China is Calling in Loans To Dozens of Countries (fortune.com) 315
A dozen poor countries are facing economic instability and even collapse under the weight of hundreds of billions of dollars in foreign loans, much of them from the world's biggest and most unforgiving government lender, China. From a report: An Associated Press analysis of a dozen countries most indebted to China -- including Pakistan, Kenya, Zambia, Laos and Mongolia -- found paying back that debt is consuming an ever-greater amount of the tax revenue needed to keep schools open, provide electricity and pay for food and fuel. And it's draining foreign currency reserves these countries use to pay interest on those loans, leaving some with just months before that money is gone. Behind the scenes is China's reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help. On top of that is the recent discovery that borrowers have been required to put cash in hidden escrow accounts that push China to the front of the line of creditors to be paid.
Countries in AP's analysis had as much as 50% of their foreign loans from China and most were devoting more than a third of government revenue to paying off foreign debt. Two of them, Zambia and Sri Lanka, have already gone into default, unable to make even interest payments on loans financing the construction of ports, mines and power plants. 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."
Countries in AP's analysis had as much as 50% of their foreign loans from China and most were devoting more than a third of government revenue to paying off foreign debt. Two of them, Zambia and Sri Lanka, have already gone into default, unable to make even interest payments on loans financing the construction of ports, mines and power plants. 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."
How about US (Score:3, Interesting)
How much does the USA owe China?
Re:How about US (Score:5, Informative)
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Source of quote [usafacts.org]
Re:How about US (Score:5, Funny)
WTF is Belgium and Luxembourg up to?
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It's a Walloon conspiracy!
Re:How about US (Score:5, Insightful)
WTF is Belgium and Luxembourg up to?
Umm... investing their money? US Treasuries are considered the gold standard in long-term safe investments that pay a decent rate of return.
Re:How about US (Score:4, Informative)
Bullshit. Biden has been sitting down with them.
The Rethuglicans just have to stop playing political chicken with the economy. They all enthusiastically signed off on Trump adding multiple trillions of dollars to the debt, the vast majority of which ended up in the pockets of the already wealthy, and now they want to use the threat of default as an excuse to gut Medicaid and Social Security.
Re:How about US (Score:5, Insightful)
Yep. I don't like that he's negotiating with hostage takers.
Come on - the GOP, three years running under TFG, voted to raise the debt ceiling with *zero* clauses... and they increased the US debt: "At the end of fiscal year 2020, the debt was $26.9 trillion. Trump added $6.7 trillion to the debt between fiscal year 2017 and fiscal year 2020, a 33.1% increase"
They want him to cut the debt, something they don't care about or act on when they're in power? No problem: I proposed the Donald Trump and GOP Debt Reduction Bill, that a) repeals the tax cut for the wealthy that they passed, and doubles the top tax rate, eliminates the low tax rate for interest, dividend, and capital gains and rolls it all into "income", and doubles the corporate tax rate.
No problem.
Re:How about (Score:2)
CONGRESS is supposed to control the purse!
Your argument is that because they funded and agenda they support they should fund one they don't?
Sorry you lost the House, your party should not control the purse, simple as that. Bohner was an idiot for capitulating to Obama in the 2010s. The GOP should stick to it, if you want to control appropriations win few more elections!
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On the contrary, whitroth's proposal is to correct the terrible fiscal decisions of the last president to bring things back in order now.
I'm thinking about investing in guillotines. If the GOP keeps going the way it has been, I'm predicting a sharp increase in demand.
Re:How about US (Score:5, Interesting)
"We spend money unwisely under the last administration so we should do it under this one, too".
There are two sides to managing the debt: spending and income. Let's look at the other side: income. Start by reversing the Trump's tax cuts for the wealthy.
Re:How about US (Score:5, Informative)
"We spend money unwisely under the last administration so we should do it under this one, too".
Unintentionally ironic nickname, that was not the point the poster was making.
The GOP's raising of the debt limit under Trump shows they obviously don't care about raising the debt limit, because they shouldn't. All raising the debt limit does is allow the US to carry out the budget they already agreed to. If you think the country is spending too much money then raise revenue or cut spending during the budget, don't get cold feet when it's time to pay the bill you already agreed to.
Trying to save money by shutting down the government or going into default is the stupidest possible way to deal with a fiscal crisis.
AFAIK the US is the only country on the planet to function this way, why? Because when they wrote the US constitution they went hardcore with the separation of powers and gave congress both the power to pass budgets and the power to authorize borrowing to enact those budgets.
The borrowing was automatic until one party realized they had the power to get themselves on the news and hold the country hostage by refusing to raise the debt limit. And now you're sitting there cheer leading the a-holes who are costing you money with wasteful government shutdowns because partisan shot-taking is more important to you.
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That's exactly the point the poster was making. You're off topic.
From the OP, Come on - the GOP, three years running under TFG, voted to raise the debt ceiling with *zero* clauses... and they increased the US debt:.
Ie, the poster isn't making the simple "but they did it first" argument you claim they did. They're pointing out that the GOP clearly has no problem passing clean debt ceiling increases when they're in power, only when Democrats are in power.
I was going to stop reading right there but my eye caught the next line where my name triggered your feeeewings
You have an 8 digit UID, I don't know how old that makes your account but I doubt it's old enough for you to get too att
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You argument: we have done stupid things before so we should do more stupid things now.
Or we could just spend less.
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that's what budgets and appropriations bills are for. Who writes and passes those again?
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And as I've said elsewhere, the president needs to be involved or they can send up whatever random ass thing and he vetoes it and then we're right where we are now in negotiations as to what he's willing to sign so why not just skip the silly veto every year and negotiate it up front?
Re:How about US (Score:4, Informative)
Probably treasury bills will be paid off first. Hitting the debt ceiling does not mean nothing gets paid, there will be a priority over what gets paid out of the available money.
It's all stupid though - some house Republicans are goofballs that would love to see things burn down, but the more moderate Republicans are playing a dangerous game in delaying this as long as they can hoping for concessions and to appeal to the voters who also want to see things burn down. If they want to cut the debt, the FIRST must limit spending; instead because they didn't get their way in the budget they think that they can attempt a second attempt to indirectly defeat the budget by not raising the debt ceiling. In other words - they agreed to buy things but then are trying to not pay for them. Overly simplified, as this isn't the same as a credit card.
Also in their negotiations, they still continue to insist only on spending cuts but not on raising revenue. Because revenue means taxes somewhat but they've all taking this holy vow to not Render Unto Caesar any taxes, and fears that they'll be voted out of office. Of course, they'll never consider reducing military budgets or touching a penny of medicare or social security, as that would get them voted out of office for sure, and that's the vast majority of expenditures. They also won't get rid of tax loopholes that only the rich use, because those are some major campaign donors.
I think most Republicans have dropped their fiscal conservative ideals by this point, and they're focusing most of the energy on social conservatives and also in destroying the federal government. Republicans used to be the smart money people but no more.
Re:How about US (Score:4, Insightful)
So when literally every other debt ceiling revision is done as a one-sentence bill that revises the number, now all of a sudden it's Biden's fault that House Republicans can't get on board with House Democrats, Senate Democrats, and a lot of Senate Republicans including the Minority Leader?
Yeah, that makes perfect sense.
House Republicans need to pull the lit fuse out of the dynamite, and they're the only ones that can without some kind of legal fuckery that will cause global instability and very likely lasting economic damage.
If you want to make budget changes, maybe negotiate that through the budget process that needs to be complete by 30 September instead of next fucking week.
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Invoke the 14th amendment and ignore the debt ceiling.
I've never quite understood this interpretation of the 14th amendment, and how Biden should 'ignore the debt ceiling'. The amendment basically says that the US is Constitutionally bound to pay its debts, not that the President can borrow as much as he wants. There is actually more than enough money coming in to make payments on our debt. What Biden SHOULD do is put debt payments at the front, pay for the programs/whatever that he wants to prioritize, and then when there is no more money for Republican pr
Re: How about US (Score:2)
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What do you think is going to happen when you take away the safety nets and other social programs? Do you think the old and the poor are just going to quietly die in the weeds and disappear?
Re:How about US (Score:4, Insightful)
If you actually think that every person is capable of working, let alone able to work a job that pays enough to covers all of their needs, in perpetuity until the day they die, then you are too delusional to have a discussion with
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1) it's unconstitutional and ridiculous
2) Biden could just agree to a lower total of expenses.
There is no constitutional requirement to spend more money every year or raise the debt cap.
Spending less and inside budget would be a sign of leadership.
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The 14th amendment does has a valid point about paying authorized public debts. This fight over spending _should_ have been done when passing the budget. Not raising the debt now is like trying to re-legislate the budget hoping to get a different outcome this time. It is legitimate and authorized debt.
Biden can agree to a lower total of expenses - DURING THE BUDGET PROCESS! The negotiations going on now are about trying to get consessions from Biden for the NEXT budget. We can also agree to increased rev
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Spending less and inside budget would be a sign of leadership.
Raising taxes is another way to resolve the issue, but we never talk about that because Republicans have convinced people that making the already-wealthy people more wealthy somehow benefits ordinary people, and the Democrats are too timid to raise this possibility.
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Um... yes there is. Congress has said "you shall spend money on these things". The executive branch is in fact required to spend that money on those things.
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debatable and the courts will work that out. Might even have to go on a bill by bill line item by line item basis. In a lot of cases congress authorized the executive to spend money on things - which is NOT the same as mandating it do so, but it explicitly forbade the treasury from issuing debt past a certain point a court might say they simply can't spend money they don't have in that case authorized or otherwise.
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Nixon tried that in 1974, which resulted in the Congressional Budget and Impound Act [wikipedia.org]. The President may REQUEST that Congress rescind an appropriation, but that's it. The assumption is, if Congress authorized appropriations in law, the President MUST spend it.
This is the basis for the Impeachment of President Trump and his attempt to withhold or put conditions on funds allocated in law to Ukraine.
And the courts HAVE worked that out [wikipedia.org], back in 1975.
Re:How about US (Score:5, Insightful)
The 14th amendment solution may be a bit contentious and likely a big fight in the courts but... If the deadline passes Biden may be forced into it. Not raising the debt ceiling is worse than the disease. This is NOT printing more money - congress has already passed a budget and the problem is that months later congress does not want to pay for it. All this would be doing is paying bills that have already been agreed to.
There's nothing in the constitution about "debt ceilings" anyway, this was added recently in 1917.
Generally the debt ceiling is a "must pass" bill, so all the prior politicization over it was posturing. Everyone knows they'd pass it eventually since not passing it would be an economic disaster. The snag is that there are way too many people in congress that do not want compromise and they seemingly do actually want an economic disaster (or are too stupid to realize that it will happen). Remember, McCarthy amazingly couldn't even get his own party to vote for him as speaker of the house until he conceded with the ignoramus wing of the party.
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If by "solve" you mean make the US dollar equivalent to monopoly money then yes both of those solutions will "solve" the problem. Enjoy using a wheelbarrow full of money to buy a loaf of bread.
That's not how fiat currencies and the economy work. The stability and value of a fiat currency is determined by its trading, not by exclusively its supply. It's a highly complex multi-variable problem. The USA is a massive financial powerhouse, insane debt, yet also insane GDP and insane international trading volume.
The only countries which cause hyper inflation are those who don't balance these against each other. Printing $1tn and holding it is not significant compared to the value of trade and the econo
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The budget was already authorized by law. Debts have already been taken out. These must be paid. Not raising the debt ceiling is the same as saying "don't pay the public debt that we already authorized".
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In this case, "AUTHORIZED BY LAW" implies debt that has been authorized by law. So if Congress passed a law that says Joe Blow gets $5 each week, then THAT would be debt authorized by law and the 14th says that debt has to be paid. It doesn't mean that the use of the 14th needs to be approved by law. That would defeat the point of that clause.
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If the US defaults, the US dollar, which almost every other currency in the world is pegged to, will catastrophically lose value and send the entire world into economic armageddon. Playing chicken with the debt ceiling is a fools game. Those debts are already owed regardless.
It would be interesting to see the overlap of conservatives condemning the student loan forgiveness AND those willing to default on the USA's debts as a political maneuver
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Or we could just spend less.
That's a novel idea.
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Fine. Cool. The debts we currently have still needs paid. And it is up to congress to control the purse, not Joe Biden
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There is how our government is designed on paper and there is the reality that if the president doesn't "pre-agree" to the budget he can just veto it and we're back at square one but wasted a lot of time getting there. The actual system is much more practical than what we have on paper yet still falls within the bounds of the constitution.
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In recent history, the closest we ever got to that was the Clinton administration. Immediately reversed by Bush. What does that tell you?
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There is no conflict there. Student loans should not be forgiven. Those who must default should default.
Because those were special low rate loans they cannot be discharged but that does not mean they can't be paid late.
The same thing largely applies to US bonds and government liabilities they might be considered somewhat special, and yes the 14th amendment does say they MUST be paid EVENTUALLY.
Re: How about US (Score:3)
Argentina and Greece wholeheartedly agree!
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Rethuglican? Are you visiting from DailyKos?
Lol, but you misspelled it.
It's RethugliKKKan.
Re:How about US (Score:5, Interesting)
The difference is that the USA, as big as that debt is, can pay it off. It's just a matter of the political will to actually pay it, which means pulling from some other programs. The three major expenses of USA are interest on debt, US military, and Social Security. Everything else is pocket change. So far, USA hasn't been willing to cut any of those big three, but maybe in the next few days, it'll default on the debt. Hope not.
Re:How about US (Score:5, Informative)
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Also don't point out the fact that when the program started it had 8 workers paying in for every retiree withd
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Re:How about US (Score:5, Informative)
Foreign holdings of US debt is only around 30%. The US is the highest owner of US debt [pgpf.org]. The Fed alone holds around 9 trillion, and private investors through mutual funds own another 4 trillion or so.
Re:How about US (Score:5, Informative)
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
This list is missing the top country. The US government, institutions, and people hold about $23.9 trillion out of the total $31.798 trillion debt. That is, the US itself holds more than three times the total debt from all foreign countries combined.
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The list was of foreign owned US debt.
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Yes, and then it was used just as honestly as the ads that show the very top of a bar graph, cutting off the lower 60% that would show that the difference between Acme brand and brand X is trivial.
By adding in the domestic owners of debt as well, everything is put in proportion.
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Imagine this nightmare scenario: China, being buddies with Russia, tells the U.S. that unless it stops supplying Ukraine with weapons to defend itself from Russia, they'll demand full repayment of the $1.1T the U.S. owes them -- or else.
The US would just laugh at China, the same way we are all laughing at you.
US treasuries don't work that way.
The worst China could do is stamp its feet and pledge to not buy any new ones.
They could sell the ones that they currently have at a loss to someone else, shooting themselves in the foot. And having virtually no effect on America.
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Of course the sums here are actually "some billions" and "several trillion", however the principle is the same.
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Well, I don't think the US government can have secret terms for its debt. So likely not a problem.
The US debt owned by China is pretty small. So really not a problem in the US.
Re:How about US (Score:5, Insightful)
Duh? (Score:2)
You thought the West was exploiting countries with economics? Anyone who thought China was a good alternative was outright stupid.
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Re:Duh? (Score:5, Insightful)
A politician's reign is typically from 5 to 20 years, depending on the country's system etc. It's too tempting to borrow now to hand out favors to voters and backers, and then let the next generation pay it off. Hit-and-run.
This is how big countries and big banks snag a country by the gonads.
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arguably if everyone is bankrupt than the problem is not the debt that the valuation of the currency is incorrect.
At that point it *is* a monetary problem.
Ultimately debts are claim on future production. Someone somewhere should be in possession of something that has greater value than their liabilities by definition.
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Screw the lenders! (Score:4, Informative)
This is common not only with China as the lender but also with private banks, other countries and multinational organizations lending to "less developed" countries who are desperate for investment in infrastructure.
China has been notable in that they tend to invest in showy projects such as stadiums in addition to ports and resource extraction.
Of course, when it comes time to pay the piper, they come up short and end up cutting domestic spending on things like health, education, shelter, etc.
Default is always an option but banks (and countries) have ways of enforcing compliance (which usually make things worse for the citizens).
Capitalism is the best system for generating profit but not necessarily well-being.
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If you screw the lenders then you don't get the money in the first place. Therein lies the problem: countries without inherent wealth have to do something to attract the attention of those who have wealth to get them to invest. That attraction is the return on investment (ie. wealth extracted from the country over longer term in exchange for infrastructure now). The problem is that the investment has to be in stuff that actually makes the receiving country wealthy enough to pay off the debts. Water, power,
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I was going to say, it's a good job they qualified their statement with "most unforgiving *government* lender", because private lenders have bankrupted entire countries before.
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Capitalism is great for "well being" its done more for well being than any other system ever.
Capitalism is a tool, it CAN be used in predatory fashion. I stab you with a Phillips head screw driver too, it does make screw drivers bad.
The issues here are two (2):
China is making loans which I don't believe they expect the borrows *can* repay. Others like the IMF and Western investors are not stepping in because they can see these places are not ready for such investments. China's goal isnt to make money inve
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We need to ban screw drivers. Think of the children!
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Unregulated or poorly regulated capitalism are a real problem.
I stab you with a Phillips head screw driver too, it does make screw drivers bad.
It does mean that we need laws and enforcement that tell you what you can and cannot do with your Phillips head screw driver.
And behold! We do. There are substantial penalties for assault and homicide.
We should implement more of those for the instruments of Capitalism.
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Or, maybe nations should just not take out loans they can't afford to repay. We're not talking about some scamster going after gullible and half-senile seniors here. These are contractural transactions entered into by governments. Governments have veritable armies of lawyers, analysts, economists, auditors, regulators, and other bureaucrats whose entire jobs are to look out for the interests of the government and make sure that contracts and treaties are on the up-and-up.
It's called due diligence. Joe S
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Clearly you're not familiar with government in low income countries.
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In several/many of these places, the leadership was either flat out bribed or used the money to build useless but flashy projects to help their popularity.
These are not places with the same kind of western concepts of ethics and checks/balances you're used to.
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>Capitalism is the best system for generating profit but not necessarily well-being.
Historically, it's by far the best system for generating well-being though. And one thing that unites all utopian thinkers that believe that they can imagine a new system that would generate a utopia better than what we have today is that applying their utopian thinking leads to destruction of well-being.
Don't dance with the devil (Score:3)
and you won't get burnt.
Unfortunately, many poor nations have to sell their soul to survive at a given point in time, and now they're worse off that if they had done nothing at all.
And yet I also understand China's position, which isn't in the business running a charity for poor nations.
Don't be that poor in the first place. (Score:3)
These countries have always been chaotic and badly run. They are natural victims for colonialists.
So it has been for at least a thousand years. China is just the latest to shake them down.
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Actually, a lot of poor nations are Kleptocracies. This is just a way for the ruling class there to steal more from the population. That they effectively sell their country to China along the way is something they could not care less about.
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many poor nations have to sell their soul to survive at a given point in time
No not really. None of this was required. The IMF and other international funds have been providing sensible loans to the 3rd world for years. This is largely squandered through corruption. What China is doing is providing loans for big flashy projects that provide little to no benefit but none the less allow a politician to show "progress".
You know, like in Angola where people earn fuck all, education is in the shitter, the nation is a giant slum save for a few oil industry workers who stay at nice hotels
Modern colonization (Score:5, Insightful)
Re:Modern colonization (Score:5, Insightful)
Re: Modern colonization (Score:3)
You know what would certainly help? Sending even more foreign aid cash for a few more decades! I am sure some local war lords have not upgraded their Bentleys and Porsches in a year or twoâ¦
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China figured out it's easier and just as effective to financially conquer a country as it is to do so by military force. They've already bought up huge tracts of farmland in Africa and you can bet that any country that defaults will end up being a vassal state to China.
The problem is China can't export the farmland to China but a country can nationalize it.
Re: Modern colonization (Score:5, Insightful)
Re:Modern colonization (Score:5, Interesting)
It isn't the amounts.
The problem is that normally the west would cut them a break and every takes a hair cut but they have a special side deal which puts China at the front of the line automatically and the western banks/gvts/orgs don't want to get fucked and leave China whole.
They want everyone to take a loss and China has arranged it so they don't have to.
The west won't give them a break if China makes out well. That's the problem. Not the total numbers.
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Why would the other lenders want the first penny going to China much less $15m?
If their loan is forgiven by $50, then 30% of the forgiveness is going to China.
You don't see a problem in that?
Salaries or Default (Score:3)
China = Pay day loan ??? (Score:3)
Instead of Guido showing up to Break your knees, it's Mr Chou and his henchmen
What were they thinking? (Score:3)
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They can just default. It's not like any of those countries haven't done so before. Many of those countries have "nationalized", or stole, resources and infrastructure before. That leaves China's only recourse is years and years of negotiations with some inter-governmental body, or military force, neither of which will benefit
Same old story (Score:2)
“he who feeds you, controls you”
Thomas Sankara
Set it to $0 (Score:4, Interesting)
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Well, who decides that? The ICJ? Oh, wait, China does not recognize them. Just some other rogue nations, like the USA.
wimpy (Score:2)
I will pay you Tuesday for a hamburger today. Apparently, Tuesday has arrived.
Chinas learning what the west learned long ago (Score:4, Funny)
That is one way to own them (Score:3)
And a very capitalist one: Offer them loans they are to stupid and greedy to refuse and then have them pay through the nose forever. Actually an ideal way to own a kleptocracy and many (most?) poor countries qualify.
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belt and road: a lot more belt, far less road.
i for one am absolutely shocked to see something like this happening... could the drumbeats of global economic collapse be getting louder?
(Also let this be a warning to the people who bemoan western hegemony, i get the not-so-subtle impression that the Chinese are far less forgiving than the West.)
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This. This is the main reason why loans are made in any case - to own its/their arse in the long term,
China vs IMF (Score:2)
You only hear BAD CHINA on /. (Score:3)
Golden opportunity to stick it to China? (Score:3)
This seems like a golden opportunity for western countries to strike a major blow to China without really having to do anything.
All they'd have to do is let these countries know that, "hey, if you default on loans to China specifically, and/or seize the domestic assets securing the loans, we'll look the other way and not ding your credit rating."
China would be screwed.
Re:How about just tell China to F itself? (Score:4, Insightful)
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Which would be what? These aren't the kind of countries with much in the way of assets abroad. China might repossess a consular headquarters in Beijing or something, but the assets they actually want are inside the debtor countries. And they can't have them unless they're given by choice.
The West would find it hilarious if China tried to take anything of strategic value from these countries by force.
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and they can ban that at an later time