China and the New Silk Road: The new global lender everyone is flocking to and dreading

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The bone Developed countries wary of loans from Chinese billionaires. And even more when Beijing has become the world’s largest lender in recent years. They fear this is just an elaborate long-term strategy to grab valuable assets.

It is difficult today to quantify this expansive Chinese policy which is part of the new silk road to which Argentina has adhered and which aims to make the Asian country the first world power in 2049, the date of the centenary of the founding of the People’s Republic of China.

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For Christophe Trebescheconomist atl Kiel Institute for the World Economy In Germany, “half of the money that China lends to developing countries corresponds to hidden creditsgranted outside the orbit of the China Development Bank and the Exim Bank of China, the two major state-controlled institutions. These indirect loans, according to their calculations, they would already reach 200,000 million US dollars.

Even a report prepared by the BBC indicates that the average debt of 50 countries most indebted to China increased until reaching more than 15% gross domestic product (PBI) of these nations.

The countries that make up the New Silk Road, according to their year of joining. (Infographic: Fudan University Green Finance & Development Center).

This program of investments and loans with which China seeks to build a vast network of transport, energy and telecommunications infrastructures arouses both enthusiasm and mistrust.

On the one hand, developing countries obtain resources to develop strategic enterprises that would otherwise be impossible to realize due to the significant barriers to accessing international credit. On the other, analysts warn of a new kind of diplomacy that has been called “the debt trap”.

What China’s “Debt Trap” Diplomacy Means

The concept of “debt trap diplomacy” was coined by the Indian geostrategic specialist Brahma Chellaney in 2017. His thought is simple: China only grants loans millionaires in exchange for concessions economic or political. And it directs all its power to the poorest nations with expensive long-term credits.

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So, if a debtor country defaults on its obligations payment, the The Asian country keeps its strengths. But the truth is that China has filled a void and dozens of countries have joined this plan, many in Latin America, including Argentina and its neighbors Chile and Uruguay.

China, investments and debt
China, investments and debt

For the former Argentine ambassador to Beijing Diego Guelar the debt trap isonly mythology. Chinese loans are very similar to Western loans. They took the Western model of international credits,” he said in a dialogue with NT.

The Sri Lankan port affair that set off all the alarms

The port city of Hambanota, Sri Lanka, is the case most cited by critics of Chinese credits. Beijing financed its construction.

American and Indian officials denounce China granted a loan of 307 million dollars in 2010. But the port could not compete with that of Colombo, the capital of the country.

Before him business failure, the country has requested another loan from Beijing for US$757 million on more demanding terms with an annual interest rate of 6.3%. the Total debt exceeded US$1 billion.

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The amount, with interest, has become invaluable for the small Indian island. China then kept the port under concession for 99 years. Former US Secretary of State Mike Pompeo came to judge aspredatorBeijing action.

Sri Lanka was not the only case. the China critics point to controversial investments and loans in Kenya and Malaysia and in several African countries. But Guélar said “there is no sinister design by Chinese power” in his investment strategy.

“Like any bank, it requires guarantees. For China, it is not good news not to pay the credit. They have a stock of bad credit, but they are increasingly entrenched in international credit technology,” he said.

In his dialogue with NTGuelar said “it is not a foreign policy design to squeeze” poorer nations. “They look more and more like international credits. The rest goes through mythological facts that the Chinese are bad or the American is a conspirator and imperialist who guards the wealth of the people. What they want is to be paid,” he concluded.

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