[George83728]

The important context is that these loans were given with the expectation that the recipient would eventually default. These loans are backed by resource rights, and would also giving China considerable leverage to demand the right to create ports / military bases, etc. Anybody paying attention has seen this coming miles away (example: https://doi.org/10.1016/j.resourpol.2018.04.014), but such loans are too tempting for borderline dysfunctional governments with short-sighted politicians to pass up.

[bequanna]

Sure, but wouldn’t China be relying on those countries willingly giving those things (ports, resources, etc) to them?

Why would any country do that?

[boeingUH60]

Sri Lanka handed over a port to China to pay off debt..

https://www.nytimes.com/2018/06/25/world/asia/china-sri-lank...

[tintedfireglass]

pay off debt... to India

[opportune]

On one hand I don’t think China is doing that much wrong here, at least nothing worse than other countries.

But basically because it’s not “those countries” giving those things away, it’s the corrupt kleptocrats who represent those countries which are giving them away in exchange for some personal gain. They don’t care about what it does the country because they can take their personal wealth and family to London or Miami and forget about it

[peteradio]

So it's like pick-pocketing a frail person.

[George83728]

If the debtor country doesn't cooperate the lender has all manner of soft and hard power to fall back on. They can fund political opponents or instigate coups to install a puppet government. Organize sanctions, train guerilla fighters, or even overtly start a war.

Needless to say, China is not exactly a pioneer in this space...

[bequanna]

But doesn’t this make a huge opening for someone like the US to step in and say: “hey, we will bail you out and stop China from interfering. Just sign this treaty and let us occupy with some troops”?

[sshine]

You can’t buy infrastructure in other countries because it’s not for sale. But when countries default on their loans, they can repay with infrastructure, e.g. with the thing they lent money to build.

It is a kind of economic warfare, you could say, except it’s completely legal to bet on some country lending and defaulting.

[neurostimulant]

If they don't, they can't get new loans anymore, which will doom the country. It's really hard to grow your economy without foreign reverses. Even North Korea, a hermit kingdom, works really hard to grow their foreign reserve.

[jasmer]

No, this is not true.

The loans were not made by special investment banks but regular banks of China, if they are not repayed it will be havoc.

They expect the loans to be repaid, and are definitely in trouble now that there are defaults.

Also the terms were less generous than IMF etc..

[nonethewiser]

Regular banks or not, the Congo's Sicomines agreement (linked above) and Sri Lankan port seizure make it pretty clear - China stands to achieve strategic goals when countries default on loans.

[jasmer]

So yes, but, it's not very clear at all, and this idea that 'China is making the loans so they default and then get access to ports' is 'rationally cynical' but not quite right.

Also, everyone is aware that this could be the reality and of the outcomes.

In reality - China's loans were regular commercial loans made by regular commercial banks (don't get me wrong, at the behest of the CCP).

The amount of $ lent out is staggering and it's not going to come back and it's yet another gigantic problem for China.

And yes, in the end, 'ports will be seized' etc..

Also I think we should be cynical in that China has zero goodwill whatsoever, unlike I think the duplicitous goodwill of the West they don't care one bit and will absolutely dig their tentacles into poor countries in an attempt to control them.

Unlike Soviet policy which was based on defence and handouts, China is based on deeper economic integration and they uses their 'very cheap labour and zero regard for anything' to build a lot of stuff. Africa is getting roads and airports which will go a long way to providing cover for the local regimes.

It remains to be seen if they can keep this up, but I don't see it subsiding - China is in a very good position to provide 'very cheap stuff' to 'very poor countries' and lever that economic clout. India also uses it's 'serf population' as a form of geopolitical leverage, if you were wondering 'who build the Qatar stadiums' ... it was that.

It's right for us to be cynical but we can't be arbitrarily cynical, it's generally a bit more complicated, and unfortunately there is zero public discussion or anything in the media in North America, and not enough in Europe either.

[theGnuMe]

China provides the funding, the materials and the workers to build the infrastructure. That's the bigger issue.

[smitty1e]

I'm not confident of a public/private sector distinction in China.

[George83728]

"Regular banks of China" are all de facto organs of the CCP government. They play along with the strategic agenda or their executives get reeducated.

[jasmer]

Yes, but the are making loans on regular commercial terms. So failure will be bad.