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>Beijing is heavily focused on its neighbors, lending them money for extensive road-building projects. Pakistan is running out of money to repay the loans, part

by carlmr 8y ago

>Beijing is heavily focused on its neighbors, lending them money for extensive road-building projects. Pakistan is running out of money to repay the loans, part of a broader pattern of what critics call China’s “debt trap” diplomacy. If you've read "Confessions of an Economic Hitman", you know that the US has been following this strategy for years now. China is just copying a very workable model that the US pioneered. You have your banks giving loans to pay your companies to build projects that another country can't pay for (and you know it). Should they for some reason pay for it you made your bank some money and a lot of money for your construction company. Should they not be able to repay it your company has earned the same money and your bank is sitting on some pretty low risk long term loans which will pay out multiple times in interest. You make even more money.

yuy910616 8y ago
Nice. Love that book
badpun 8y ago
> Should they not be able to repay it your company has earned the same money and your bank is sitting on some pretty low risk long term loans which will pay out multiple times in interest. You make even more money. Or, the country defaults (like Poland in the eighties), and negotiates a partial cancellation of the debt, in exchange for adopting some of the recommended economic policies (in case of Poland, these were the Chicago-school liberal policies).
- carlmr 8y ago
  True, that's a third case, but rare, and still gives you some degree of influence for your money.
  - screye 8y ago
    Or you ask the country to surrender land over to the lending company. As seen with Srilanka handing over a port to China.
voodoo_v_ 8y ago
But that is not what China does. When the other country can’t pay back the loan, China “buys back” the construction project and turns it into something useful for them, like a military base. That is for instance a worry with the Vanuatu wharf but there are multiple examples across the Pacific (Tonga, Sri Lanka, Cook Islands, ...)
- mtw 8y ago
  Same way the US managed to open military bases in countries economically important for them (Germany, UK, Bahrain, Japan, South Korea, Saudi Arabia). Guantanamo was opened to protect the investments in the Cuban economy back then
  - etrevino 8y ago
    I can't speak for the Guantanamo instance, but I can say that the US didn't use loans as leverage to build military bases. In most of the cases you cite they were put there to contain the Soviet Union and its allies. Often the national governments involved wanted or felt they needed the Americans (even if there were local reservations).
amriksohata 8y ago
The US didnt pioneer this, humans from the first colonisers pioneered this, loot by subversion.
- lotsofpulp 8y ago
  It’s inevitable when one party has more power than the other. There are 3 options, either the powerful party can be charitable and give things away, or it can do business such as loaning money, or it can take what it wants by force. It’s human to want to stay in control and gain more control so the second and third options are most likely.
NicoJuicy 8y ago
It could backfire heavily, that's at least what i suspect. There are already protests that the investments doesn't lead to local labor, but Chinese labor + racism.

by carlmr 8y ago

yuy910616 8y ago

Nice. Love that book

badpun 8y ago

> Should they not be able to repay it your company has earned the same money and your bank is sitting on some pretty low risk long term loans which will pay out multiple times in interest. You make even more money. Or, the country defaults (like Poland in the eighties), and negotiates a partial cancellation of the debt, in exchange for adopting some of the recommended economic policies (in case of Poland, these were the Chicago-school liberal policies).

carlmr 8y ago
True, that's a third case, but rare, and still gives you some degree of influence for your money.
- screye 8y ago
  Or you ask the country to surrender land over to the lending company. As seen with Srilanka handing over a port to China.

voodoo_v_ 8y ago

But that is not what China does. When the other country can’t pay back the loan, China “buys back” the construction project and turns it into something useful for them, like a military base. That is for instance a worry with the Vanuatu wharf but there are multiple examples across the Pacific (Tonga, Sri Lanka, Cook Islands, ...)

mtw 8y ago
Same way the US managed to open military bases in countries economically important for them (Germany, UK, Bahrain, Japan, South Korea, Saudi Arabia). Guantanamo was opened to protect the investments in the Cuban economy back then
- etrevino 8y ago
  I can't speak for the Guantanamo instance, but I can say that the US didn't use loans as leverage to build military bases. In most of the cases you cite they were put there to contain the Soviet Union and its allies. Often the national governments involved wanted or felt they needed the Americans (even if there were local reservations).

amriksohata 8y ago

The US didnt pioneer this, humans from the first colonisers pioneered this, loot by subversion.

lotsofpulp 8y ago
It’s inevitable when one party has more power than the other. There are 3 options, either the powerful party can be charitable and give things away, or it can do business such as loaning money, or it can take what it wants by force. It’s human to want to stay in control and gain more control so the second and third options are most likely.

NicoJuicy 8y ago

It could backfire heavily, that's at least what i suspect. There are already protests that the investments doesn't lead to local labor, but Chinese labor + racism.