China calling Belts and Roads loans, countries are nearing collapse

[thewayne]

Gee, who didn't see this coming?

In 2013, China started the Silk Road Economic Belt Initiative, or One Belt One Road. Basically pretty much any country could ask China for many large buckets of money to build stuff: a superhighway across the country, a new deepwater port, power plants, etc. And China would build it.

And now it's time to pay the piper.

China is calling in the loans and showing zero compassion or debt forgiveness. Pakistan is shutting down a lot of power production, causing a large amount of its textile industry to shut down. That will do wonders for Pakistan's economy.

From the Fortune article: "In March, heavily indebted Honduras cited “financial pressures” in its decision to establish formal diplomatic ties to China and sever those with Taiwan.

Last month, Pakistan was so desperate to prevent more blackouts that it struck a deal to buy discounted oil from Russia, breaking ranks with the U.S.-led effort to shut off Vladimir Putin’s funds."

I saw this problem from the beginning. Is the USA going to bail them out, adding further to our debt, are they going to collapse into war, are they going to become non-contiguous Chinese territories? Or is it going to collapse the world economy?

Stay tuned! It's going to be a really big shew!

https://fortune.com/2023/05/18/china-belt-road-loans-pakistan-sri-lanka-africa-collapse-economic-instability/

https://slashdot.org/story/23/05/22/1439227/china-is-calling-in-loans-to-dozens-of-countries

Comments

[disneydream06]

WOWZA...
This is and is going to SUCK!!!!!!!!!!!!!!!
Hugs, Jon

[thewayne]

Yep, that's the size of it.

[disneydream06]

I guess inflation prices aren't going away. :(

[armiphlage]

I'm surprised that countries aren't just jumping straight to total repudiation of their debt. They probably can't get loans or sell bonds at any reasonable rate right now, so declaring that they won't repay debt might make their credit rating worse, but won't have any practical effect on their options. The countries probably don't have any worthwhile assets in Chinese territory, and it's (hopefully) unlikely that China would invade another country to repossess port facilities and other infrastructure.

If countries claim that they only aren't paying back China temporarily due to a plausible excuse (Pakistan could suddenly care about human rights for Uyghurs, and claim they will only resume payments when all ethnic groups in China are treated equitably), that might even gain them political points with China's rivals.

[thewayne]

Interesting concept, we'll see what happens. This was pretty much an inevitable outcome, there were no way these projects were going to generate enough revenue to pay for themselves, and sooner or later China was going to demand payment.  And these countries that took the money have a lot of fundamental problems that kept their economies so low, and vulnerable to being courted with such loan programs.  It's much like payday loan scams.

[silveradept]

Whatever the solution is, it's probably whatever the IMF and World Bank did to other countries who found themselves in similar situations and couldn't afford the interest payments on the loans, either. I should hope that the organizations in question recognize that the solution they're going to come up with is loan forgiveness, and they do so sooner rather than after they take a drubbing on PR about choosing to bankrupt countries rather than be willing to forgive their investments in infrastructure.