A cautionary tale - borrowing from China

| No Comments

They might want their money back at some point.  From Fortune Magazine:

‘In a lot of the world, the clock has hit midnight’: China is calling in loans to dozens of countries from Pakistan to Kenya
A dozen poor countries are facing economic instability and even collapse under the weight of hundreds of billions of dollars in foreign loans, much of them from the world’s biggest and most unforgiving government lender, China.

An Associated Press analysis of a dozen countries most indebted to China — including Pakistan, Kenya, Zambia, Laos and Mongolia — found paying back that debt is consuming an ever-greater amount of the tax revenue needed to keep schools open, provide electricity and pay for food and fuel. And it’s draining foreign currency reserves these countries use to pay interest on those loans, leaving some with just months before that money is gone.

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.

Countries in AP’s analysis had as much as 50% of their foreign loans from China and most were devoting more than a third of government revenue to paying off foreign debt. Two of them, Zambia and Sri Lanka, have already gone into default, unable to make even interest payments on loans financing the construction of ports, mines and power plants.

By design.  China will take ownership of those properties.
How to take over a nation without firing a shot.
How much do we owe them?

Sri Lanka is a classic case.  The government there was propped up by the Chinese money.  They thought they were on top of the world and started mandating various environmental stupidity.  Forcing farmers to grow organicaly, forcing renewable energy. The nation crashed.

Since Sri Lanka defaulted a year ago, a half-million industrial jobs have vanished, inflation has pierced 50% and more than half the population in many parts of the country has fallen into poverty.

Much much more at the site.  Local corruption plays a big part but China is doing a lot of these loans "under the table" - other nations have no idea.  They are not playing nice.

Leave a comment

May 2023

Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

About this Entry

This page contains a single entry by DaveH published on May 23, 2023 6:51 PM.

The Kings was the previous entry in this blog.

The US Dollar as the world's reserve currency? is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Monthly Archives

Pages

OpenID accepted here Learn more about OpenID
Powered by Movable Type 5.2.9