China is calling in loans to dozens of countries from Pakistan to Kenya
1–10 of 87 posts
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#2I wonder if they’re going to squeeze the vice a bit and then offer the opportunity to refinance in RMB as part of their larger strategy of de-dollarizing the world economy.
The main barrier I see is they’d have to become willing to run an ongoing current account deficit to replace the dollar, which is a totally alien strategy up until now so far as I can tell.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#3There'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 great to begin with).
In the west, loans like these are usually looked at as "aid"[1] and structured with some sort of guarantee that ensures the banks involved see it as a tolerable risk. Is that not true for Chinese loans? The article doesn't really say. But if not, again, that's extremely bad for China, not Kenya!
[1] Which is not to say they aren't or haven't been exploitive. Just that the loan risk itself tends to be borne by western governments.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#4So china lent money loan-shark style for things that these countries probably didn’t need but china convinced them would help them, and now it’s calling the loans due and of course the promised revenues didn’t materialize so these destitute countries are left holding the bag.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#5> Behind the scenes is China’s reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help. On top of that is the recent discovery that borrowers have been required to put cash in hidden escrow accounts that push China to the front of the line of creditors to be paid.
This is the part of “belt and road” where they beat you with the belt.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#6There'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.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#7There'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.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#8> Behind the scenes is China’s reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help. On top of that is the recent discovery that borrowers have been required to put cash in hidden escrow accounts that push China to the front of the line of creditors to be paid. This is the part of “belt and road” where they…
And then bulldoze you on the road :D
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#9There'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 than they're letting on.
If they expect these countries' legal courts to hold up these agreements to pay in full, then they clearly aren't as smart as their PISA scores suggest.
Re: China is calling in loans to dozens of countries from Pakistan to Kenya
#10What 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.