions that will have consequences in the long term for a bribe, since when the concequences will reach, they will be gone already.

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