[yorwba]

The debt is real, but it represents money Chinese banks have already transferred. This does not increase the Chinese government's influence; on the contrary, it will require influence to get the recipient countries to pay back at least part of the amount.

It would be different if the payments had been conditional on doing whatever the Chinese government wants, but most of the lending up to 2016 was made with little oversight (which is why the sum is so high) and only after several high-profile project failures (e.g. the port of Hambantota, where after a debt-for-equity swap, a Chinese consortium is stuck operating it to try recoup the construction costs), the criteria for issuing new loans were made more strict, similar to those of other institutions like the World Bank.

The bitter lesson for the Chinese development finance industry is that "publicly guaranteed debt" is not very guaranteed when a new government comes to power every few years and wants to renegotiate the terms of agreements made with the previous government.

[refurb]

Examples are not hard to find.

"Laos set to cede majority control of its national power grid to China to service Belt and Road debts"

https://asiatimes.com/2020/09/laos-the-latest-china-debt-tra...

[yorwba]

Yes, and that's a bad thing for the Chinese investors.

As an analogy, consider a bank giving someone a loan to build a house. In case of default, they'll repossess the house to recoup some of the amount.

Does this mean it's a good idea for a bank to give huge loans to people who they know won't be able to pay it back, so that they'll get the house? Obviously not! Repossession only avoids losing the full amount of the loan; the bank is still making a loss overall.

Laos ceding majority ownership of the power grid to the Chinese company that built it only means that the infrastructure investment isn't as profitable as expected (otherwise they could just use the profits to service the loan) and they're cutting their losses.

[refurb]

I think the point is that it's about more than just financials. If you own the national grid for a country, you can have a lot more political influence than before.

"We're more than happy to provide the necessary grid updates, but we're going to need to see some reciprocation, maybe sign that military base lease we asked for?"

[yorwba]

They don't need to own the national grid for that. The influence in that case would come from money they are offering, not the money they already paid.

They could've made the exact same demand the first time, but what they actually did was more like

"We're more than happy to provide the necessary grid updates, just pay the money back later, okay?"

And then Laos decided to renegotiate the agreement instead...

[refurb]

Those are very different situations. In the first situation, Laos' national infrastructure is at risk. They're screwed if they don't accept help.

In the second situation, they can say no to the money and be no worse off.