[ajross]

There's a weird frame to this article that seems to be painting China as a "loan shark" villain pressuring the poor debtor countries. But that's not the way loans work at this scale. If this debt is bad, it's bad, and pressure isn't going to get those RMB back. China is on the hook here, and that's extremely bad for China. At the end of the day Kenya or Zambia can just refuse to pay (it's not like their credit is great to begin with).

In the west, loans like these are usually looked at as "aid"[1] and structured with some sort of guarantee that ensures the banks involved see it as a tolerable risk. Is that not true for Chinese loans? The article doesn't really say. But if not, again, that's extremely bad for China, not Kenya!

[1] Which is not to say they aren't or haven't been exploitive. Just that the loan risk itself tends to be borne by western governments.

[ignormies]

China's primary goal here isn't to make money -- it's political and economic leverage in emerging economies.

https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

[cpursley]

The very purpose of political and economic leverage is to make money, even if not from those you are leveraging. Otherwise, what’s the point?

[rektide]

Money is one compelling form of power, sure. And one a regular citizen also sort of understands, albeit not at scale.

But being able to takeover ports, build bases, make claims on other nations is a way to extend sovereignty far outside your borders, that is power that sometimes yes will be used to make money. But sometimes there are indeed other more direct interests that need serving, that these debts will lever them access to.

Overall I think it's more harmful than useful to flatten the interests down to being all about money. States have other things they must also do & maintain, and not all of them are easily buyable.

[George83728]

They give loans backed by resource rights to build up some infrastructure, roads and ports particularly, then wait for them to default. Now they have resource extraction rights as well as the infrastructure needed to extract those resources. Cash is less important than power, China means to reshape the international order because they're tired of being a second class player in global affairs.

[neurostimulant]

Money can't buy everything. But if you lend the money and the borrower can't pay it back, suddenly you can ask something that normally can't be bought directly with money.

[ricardobeat]

See the other comments regarding resource rights.

[freitzkriesler2]

Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you.

However, the west knows that these countries notoriously never pay back the loans so the investment is made back by operating this infrastructure for the benefit of western firms.

It appears China has made a strategic error in not doing the same OR China is in a far worse economic condition than they're letting on.

If they expect these countries' legal courts to hold up these agreements to pay in full, then they clearly aren't as smart as their PISA scores suggest.

[worrycue]

> Typically there is collaterial involved, in this case "owning" or operating the airports, railways, roads, or what have you.

If they refuse to hand over the collateral?

[freitzkriesler2]

The collateral is already handed over. It's mostly western firms operating the infrastructure which you can see is where the money is made.

Countries can and do nationalize this infrastructure kicking out the western firms, this typically makes the debtor angry which leads to the classic intelligence over throw ops we see.

[nonethewiser]

This explains why the debt is bad for Pakistan, Kenya.

> 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.”

Furthermore, another bad thing for Kenya, Pakistan, etc. would be China repossessing. In fact some speculate thats really the end goal. China would love to operate all these ports themselves. Already happened in Sri Lanka. Unfortunately for the people in these countries the leaders can make a lot of money by signing off on bad loans and then they never have to face the consequences themselves.

[nradov]

Perhaps Pakistan should cancel their nuclear weapons program and stop funding terrorists. That would probably free up some money to pay for electricity.

[selimthegrim]

Saudis pay the bill for those. Power problems are more from overcapacity and high fixed capacity charges.

[Reubend]

I don't know what's going on behind the scenes, but if I were to speculate, they probably have a contingency plan for this scenario which involves concessions from those countries if they default. Maybe land or mineral rights, maybe something more complicated. That's just a guess from my side though.

[arein3]

I suppose the "contingency plan" was the main plan all along.

It is easy to bribe or to force governments in poor countries to take a loan in disadvantageous terms. Public servants easily do actions that will have consequences in the long term for a bribe, since when the concequences will reach, they will be gone already.

[nonethewiser]

They already repossessed a port in Sri Lanka

[George83728]

These countries defaulting is precisely what China intended from the start. The loans are backed by mineral rights, and refusal to honor those agreements would give China all the excuse it needs to back coups, or even resort to military intervention (particularly if the RBIO falls apart, probably due to domestic political strife in America.)

[nradov]

China still doesn't have an expeditionary military. They have very little capability for direct military intervention in any country farther away than Vietnam or India. Even sustaining a small naval flotilla in the Persian Gulf was a major stretch for them.

They are working on building up such a capability and the situation may be different in 10 years. But as of today, they really can't.

[George83728]

> They are working on building up such a capability and the situation may be different in 10 years.

Yeah, that's what we're discussing.. these 'loans' are in pursuit of their strategic objectives.