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China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption according to a new paper “China as an International Lender of Last Resort” by Sebastian Horn of the World Bank; Brad Parks, a research professor at William & Mary University; Harvard’s Carmen Reinhart; and Christoph Trebesch, a director at the Kiel Institute. The researchers found 128 bailout loans worth $240 billion dollars to 20 countries between 2000 and 2021. The vast majority were extended over the last five years, and almost half happened in 2019-2021. Moreover, the researchers found that People’s Bank of China swap lines are far more meaningful than direct loans.
Here is a link to the paper:
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China’s Overseas Bailouts: A Strategic Investment or Debt Trap?
In recent years, China has been making headlines with its overseas bailouts, providing financial assistance to struggling countries and businesses around the world. While some view these bailouts as a strategic investment in economic development and global influence, others are concerned about potential debt traps and geopolitical implications.
One of the most notable examples of China’s overseas bailouts is its involvement in the Belt and Road Initiative (BRI). Launched in 2013, the BRI is a global infrastructure development strategy aimed at enhancing connectivity and economic cooperation between countries. As part of this initiative, China has invested billions of dollars in various projects, including ports, railways, and power plants, in countries across Asia, Africa, and Europe.
While these investments have been hailed as a means of promoting economic growth and development in struggling regions, they have also been met with criticism and concern. Some argue that the BRI projects are plunging countries into unsustainable debt, as they often come with high interest rates and complex repayment terms. In addition, there are fears that these investments are creating a dependency on China and undermining the sovereignty of the recipient countries.
Beyond the BRI, China has also been involved in providing bailouts to countries facing financial crises. For example, in recent years, China has extended financial assistance to countries such as Venezuela and Sri Lanka, which are struggling with economic instability and debt burdens. While these bailouts have helped these countries avoid defaulting on their debts, they have also raised questions about China’s intentions and the potential political influence it may gain as a result of its financial support.
Furthermore, China’s overseas bailouts have raised concerns about the environmental and social impact of its investments. Critics argue that China’s projects often lack transparency and environmental safeguards, leading to negative consequences for local communities and ecosystems. There are also concerns about the lack of accountability and oversight in the implementation of these projects, raising questions about the long-term sustainability and impact of China’s investments.
Despite these criticisms, China’s overseas bailouts continue to play a significant role in shaping the global economic landscape. As the world’s second-largest economy, China’s financial assistance has the potential to create significant influence and impact on the global stage. However, it is crucial for both China and the recipient countries to carefully consider the potential risks and implications of these investments, in order to ensure sustainable and mutually beneficial outcomes.
In conclusion, China’s overseas bailouts have sparked a debate about the potential benefits and risks associated with its investments. While these initiatives have the potential to drive economic development and global connectivity, they also raise concerns about debt sustainability, geopolitical influence, and environmental and social impact. As China continues to expand its presence in global financial markets, it is important for all stakeholders to carefully consider the long-term implications of these investments and work towards creating sustainable and mutually beneficial partnerships.
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algorithm stuff
"More opaque and fractured than before."
Sounds like the "multipolar world" to me.
Lucid explanation for a somewhat complex subject .
Imvestment plus jobs is better than idling. What they got to lose. Contracts will be fulfilled if partner nation fails, as abundance of manpower will be sent to reverse any crisis.
Another point is that China can and do use the bailouts as negotiation tactics to pressure the recipient nation to use their infrastructure as collateral, increasing China’s geopolitical influence (as I believe happened in Sri Lanka?)
Do a piece on China and Caribbean countries
Is it just me or did Mr. Boyle miss an easy joke by comparing these bailouts with the good old "PIIGS" days?
Patrick can you do a video on the wholistic situation in China? What does it look like with this debt situation plus the impact of the trade wars and the real estate situation within China? I would love to understand your wholistic perspective
Do Chinese loans feature collateral such as base rights, harbor access, or power plants? To the extent loans do have collateral values, the strategic value of these assets may exceed the loans involved, a possibility China may have understood when originating the loans.
The country across the Mekong fro Kon Ken is LAO.
not LOUSE
He… Port of jabooty!
Belt & Road Initiative is similar to the UNICEF and UN days in Africa.
How many millions of donations & tax payer dollars went towards building sporting facilities and enriching the countries leaders; rather than streets, schools and infrastructure?
It's the same shit, just from the Chinese rather than America.
Donald Trump severely cut back on the reckless spending in under developed countries that left a Global market ripe for China to pursue – But the Senate has been able to continue the funding in the Middle East, because Russia has their eyes on the Middle East since the end of the Cold War (As we know it)
OneBeltOneRoad is such a joke made in china junk at 2-5 times the price. Projects have already fell apart are worthless or cant be completed due to just being too fucked. When a western company would have built something to last a centery+ for just a tad more in price while also hiring local workers for the project. All the made in China garbage is made by Chinese no locals work on any project or even oversee it. Till the damage is done and the scam is completed and your left with a bill now 2-5 times the cost of what a western company could have done. When they said it was going to cost beyond much less. Han monkies are a joke. The biggest greatest scam in history the greatest debt trap too further proving made in china is a liability its not even worthless.
The CCP is becoming so adept at managing crises which the CCP have spawned and constructed
"The lenders should've been more careful about who they lent money to." Oh, no, they were quite careful.
I love your content but blinkist is trash
Explain the Chinese swap lines in debt relief given the projects were financed in USD and not Yuan
For its flaws, the BRI is a positive asset to the developing world.
I thought China's goal originally was to force countries to give up strategic resources. I think it was Sir Lanka that recently gave China an important port?
Thank you for another great video mate. I enjoyed every second. Please keep it coming.
China is an underappreciated hero to the world.
Your suit is exquisite!
I love these chinese comments with chinese names hating Patrick now when they earlier praised him when Patrick said something good about china in the previous china video.
Good afternoon Patrick, many thanks for your channel! Highly informative, relevant and a pleasure to listen to 🙂 I was wondering whether you have done any Africa-specific research/videos. I searched but didn't find anything but the tidbits you've referenced previously in related vids – IMF loans, Egypt currency etc have been VERY helpful!
Thanks and keep up the good work, Sir.
11:50 as opposed to the super careful ways the IMF grants loans? The IMF puts strings attached the guarantees developing economies will do worse. The whole reason for the third world debt crisis was the Volcker Shock. China scare mongering.
This is what I think about when people say Chinas RMB will over take the dollar.
I mean do you trust the way they operate?
The question is, if they use lending to steal enough ports in the world does that mean their banks stay afloat?
At some point arresting all of your businessmen is going to backfire economically. And letting some party member run the banks , and housing projects will blow up in their faces.
If more people realized what a disaster China was IN China, I think foreign investors would flee. Especially when they keep building empty cities that fall apart and have no one move in.
I keep hoping these videos will teach me something. I'm interested in the topic but the videos are too technical for me I guess. I usually end up tuning out part way through.
I grew up in Brazil and for at least 30 years the whole financial survival of the country depends on keeping up with IMF debt repayment. Most of the loans are made just to roll the debt itself and there's nothing concrete left, vital infrastructure is falling apart. It drains up to 20% of the government resources mostly just to pay interest rates. For many countries in Latin America, the situation is even worst. So be honest and make an equally critical video about the IMF loans.
I grew up in Brazil and for at least 30 years the whole financial survival of the country depends on keeping up with IMF debt repayment. Most of the loans are made just to roll the debt itself and there's nothing concrete left, vital infrastructure is falling apart. It drains up to 20% of the government resources mostly just to pay interest rates. For many countries in Latin America, the situation is even worst. So be honest and make an equally critical video about the IMF loans.
stop complain，you can choose not to borrow the money before everything ， no one force you，stop blabla
It's about IMF nothing else
Good try! China's aim is very clear-"debt traps"!
The fallout of the Corona policy is driving the inflation, not the war in Ukraine. Opec is even lowering its production to maintain the oil price level.
The massive debts policy to finance the lockdowns, and the disruption of the supply and production lines is to a vast majority responsible for the inflation.
Also the shortage of labor force – first due to the lockdowns, then through the great resign.
The US is hardly doing business with Russia, but a lot with China (=> Zero Covid), had paid billions if not trillions for stimuli checks and other measurements to keep the economy and the people afloat during the pointless lockdowns (=> Sweden and its successful no masks and no lockdown policy vs. China failed zero COVID policy). But if you flood the market with money, it will lose in value.
I asked 10 of my friends, all college grads, 7 masters degrees, 1 Dr. (real Dr., not phD) 1 PhD But not a narcissist. Only 2 heard of 'Belt and Road' Americans lack of awareness of geopolitics has lead us to decline domestically and internationally.
Beware of China They cannot be trusted.
Beware of China, they cannot be trusted.
Before he was President, Donald Trump said "If you owe the bank a million dollars, you're in trouble, if you owe the bank a billion dollars, they're in trouble" and I think there is wisdom in this because as we see with these loans – if they threaten the Chinese banking sector, the PBOC is incentivised to help bail out debtors.
This analyst has completely ignored the large number of countries that had their entire debts “forgiven” by China. There’s always a hidden agenda,but it’s not subtle enough to be hidden.
Those China loans for countries under the belt and road initiatives are only a small fraction of the total loans undertaken by the countries. Must be very aware of this truth and not be simply swayed. Only China and Russia have forgo some of their loans given to African countries. If you took loans from the World Bank and IMF dominated by US you are literally dictated and you may not even have a say on some of your own country's economic decisions.
For China it’s about employment. Global influence is not a priority. Keeping the pitchforks from reaching Xi is! It’s a third world country that still has development status. The trillions it has procured from the west is beginning to dry up…
Any chance you could talk about countries buying oil in foreign currencies? I keep hearing about brazil switching to a different currency other than USD and I'm curious what the ramifications of that could be.
I would argue, that the vast majority of money that China lent out for the BRI, won't ever be paid back in full. Not even paid in other means….such as strategic ports or strategic bases. China is going to be left holding the bag.