Is China the World’s Loan Shark?




Search  

ORIGINAL POST

Posted by Ed 38 days ago

China isn’t just the world’s largest exporter of goods: It’s now the world’s largest exporter of capital, too. Of course, these two facts are linked. China earns so much from being the world’s factory, and the spending of its households is so constrained, that it needs to find somewhere to park the difference. That’s the basic imbalance underlying the Belt and Road Initiative, China’s big push into the developing world.

 

Many analysts -- including senior U.S. officials -- have long worried about the terms on which China parts with slivers of its giant pile of capital. Unlike traditional development finance, Chinese loans -- especially for building infrastructure -- carry fairly high rates of interest, and the assets they build often don’t earn enough to pay them back. It’s fair to worry that some countries could end up mired in debt, borrowing more from the Chinese than they can possibly repay.

 

Chinese officials claim to be incensed by the very notion, and some Western researchers aren’t convinced, either. There’s certainly a case to be made that confusion and lack of coordination lies behind China’s loan binge, rather than a sinister geo-strategic design. Others argue that China’s domestic imperatives, including concerns about depleting its vast pile of foreign exchange, might lead it to slow its acquisitive march.

 https://www.bloomberg.com/opinion/articles/2019-07-17/chinese-loans-hold-developing-world-in-thrall?srnd=economics-vp


< Back to main category



Login now