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.
On one hand I don’t think China is doing that much wrong here, at least nothing worse than other countries.
But basically because it’s not “those countries” giving those things away, it’s the corrupt kleptocrats who represent those countries which are giving them away in exchange for some personal gain. They don’t care about what it does the country because they can take their personal wealth and family to London or Miami and forget about it
If the debtor country doesn't cooperate the lender has all manner of soft and hard power to fall back on. They can fund political opponents or instigate coups to install a puppet government. Organize sanctions, train guerilla fighters, or even overtly start a war.
Needless to say, China is not exactly a pioneer in this space...
But doesn’t this make a huge opening for someone like the US to step in and say: “hey, we will bail you out and stop China from interfering. Just sign this treaty and let us occupy with some troops”?
You can’t buy infrastructure in other countries because it’s not for sale. But when countries default on their loans, they can repay with infrastructure, e.g. with the thing they lent money to build.
It is a kind of economic warfare, you could say, except it’s completely legal to bet on some country lending and defaulting.
If they don't, they can't get new loans anymore, which will doom the country. It's really hard to grow your economy without foreign reverses. Even North Korea, a hermit kingdom, works really hard to grow their foreign reserve.
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.
So yes, but, it's not very clear at all, and this idea that 'China is making the loans so they default and then get access to ports' is 'rationally cynical' but not quite right.
Also, everyone is aware that this could be the reality and of the outcomes.
In reality - China's loans were regular commercial loans made by regular commercial banks (don't get me wrong, at the behest of the CCP).
The amount of $ lent out is staggering and it's not going to come back and it's yet another gigantic problem for China.
And yes, in the end, 'ports will be seized' etc..
Also I think we should be cynical in that China has zero goodwill whatsoever, unlike I think the duplicitous goodwill of the West they don't care one bit and will absolutely dig their tentacles into poor countries in an attempt to control them.
Unlike Soviet policy which was based on defence and handouts, China is based on deeper economic integration and they uses their 'very cheap labour and zero regard for anything' to build a lot of stuff. Africa is getting roads and airports which will go a long way to providing cover for the local regimes.
It remains to be seen if they can keep this up, but I don't see it subsiding - China is in a very good position to provide 'very cheap stuff' to 'very poor countries' and lever that economic clout. India also uses it's 'serf population' as a form of geopolitical leverage, if you were wondering 'who build the Qatar stadiums' ... it was that.
It's right for us to be cynical but we can't be arbitrarily cynical, it's generally a bit more complicated, and unfortunately there is zero public discussion or anything in the media in North America, and not enough in Europe either.
You hear the same language with fear mongering about foreign countries “calling in” US debt. These people must be terrified of their bank all of a sudden demanding the entirety of their remaining mortgage now.
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.
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 it on buying elections, as opposed to rebuilding the economy. The reason the IMF has refused to allow Pakistan to draw down money from its IMF loans is because under the Imran Khan govt they spent it on oil subsidies and allowing arbitrage on the Pakistani currency (interesting that if as you say the IMF is a tool used by the west to control countries, they are the ones saying no to a country borrowing from the country, while the country is going out of its way to get money from the IMF).
It’s not a surprise that countries that can literally not raise funds from any private or public entities are expected to endure financial restraint (since it was the lack of restraint that brought them there in the first place).
But the Belt and Road loans were not to desperate countries desperately looking for funds. The Belt and Road initiative was for countries, which at the time were financially stable. Their leaders figured that getting sparkly Chinese infrastructure investment would boost their re-election chances. And as a bonus, unlike the World Bank funds (which is the correct equivalent to the BRI loans), the Chinese didn’t require you to prove the economic viability of the projects, they didn’t require you to raise additional private capital for the project, and most importantly, the Chinese had absolutely no qualms about their companies personally bribing the leaders of the recipient companies tens of millions of dollars.
In return, all these countries’ leaders had to agree to was paying higher interest rates, not creating local jobs because the Chinese would export their own workers, and not building local businesses because Chinese companies would get all the contracts. But that was a future leader and citizens’ problem, while they could stash the cool Chinese payoffs in London and Dubai.
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.
This is why JP+SK's FDI has been aimed at more mature markets like India, Indonesia, PH, VN, TH, MY, MX, BR while Chinese FDI is aimed at Laos, Cambodia, Central Africa, Central America, South Asia.
> 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.
This is irrelevant.
> And as a bonus, unlike the World Bank funds (which is the correct equivalent to the BRI loans), the Chinese didn’t require you to prove the economic viability of the projects, they didn’t require you to raise additional private capital for the project, and most importantly, the Chinese had absolutely no qualms about their companies personally bribing the leaders of the recipient companies tens of millions of dollars.
>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.
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?
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).
Yes, that is me ranting about how my race and continent remains undeveloped…but sure, I guess you’re about to accuse me of racism for stating facts, lol
>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).
The author is upset that China isn't willingly choosing to forgive billions in loans.