China is calling in loans to dozens of countries from Pakistan to Kenya. By Brendan Condon.
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. …
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.
In Pakistan, millions of textile workers have been laid off because the country has too much foreign debt and can’t afford to keep the electricity on and machines running.
In Kenya, the government has held back paychecks to thousands of civil service workers to save cash to pay foreign loans. The president’s chief economic adviser tweeted last month, “Salaries or default? Take your pick.”
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. …
“In a lot of the world, the clock has hit midnight,” said Harvard economist Ken Rogoff. “ China has moved in and left this geopolitical instability that could have long-lasting effects.” …
Jumping to the front of the queue:
In the past under such circumstances, big government lenders such as the U.S., Japan and France would work out deals to forgive some debt, with each lender disclosing clearly what they were owed and on what terms so no one would feel cheated.
But China didn’t play by those rules. It refused at first to even join in multinational talks …
Clauses mandating that borrowing countries deposit U.S. dollars or other foreign currency in secret escrow accounts that Beijing could raid if those countries stopped paying interest on their loans.
In effect, China had jumped to the front of the line to get paid without other lenders knowing. …
“The other creditors are saying, ‘We’re not going to offer anything if China is, in effect, at the head of the repayment line,’” Parks said. “It leads to paralysis. Everyone is sizing each other up and saying, ‘Am I going to be a chump here?’” …
Chinese debt trap:
China’s unwillingness to take big losses on the hundreds of billions of dollars it is owed, as the International Monetary Fund and World Bank have urged, has left many countries on a treadmill of paying back interest, which stifles the economic growth that would help them pay off the debt. …
“As soon as the financing taps are turned off, the adjustment takes place right away,” said Patrick Curran, senior economist at researcher Tellimer. “The economy contracts, inflation spikes up, food and fuel become unaffordable.”
Mohammad Tahir, who was laid off six months ago from his job at a textile factory in the Pakistani city of Multan, says he has contemplated suicide because he can no longer bear to see his family of four go to bed night after night without dinner. …
Last month, Pakistan was so desperate to prevent more blackouts that it struck a deal to buy discounted oil from Russia, breaking ranks with the U.S.-led effort to shut off Vladimir Putin’s funds. …
You sure?
China has also pushed back on the idea, popularized in the Trump administration, that it has engaged in “debt trap diplomacy,” leaving countries saddled with loans they cannot afford so that it can seize ports, mines and other strategic assets.
On this point, experts who have studied the issue in detail have sided with Beijing. Chinese lending has come from dozens of banks on the mainland and is far too haphazard and sloppy to be coordinated from the top. If anything, they say, Chinese banks are not taking losses because the timing is awful as they face big hits from reckless real estate lending in their own country and a dramatically slowing economy.
For thousands of years, China has regarded non-Chinese as barbarians. Talk about a racial superiority complex! Maybe not the best partner for non-Chinese. Africa, in particular, is finding that the new colonial masters are worse than the departing Europeans.
