I remember reading about Sri Lanka, how it’s a prime example of the lie about Chinese debt diplomacy. To quote the article: “Research shows that Chinese banks are willing to restructure the terms of loans and have never actually seized an asset from any country, much less the port of Hambantota”
“Research shows that Chinese banks are willing to restructure the terms of loans and have never actually seized an asset from any country, much less the port of Hambantota”
I hadn’t read the misinformation about China claiming that they were trying to seize a port. My main concern is that a lot of the details of the financial arrangements made in the past haven’t ever been made public. Which means they probably aren’t being made with a high degree of public input, despite the general public being the one who will have to pay them back.
Another concern is that there have already been multiple defaults, which either means China isn’t doing a lot to ensure the country have the ability to remain in solvency. Or that they don’t really care if they get the money back… in which case, why structure the loans with such an aggressive payment program in the first place?
It’s been a while since I looked at the default in Sri Lanka, and after reviewing it does look like they are in talks to restructure terms at least enough to qualify for an IMF loan.
However, unless we seen the actual terms it could be a robbing peter to pay Paul scenario.
And again, this isn’t just some accusation about China being inherently evil or sneaky. It’s just extremely hard to effectively materially support smaller countries in a significant way that doesn’t have unforseen consequences on their domestic political structure.
I don’t know much about them, but in what way are they aggressive?
Or that they don’t really care if they get the money back
To some extent, yes.
The second problem with the narrative is that it relies on the assumption that it is Chinese policy to advance predatory loans with onerous terms and conditions to ensnare countries into debt. In reality, China often advances loans at fairly low interest rates, and is often willing to restructure the terms of existing loans to be more favorable to the borrowing country, or even forgive loans altogether. In fact, in August of 2022, the Chinese government announced it was forgiving 23 interest-free loans in 17 African countries. Prior to that, between 2000 and 2019, China had also restructured a total of $15 billion of debt and forgiven $3.4 billion in loans they had given to African countries.
don’t know much about them, but in what way are they aggressive?
It’s hard to be exact, as I have said they tend to keep the details pretty close to their chest. But the oddest thing I have seen is several countries defaulting within just a few years of them being written.
Usually if you weren’t being aggressive with your terms , there would be a windfall period of low to no interest payments before you would start collecting. This gives the borrower some time to recoup their investment before having to make payments.
I have also seen claims, (with no real evidence) that in the terms of the loan is a clause that forces the borrower to create an escrow account that pays the loan in advance of other responsibilities. But as I said, those claims didn’t really back it up with a lot evidence.
China often advances loans at fairly low interest rates, and is often willing to restructure the terms of existing loans to be more favorable to the borrowing country, or even forgive loans altogether. In fact, in August of 2022, the Chinese government announced it was forgiving 23 interest-free loans in 17 African countries. Prior to that, between 2000 and 2019, China had also restructured a total of $15 billion of debt and forgiven $3.4 billion in loans they had given to African countries.
I think this article is conflating ifl loans with commercial and policy bank loans. IFL loans are small interest free loans that china typically allocates to developing nations for specific state works. They’re kinda a small grant that china utilizes to spread influence and open doors in the southern hemisphere.
Unfortunately ifl loans only account for about 1% of the total 159 billion in loans given to Africa from 2010-2020. And the actual loan forgiveness for African IFL programs has only been estimated to be worth between 132-402 million dollars.
I remember reading about Sri Lanka, how it’s a prime example of the lie about Chinese debt diplomacy. To quote the article: “Research shows that Chinese banks are willing to restructure the terms of loans and have never actually seized an asset from any country, much less the port of Hambantota”
I hadn’t read the misinformation about China claiming that they were trying to seize a port. My main concern is that a lot of the details of the financial arrangements made in the past haven’t ever been made public. Which means they probably aren’t being made with a high degree of public input, despite the general public being the one who will have to pay them back.
Another concern is that there have already been multiple defaults, which either means China isn’t doing a lot to ensure the country have the ability to remain in solvency. Or that they don’t really care if they get the money back… in which case, why structure the loans with such an aggressive payment program in the first place?
It’s been a while since I looked at the default in Sri Lanka, and after reviewing it does look like they are in talks to restructure terms at least enough to qualify for an IMF loan.
However, unless we seen the actual terms it could be a robbing peter to pay Paul scenario.
And again, this isn’t just some accusation about China being inherently evil or sneaky. It’s just extremely hard to effectively materially support smaller countries in a significant way that doesn’t have unforseen consequences on their domestic political structure.
I don’t know much about them, but in what way are they aggressive?
To some extent, yes.
https://www.liberationnews.org/why-chinese-debt-trap-diplomacy-is-a-lie/
It’s hard to be exact, as I have said they tend to keep the details pretty close to their chest. But the oddest thing I have seen is several countries defaulting within just a few years of them being written.
Usually if you weren’t being aggressive with your terms , there would be a windfall period of low to no interest payments before you would start collecting. This gives the borrower some time to recoup their investment before having to make payments.
I have also seen claims, (with no real evidence) that in the terms of the loan is a clause that forces the borrower to create an escrow account that pays the loan in advance of other responsibilities. But as I said, those claims didn’t really back it up with a lot evidence.
I think this article is conflating ifl loans with commercial and policy bank loans. IFL loans are small interest free loans that china typically allocates to developing nations for specific state works. They’re kinda a small grant that china utilizes to spread influence and open doors in the southern hemisphere.
Unfortunately ifl loans only account for about 1% of the total 159 billion in loans given to Africa from 2010-2020. And the actual loan forgiveness for African IFL programs has only been estimated to be worth between 132-402 million dollars.