China's overland Silk Road and Maritime Silk Road Thread


supercat

Junior Member
This is an opinion piece written by a serious China scholar who specializes on China-Africa relationship. Her blog is also excellent for information about China-African affairs.

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Is China the World’s Loan Shark?
Some say Beijing lends money for infrastructure and development to pressure poor countries with debt. Not so.
By Deborah Brautigam
Ms. Brautigam is an expert on China-Africa relations at Johns Hopkins University.


WASHINGTON — Representatives from more than 150 countries began to gather in Beijing on Friday for
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to celebrate China’s grand Belt and Road Initiative. Since
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, B.R.I. — a vast, worldwide web of infrastructure-development projects mostly funded or sponsored by the Chinese government — has generated both tremendous enthusiasm and
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.

Some call the
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program
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, arguing that it could radically
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of international trade as well as
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.

Others accuse China of using B.R.I. as a way to flex its economic muscle for political gain on the sly. The whole effort is a cover for “
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,” goes one common criticism — or,
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, the United States national security adviser, China is making “strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands.” (
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with him, at least about this.)

Yes,
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in the developing world, and Chinese overseas lending is, for the first time,
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. But a number of us academics who have studied China’s practices in detail have found scant evidence of a pattern indicating that Chinese banks, acting at the government’s behest, are deliberately over-lending or funding loss-making projects to secure strategic advantages for China.

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in southern Sri Lanka: The government handed control over the port to a Chinese company in 2017 after struggling to make its loan payments to China. But that’s a special case, and it is widely misunderstood.

China does not publish details about its overseas lending, but the
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at Johns Hopkins University (which I direct) has collected information on
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, totaling more than $143 billion. Boston University’s
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has identified and tracked
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.

Based on the findings of both institutes, it seems that
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.

Take Africa. The International Monetary Fund estimates that as of late January some 17 low-income African countries already were in, or were at risk of, “debt distress,” or of experiencing difficulties in servicing their public debt. We at the China Africa Research Initiative
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based on our data on Chinese loans as well as statistics from the World Bank and the I.M.F. — and we discovered that a crowd of global banks and bondholders were involved: notably, in Mozambique,
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; or in Chad, the
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. In some of the 17 countries the I.M.F. identified as vulnerable, including Cameroon and Ethiopia, China was the single-largest creditor, but non-Chinese lenders still held the majority of the debt. Only in Djibouti, the Republic of Congo and Zambia did Chinese loans account for half or more of the country’s public debt.
to be continued...
 

supercat

Junior Member
... continued from above

In
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, the Global Development Policy Center concluded that, aside from “the important possible exception of Venezuela,” financing from China alone did not appear to be driving borrowers above the I.M.F’s debt-sustainability threshold

In most of Africa and Latin America, in other words, China’s lending is significant, but fears that the Chinese government is deliberately preying on countries in need are unfounded.

Sri Lanka is often cited as the poster child for the ills of Chinese debt-trap diplomacy. China financed a port in Hambantota; the port incurred losses, making loan-repayment difficult; after the election of a new government in Sri Lanka, 70 percent of the port was sold to a Chinese company, prompting speculation that China had orchestrated the whole fiasco.

Yet the plan to build a port in Hambantota had long been part of Sri Lanka’s broader hopes to compete with Singapore as a regional transport hub. According to a 2006
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by the Danish company Ramboll, Hambantota would be economically viable in time if it focused on becoming
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and on supplying fuel to ships plying the Indian Ocean. Whereas the transshipment business developed in line with predictions, domestic political infighting
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. The port struggled for revenues and then so did the port authority to pay back its loans.

But the Hambantota loans accounted for only
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. When the sale of the port was negotiated in 2016, Sri Lanka had an external debt of $46.5 billion;
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., only 10 percent of it was owed to China. As the economists Dushni Weerakoon and Sisira Jayasuriya have argued, “
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.”

And B.R.I. can be risky for China, too. Consider China’s largest overseas loan recipient, Venezuela, to which it has lent
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. The Chinese government was expecting to be repaid in oil exports. But
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fell sharply between 2014 and 2016. As Venezuela descended into political chaos,
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. For the past few years, the government
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. Matt Ferchen, of the Carnegie-Tsinghua Center for Global Policy, has argued there is no evidence that Venezuela’s difficulties, including over its repayments, have served China’s
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.

There certainly are problems with China’s approach to overseas lending. For one thing, Chinese banks still rely too heavily on Chinese construction companies to find and develop B.R.I. projects. Deals are often struck
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, creating opportunities for
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, and lending credence to accusations that projects bankrolled by China are sometimes overpriced.

But the idea that the Chinese government is doling out debt strategically, for its benefit, isn’t supported by the facts. Many of the would-be borrowers gathering in Beijing this weekend are likely to carefully
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of Chinese loans; some may be poor, but that doesn’t make them unaware or unsavvy. China’s B.R.I. isn’t debt-trap diplomacy: It’s just globalization with Chinese characteristics.

Deborah Brautigam is the Bernard L. Schwartz Professor of International Political Economy at the Paul H. Nitze School of Advanced International Studies, at Johns Hopkins University.

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Viktor Jav

Senior Member
Registered Member
That is perhaps the greatest problem OBOR is facing as of now. While the lion's share of the blame falls on the individual nations for not doing their homework before accepting the investments, thus leading to such issues. China cannot escape the fallout completely, like it or not it has to realize that such large scale investments comes which such image issues. And to be frank China has not make things better either with its earlier "no questions ask" attitude regarding the feasibility of projects and the capacity of the nations to repay in a reasonable manner . Recklessness and fecklessness, not some carefully planned plot of domination, that is the real hole in OBOR, which while makes it less devious does not lessen the fallout of the resulting scandals.

While China has come to realize the damage of such aloofness and had taken steps to try and ensure a level of transparency and anti-corruption among the participating states. There is more that it can do, like setting up a oversight body consisting of people from all the participating nations as well as non-participating nations like Germany, France and Britain ensure a balanced view point. This body would be responsible for auditing beforehand financial stability of the receiptant state, the feasibility of the projects involved and the timely repayment of the said investments. The body should have the power to immediately halt any further investments should it be suspected that the investments is heading towards another Sri Lanka scenario
China should also use the leverage it has in the OBOR project to ensure that each participating nation toes the line of the said body, while this might be a unwelcomed moved to some of the states. In the end China has to realize that being the originator of OBOR, it has the unstated burden of being responsible for its overall success and integrity.
 

Viktor Jav

Senior Member
Registered Member
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This article explore the possibility of US and the West participating in the OBOR project either as a full member, or side-by-side by initiating similar projects and investment initiatives. All in all this possibility should be lauded by entire world, China included. Multiple investment initiatives gives more choice to the states involved, allowing them to tailor their investment policies to one that is to their liking. Competitive investments can also allow both China and the West to discover each other's strong points and weaknesses that can be addressed. And finally there is the obvious advantage of increased economic growth and prosperity for all participating nations, provide the investments are sound and reasonably made.
 

Masticore99

Just Hatched
Registered Member
That is perhaps the greatest problem OBOR is facing as of now. While the lion's share of the blame falls on the individual nations for not doing their homework before accepting the investments, thus leading to such issues. China cannot escape the fallout completely, like it or not it has to realize that such large scale investments comes which such image issues. And to be frank China has not make things better either with its earlier "no questions ask" attitude regarding the feasibility of projects and the capacity of the nations to repay in a reasonable manner . Recklessness and fecklessness, not some carefully planned plot of domination, that is the real hole in OBOR, which while makes it less devious does not lessen the fallout of the resulting scandals.

While China has come to realize the damage of such aloofness and had taken steps to try and ensure a level of transparency and anti-corruption among the participating states. There is more that it can do, like setting up a oversight body consisting of people from all the participating nations as well as non-participating nations like Germany, France and Britain ensure a balanced view point. This body would be responsible for auditing beforehand financial stability of the receiptant state, the feasibility of the projects involved and the timely repayment of the said investments. The body should have the power to immediately halt any further investments should it be suspected that the investments is heading towards another Sri Lanka scenario
China should also use the leverage it has in the OBOR project to ensure that each participating nation toes the line of the said body, while this might be a unwelcomed moved to some of the states. In the end China has to realize that being the originator of OBOR, it has the unstated burden of being responsible for its overall success and integrity.
That presupposes that non-participating nations have an interest in the project's success and would in good faith audit the projects. I think what would instead happen is enormous amounts of bureaucratic red tape to outright sabotage, as countries like France and Germany would prefer to see the project fail.
 

Equation

Lieutenant General
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This article explore the possibility of US and the West participating in the OBOR project either as a full member, or side-by-side by initiating similar projects and investment initiatives. All in all this possibility should be lauded by entire world, China included. Multiple investment initiatives gives more choice to the states involved, allowing them to tailor their investment policies to one that is to their liking. Competitive investments can also allow both China and the West to discover each other's strong points and weaknesses that can be addressed. And finally there is the obvious advantage of increased economic growth and prosperity for all participating nations, provide the investments are sound and reasonably made.
Please that article is just another sour grape as China OBOR has become more and more popular it is now in China's best interest to share the glory with the US and West when they didn't take the initiative in the first place?
 

Nutrient

Junior Member
Registered Member
That is perhaps the greatest problem OBOR is facing as of now. While the lion's share of the blame falls on the individual nations for not doing their homework before accepting the investments, thus leading to such issues. China cannot escape the fallout completely, like it or not it has to realize that such large scale investments comes which such image issues. And to be frank China has not make things better either with its earlier "no questions ask" attitude regarding the feasibility of projects and the capacity of the nations to repay in a reasonable manner . Recklessness and fecklessness, not some carefully planned plot of domination, that is the real hole in OBOR, which while makes it less devious does not lessen the fallout of the resulting scandals.
I don't think that Chinese banks were reckless. I think the reason for the risky loans is China's policy of noninterference in other countries' internal matters. The policy may have stopped the banks from doing their due diligence with as much skepticism as they normally would have used. The policy may have to change a bit after the Malaysian experience: Najib's government was so corrupt, they probably lied a lot to China's banks. The banks will have to be more careful in the future.


While China has come to realize the damage of such aloofness and had taken steps to try and ensure a level of transparency and anti-corruption among the participating states.
Agree.
 

Viktor Jav

Senior Member
Registered Member
That presupposes that non-participating nations have an interest in the project's success and would in good faith audit the projects. I think what would instead happen is enormous amounts of bureaucratic red tape to outright sabotage, as countries like France and Germany would prefer to see the project fail.
And why should the listed nations not ? Germany, French and Britain has interests in the success of OBOR, in fact the overland silk road freight train route ends at Duisburg which is in Germany. The notion that "if you are not with us, then you are against us" is just as petty and immature as Washington's stance on the global war on terror back in 2001.
 

Viktor Jav

Senior Member
Registered Member
I don't think that Chinese banks were reckless. I think the reason for the risky loans is China's policy of noninterference in other countries' internal matters. The policy may have stopped the banks from doing their due diligence with as much skepticism as they normally would have used. The policy may have to change a bit after the Malaysian experience: Najib's government was so corrupt, they probably lied a lot to China's banks. The banks will have to be more careful in the future.
That is the very definition of recklessness, in fact one can even add on the charge of negligence as well. That China takes everything other nations say at face value without fact checking.
 

Viktor Jav

Senior Member
Registered Member
Please that article is just another sour grape as China OBOR has become more and more popular it is now in China's best interest to share the glory with the US and West when they didn't take the initiative in the first place?
Intentions and attitudes means next to nothing here, what matters most is that if the West decides to step up investment initiatives with the world there is all to gain and nothing to lose.
There is no presupposed glory gained or lost with the OBOR project at its initiation, such things depends on the actions and results of the participates, even late comers can achieve the same results as first times if they act smartly.
Nor is such things anathema to the West, the Marshall Plan in 1946 is a clearest example.
 

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