Statistics:Posted by Muns — Tue Nov 02, 2021 6:29 am
Statistics:Posted by Muns — Tue Nov 02, 2021 6:26 am
via OpIndiaChina’s debt-trap diplomacy?
BRI participant countries owe over 385 billion USD to China in hidden debt, study reveals
The research estimated that 40 lower-to-middle income countries(LMIC) have debt exposure to China that is higher than 10 per cent of their national gross domestic product(GDP)
29 September, 2021
Jinit Jain
China's BRI is proving to be a massive debt trap for low and middle income countries, study reveals
China has long been known for using its financial clout to further “debt-trap diplomacy”, a policy that encompasses saddling borrowing nations with excessive credit with the intention of extracting economic or political concessions from the debtor country when it finds it increasingly difficult to meet its debt repayment obligations.
Now, a report published by AidData says China’s Belt and Road Initiative has left a large number of countries burdened with “hidden debts” to the tune of $385 bn.
The report published by AidData, an international development research lab based at the College of William & Mary in Virginia, further says that scores of countries underreported their financial liabilities linked to China for many years now, resulting in mounting “hidden debts”, or confidential liabilities that the countries might be obligated to pay.
AidData has parsed through more than 13,000 aid and debt-financed projects worth more than $843bn across 165 countries for a period of 18 years ending 2017 to arrive at the conclusion that Beijing has been stealthily deploying its “debt-trap diplomacy” where China uses its financial supremacy to tie smaller countries in the allure of lucrative loans and then using the leverage to bend them to its will.
The analysis conducted by AidData researchers has hinted that Chinese lendings are considerably larger than previously estimated by credit rating agencies and intergovernmental organisations with surveillance capabilities. China, they conclude, has been able to pull the wool over intelligence agencies from finding out the substantial leverage it held on small countries by extending seemingly large credit lines to them.
Brad Parks, executive director of the AidData team, was astonished to discover that the hidden debt amount granted by China is close to $385bn, as reported by Financial Times.
The discovery of China’s practice of saddling countries with outsize loans in order to exert its influence on them has come at a time when the pace of lending on the Belt and Road Initiative has hit roadblocks, partly because of the United States’s initiative in leading the G7 effort to undercut Beijing’s hegemony in international development finance.
However, the report underscores the enduring consequences of a sharp transition since Xi Jinping unveiled the BRI plan after coming to power in 2013.
The marked shift in Beijing’s lending strategy after Xi Jinping was elected as the President of China
China had previously directed its lending to sovereign borrowers such as central banks. But under Xi Jinping’s leadership, that changed fundamentally. As of now, more than 70 per cent of China’s foreign debt comprises loans extended to state-owned companies, state-owned banks, special purpose vehicles, joint ventures and private sector institutions.
The research estimated that 40 lower-to-middle income countries(LMIC) have debt exposure to China that is higher than 10 per cent of their national gross domestic product(GDP). On average, the LMIC government is under-reporting repayment obligations to China by an equivalent of nearly 6 per cent of GDP.
“These debts usually do not appear in the government balance sheets in developing countries. The critical point is that most of them have safeguard against explicit or implicit forms of host government liability protection. That’s equivalent to erasing the difference between private and public debt,” Parks said in an interview with Financial Times.
China’s plan of pressurising borrowing countries that are struggling to repay their loans to cough up their physical assets
The research has come at a time when there is a looming fear among many countries about China moving to seize their assets in case they default in their loan repayment. Earlier last year, former Maldives President Mohamed Nasheed said China’s banks were not giving them ‘breathing space’ even in the pandemic.
The exorbitantly high outstanding amount that the Maldives owes to China led Mr Nasheed to worry if the country could face the same fate as Sri Lanka’s Hambantota port. Earlier in 2018, China made Sri Lanka cough up the Hambantota port, miles off the shores of its rival India, and a critical base to monitor the Indo-Pacific trade route.
Similar to the case of the Maldives, the former Sri Lankan President Mahinda Rajapaksa had taken enormous loans from China that the succeeding government in Sri Lanka struggled to square accounts with. As a result, after tough negotiations and months of pressure from Beijing, the Sri Lankan government handed over the port and 15,000 acres of land nearby to China for 99 years.
Not just physical but China is focused on collateralising liquid assets too: Brad Parks
Parks, however, revealed that though China has developed an image of a country using its loans to collateralise physical and illiquid assets, the research suggests that they are also involved in collateralising liquid assets.
“It is true that Chinese state-owned lenders have a strong preference for collateralisation: we find 44 per cent of the overall lending portfolio was collateralised, and when the stakes are really high, that’s when they turn to collateral,” he said.
Park says China is asking borrowers to maintain a minimum cash balance in an offshore account, or an escrow account, that is controlled by Beijing. So when the borrower fails to repay loans, the lender claws back the amount through such offshore accounts.
African countries who are part of China’s BRI cancel projects blaming China’s lack of transparency and shoddy work of Chinese companies
Countries that have a financial relationship with China are not just wary of losing their physical or liquid assets but also about the shoddy quality of work the Chinese companies are doing on their soil. This is the reason why a great many African countries are showing stiff resistance to Chinese companies, initiating action against Chinese investment and cancelling existing Chinese projects.
According to the Singapore Post, the low-grade work of the Chinese companies is to blame for the cancellation of a spate of projects.
John Hopkins University School of Advanced International Studies’ China-Africa Research Initiative report said that China signed 1,141 loan commitments with various African governments and state enterprises which were worth USD 153 billion. This was done during the period 2000 to 2019, according to the Singapore Post.
Most of these Chinese projects in Africa are getting suspended or abandoned by the African countries amidst the Covid-19 crisis and the inability of these African countries to pay back the huge loans taken from China. Hence in order to cut debt burdens, these countries decided to shut down the Chinese projects, most of which fall under Beijing’s Belt and Road Initiative 2013.
Statistics:Posted by chetak — Wed Sep 29, 2021 11:18 pm
Statistics:Posted by Muns — Wed Dec 30, 2020 7:17 am
Statistics:Posted by Muns — Wed Jun 17, 2020 6:12 am
Statistics:Posted by Muns — Sun Jun 07, 2020 6:09 am
Statistics:Posted by Muns — Fri May 29, 2020 6:12 am
Must watch video:
Joint Chiefs Chairman says Google refuses to work with US military but provides “direct benefit” to China’s military
https://twitter.com/HawleyMO/status/1106247367177764865
Statistics:Posted by chetak — Tue Mar 19, 2019 9:15 am
Statistics:Posted by vishvak — Sat Feb 02, 2019 7:33 am
China's lonely rise: After decades of heady growth, Beijing is suddenly facing resistance at home and abroadBrahma Chellaney @Chellaney
My op-ed: It's not just capital that’s fleeing China; rich Chinese choose to live overseas. In an informal vote of no confidence in the Chinese system, more than a third of surveyed millionaires in China said they were “currently considering” emigrating.
China's lonely rise: After decades of heady growth, Beijing is suddenly facing resistance at home and abroad
Xi Jinping's word may be law, but faced with difficult choices on China’s new challenges, he now finds himself under pressure
As the People’s Republic of China prepares to celebrate the 70th anniversary of its founding later this year, the limits of its Communist Party-led model are becoming apparent. And more than ever, the world’s longest-surviving and most-powerful autocracy faces difficult choices at home and abroad.
By China’s own statistics, its economy is registering its most sluggish growth in nearly three decades. The world’s second-largest economy grew by 6.6 per cent in 2018, the lowest rate since 1990, when the fallout from the massacre of as many as 10,000 people in a tank and machine-gun assault on pro-democracy demonstrators in Beijing’s Tiananmen Square a year earlier kept growth to a humble 3.9 per cent.
At a time when China appears to have entered a new era of uncertainty after more than a quarter century of phenomenal growth, it is perhaps fitting that this year marks the 30th anniversary of that massacre.
The uncertainty is evident in a new phenomenon – the flight of capital from a country that, between 1994 and 2014, amassed towering piles of foreign-exchange reserves by enjoying a surplus in its overall balance of payments.
But now, faced with an unstoppable trend of net capital outflows, President Xi Jinping’s government has tightened exchange controls and other capital restrictions to prop up the country’s fragile financial system and sagging currency. The regime has used tens of billions of dollars in recent months alone to bolster the yuan’s international value.
It is not just capital that’s fleeing China, as more and more Chinese choose to live overseas. In an informal vote of no confidence in the Chinese system, more than a third of surveyed millionaires in China said they were “currently considering” migrating to another country. An earlier report found that almost two-thirds of rich Chinese were either emigrating or have plans to do so.
Today, China’s mounting internal challenges are being compounded by new external factors. Chinese belligerence and propaganda, for instance, have spawned a growing image problem for the country internationally, which is apparent even in regions where China has invested heavily, from Africa to Southeast Asia.
More significantly, Beijing has come under international pressure on several fronts – from its trade, investment and lending policies to its human rights record, including its incarceration of more than a million Muslims from Xinjiang, a sprawling territory Mao Zedong annexed in 1949. Perhaps China’s free ride, which helped propel its rise, is coming to an end.
In modern-day “re-education” prisons, China is accused of forcing Uighurs and other Muslim groups to forsake Islamic practices and become secular citizens.
The Soviet Communist Party that ran gulags was consigned to the dustbin of history. But now the Chinese Communist Party has set up its own gulags that are more high-tech and indiscriminate and have Islam as their target. The network of concentration camps is designed to dismantle Muslim identities and change the outlook of entire communities – a grim mission of unparalleled scale.
Yet, even as international criticism has mounted, the West still seems reluctant to hold Beijing accountable for its harsh treatment of ethnic minorities, deciding against, for instance, introducing sanctions.
China, meanwhile, is confronting growing US-led pressure on the trade and geopolitical fronts, accentuating Beijing’s dilemmas and fuelling uncertainty at home. As long as the US-China trade war rages, flight of capital will remain a problem for Beijing, whose foreign-exchange reserves have shrunk by about $1 trillion from their peak of just over $4 trillion in mid-2014.
At a time when China’s imperial project, the Belt and Road Initiative, is running into resistance from a growing number of partner countries, Beijing is also confronting an international pushback against its telecommunications giant Huawei. In fact, the pushback has broadened from opposition to Huawei’s participation in next-generation 5G wireless networks to a broader effort in Europe, North America and Australia to restrict the use of Chinese technology because of concerns that it is being used for espionage.
The arrest of the Huawei founder’s daughter in Canada, at the behest of Washington, rattled China’s elites, making them angry but also fearful that any one of them could meet a similar fate while travelling to the West. With Meng Wanzhou’s detention, the US signalled that it has more powerful non-tariff weapons than China, which has long used such tools to punish countries as diverse as Japan, Mongolia, South Korea and the Philippines.
Ms Meng was held for an alleged violation of America’s Iran-related sanctions, but even Western onlookers saw her arrest as an example of US high-handedness. Instead of galvanising support against the American move, China responded in typical fashion that, as an American analyst put it, is the “mark of a thuggish state” – by jailing two Canadians.
Indeed, it is Beijing’s open disregard for international rules that explains why it can count on few true strategic allies or reliable security partners. Contrast this with the strong network the US maintains, including close collaboration with many of China’s neighbours. Beijing has alienated almost every significant power in the Indo-Pacific and beyond.
China’s lonely rise could become more pronounced with the newly restructured People’s Liberation Army becoming less of an army and more of a power projection force, the majority of whose troops now are not from the army but from the other services. Indeed, the PLA’s shift away from being a defensive force foreshadows a more aggressive Chinese military approach of the kind already witnessed in the South China Sea, where China has fundamentally changed the status quo in its favour.
The Dalai Lama recently said that, due to Chinese pressure, no Buddhist country, with the sole exception of the nominally Buddhist Japan, is now willing to grant him entry as the exiled leader of Tibetan Buddhism. However, whenever Chinese pressure forces smaller nations to cave in on any issue, it only fuels greater resentment against Beijing.
Against this backdrop, where is China heading? It has come a long way since the Tiananmen Massacre, with its citizens now more prosperous, mobile and digitally connected. Its economy, in purchasing power parity terms, is already the world’s largest.
However, its political system remains as repressive as ever, with Mr Xi centralising power in a way China has not seen since Mao. Under his leadership, the party has set out to systematically quash Muslim, Tibetan and Mongol identities, expand China’s frontiers far out into international waters, and turn the country into a digital totalitarian state.
Yet, one should not overlook what a difference less than a year has made. Few in China dared to criticize Mr Xi when he ended the decades-old, Party-led collective leadership system and abolished a two-term limit on the presidency –actions that theoretically allow him to rule for life.
But, in the new international environment in which China finds itself today, he is facing domestic criticism – however muted — for building a cult of personality around his one-man rule and for inviting an international pushback by overemphasising China’s strength and power.
Mr Xi’s word may be law but, faced with difficult choices on China’s new challenges, he now finds himself under pressure. His primary focus will probably remain ensuring stability at home. Without stability, neither he nor the Party can hope to survive in power.
To calm the economic turbulence, China’s central bank has substantially increased domestic credit to help boost consumption and investment at home. In the medium-term, the US-led tariff pressures are likely to accelerate China’s shift from low-end manufacturing to higher value-added industries like electronics, robotics and artificial intelligence.
The geopolitical pushback, for its part, could force Xi to return to the “hide your capacities, bide your time” strategy of Deng Xiaoping. But such a return can scarcely obscure China’s ambitious goals that Mr Xi has laid bare. Even if Beijing starts soft-pedalling its ambitions, it is likely to adopt a “two steps forward, one step back” strategy to keep progressing toward its goals.
Brahma Chellaney is a geostrategist and the author of nine books, including the award-winning “Water, Peace, and War”
Statistics:Posted by chetak — Sat Jan 26, 2019 7:25 pm
Statistics:Posted by vishvak — Wed Jan 16, 2019 2:00 pm
Statistics:Posted by Singha — Wed Jan 16, 2019 3:58 am
India, Iran, Russia look for new trade corridor
7 Nov 2018
India, Russia and Iran explore new route
India, Russia and Iran are meeting next month to work out the details of a massive project to open a new sea-land transport corridor that would be a cheaper and shorter alternative to shipping oil and other goods through the Suez Canal.
According to RT, the North-South Transport Corridor (INSTC), the name for the new transit route, will connect India to Russia and Europe via a combination of sea routes and an overland passage through Iran, according to Iranian state-owned news outlet Press TV. The 7,200-kilometers long corridor will reduce the time and costs of shipping by up to 40%. Transport time between Mumbai and Moscow will fall to 20 days. The annual capacity of the transport artery is expected to reach 30 million tons.
Indian logistics companies presently need to route shipments through China, Europe or Iran to access Central Asian markets. Already, routing shipments through Iran is the least time-consuming option. But the INSTC will have the ancillary benefit of allowing Indian companies to forge a new trade route to Afghanistan without having to travel through Pakistan, as tensions over Kashmir are once again on the rise. The passage corridor through the Persian Gulf will mean billions of dollars in trade for Afghanistan, cutting its dependence on foreign logistics.
Already, India has committed $500 million for developing the Iranian port of Chabahar, which will be a crucial trans-shipment point for transitioning cargo from sea to land. What's more, the arrangement has the blessing of China, which could potentially incorporate the passage into its multi-trillion-dollar 'One Belt, One Road' initiative to build new trade routes connecting China to Europe, Asia and Africa.
Indian officials said they're hoping to start building out the infrastructure required for the route to function as swiftly as possible.
"All issues may be resolved in order to operationalize the (INSTC) route as early as possible," according to Indian Commerce Minister Suresh Prabhu, as quoted by the media.
The alliance of these four countries should unnerve the US. As it stands, the rise in bilateral trade denominated in rubles, yuan and rupees, while modest so far, is set to grow, with plans to eventually undermine the dollar's hegemonic grip on global trade settlement. And with US sanctions on Iran set to take effect on Nov. 4, the Iranian regime only stands to benefit by encouraging the blooming economic partnership between Russia and India, as Russia implements its plan to circumvent the dollar, and, by extension, Treasury Department sanctions.
Russia and India have recently announced that they had sealed a long-discussed $6 billion arms deal despite threats of economic sanctions from Washington.
Statistics:Posted by chetak — Tue Jan 08, 2019 7:16 am
Statistics:Posted by vishvak — Wed Dec 26, 2018 10:10 am
[/quoteto influence the world — if not directly control it — by making the rules on which it functions. This normative determination to achieve a far greater objective has hardly been addressed when analysing China’s BRI and its impact.
Statistics:Posted by vishvak — Wed Dec 26, 2018 9:49 am