Understanding the debate about Chinese development loans, geopolitics & neo colonialism.
There has been a lot of divisive concern in recent years about Chinese (PRC) loans to developing nations.
In the Asia Pacific it is about geopolitics and China PRCs stated ambitions for sea and airspace control to the first island chain, security of her global trade routes and her desire to see an end to US hegemony in AsiaPac.
In Africa China has been pursing resource and energy security. Contrary to popular belief China PRC is not new in Africa she has been active in Africa since the 1960s and was and is still a key backer of ZANU-PF, China's relationship with Ethiopia runs back to 1980 and is now the regional cornerstone relationship in the horn of Africa. There are over a million ethnic Chinese people is Sub Saharan Africa, ties run deep.
African nations and watchers of the region the issue is one of neo-colonialism. Is China PRC simply replacing/emulating all the bad things done by the west in Africa ? Is China PRC the new patron of the same exploitative activities?
This short section below I cut is from a Quartz Africa post on the 15th of March. The post really helps nail the concern in a way we can all understand and for the trolls its not only China but private capital as well! The figures are emblematic as is using resources, were loans are collateralized against future streams of income.
The implications for the same underlying style of development loans for infrastructure can be seen with the port loan proposal in Vanuatu or in action with the port loan in Sri Lanka that went so badly wrong for Sri Lanka.
These loans as a complex geopolitical and economic strategy contrast strongly with the national incompetence that saw Australia legally cede control of the operations of the highly strategic port of Darwin to a Chinese govt aligned entity. A debacle with huge associated security issues and concerns as Darwin is the frontier with ASEAN and the Wests forward facing position at the juncture of SE Asia and the Pacific & Indian Oceans.
The scale of the money involved in the resource and infrastructure loans is staggering and in a slowing global economy where the demand for the minerals, gems, oil, agricultural products is now falling, these nations could be once again be unwittingly caught up in a 70s style "post oil shock" debt trap. In the 70s it was high interest rates that caught out developing nations, in 2020s it could be low or slow demand and repayments.
"Africa’s debt load has soared some 150% to over $583 billion in 2018 from $236 billion 10 years earlier, according to World Bank data.
A sizable chunk of that debt in Africa is made up of resource-backed loans which are struck between the resource producer (Africans) and the lender—usually China in recent years. A resource-backed loan is defined as a borrowing mechanism by which a country gets finance in exchange for, or collateralized by, future streams of income from its natural resources, such as oil or minerals, think copper, oil, palm oil, bauxite or transport on a rail system from S.Sudan to Mombassa.
A recent report from the Natural Resource Governance Institute (NRGI) examined 52 resource-backed loans made between 2004 and 2018, with a total value of more than $164 billion—30 of them, with a combined value of $65.8 billion, were made to Sub-Saharan African countries.
More than half the total amount of loans to Sub-Saharan African countries examined in the report came from China Development Bank and China Eximbank to Angola ($21.4 billion); Ghana ($3 billion); Niger ($1 billion) and Sudan ($3 billion). The remainder was mostly provided by international commodity traders to oil producers Chad ($2 billion), Congo Brazzaville ($5.1 billion) and South Sudan ($1.3 billion)."
Yinka Adegoke, Quartz Africa editor . Quartz Africa Weekly Brief. [email protected]. 15 March 2020.
So if they can't pay, default or skip payments, the debt gets paid in oil, iron ore, bauxite etc or with the garnished income from it, so the country has all the expenses on going and none of the revenue.
I am not sure what can be done to help the nations that sign up for these deals as they are legal and legitimate but understanding them and knowing the issue is a problem is the first step.