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China's 'Silk Road' project runs into debt jam

17 Comments
By Julien GIRAULT

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The Chinese I know (family) living in U.S.A. have NO TRUST in Communist China.

Look at their track record with Tibet...death and destruction!

2 ( +2 / -0 )

If their manufacturing sector slows down, then China's doesn't have any fall-back position to lean against... a good example is this.

https://www.reuters.com/article/us-china-economy-pmi/china-august-manufacturing-growth-slows-to-14-month-low-caixin-pmi-idUSKCN1LJ03Z

800lb Panda in the global trade and commerce stage is conceivably the least balanced economy in todays modern world. This is why Xi and his cohorts are making unprecedented means of securing their supply chain.

China's structurally flawed, narrow-based economic dependency is also why the Chinese government have spend so much unwonted resources to expand their military presence. All the things significant to their supply chain survival must be protected in order to secure their susceptible national interests.

Everything valuable to China's economy surrounds the nation's critical need and must have a stable global supply chain for securing organic materials to import as well as leveraged exporting trade accords. Therefore concluding that China's economy is deep only in manufacturing while narrow every else.

A big reason as to why the Chinese gov has now settled their economic system as reliant on them being an economic bully. At all cost, doesn't matter how or what, China have to preserve their supply chain enable for them to operate with their narrow-based economic system of importing raw materials for their exporting of cheap, finished products. 

Even now, Xi and co. are constantly addressing their weakness of their inherent economic framework towards other nations especially with emerging market nations who don't have overly strong economies as well as third world countries that China has interest in and can easily be manipulated. Hence, the silk road dubbed “One-Belt / One-Road”is intrinsically their economic bully plan to guarantee their long term economic viability in terms of securing their supply chain at whatever cost.

As an experienced trader and investor through various, multiple financial and capital asset classes, IMHO, the reality is with the way China is positioning their investments while structuring a heavily supply chain depended economic model, it would put Xi and his henchmen at an extremely high, unmanageable risk from the effects of global economic contraction.

1 ( +2 / -1 )

As full time personal, private institutional macro fundamental investor and technical intrinsic value-based trader like me who trades and invest 7-9 USD figure voluminous transactions through Forex futures & spot, options, bonds, stock indexes, ETFs, commodities, precious metals, cryptocurrencies and real estate, it's a huge deal to pursue and concatenate closely between the current trade war of US and China.

To discern China's so called "Silk Road" project, one must have a clear comprehension of how fundamentally vulnerable China's economy when it was developed. All the talking heads that portray as experts almost always mentioning about the how strong China's economy is. But people are forgetting how structurally defective their underlying critical architecture of their economic model.

You see, China is indeed strong but only a specific part of their economy which is manufacturing. It never was a denouement of natural economic conditions because economy is/was always a central planning one. Because of this communist controlled style of central planning, the reality is that it was designed from the top down approach.

This engineered method of their economy gives you an eagle's eye view of the big picture in understanding how weak and narrow-based their overall economy really is. A country's economic model is only as robust depending on the infrastructure of the actual nation.

Think for a second of it like this way: If a country like China gets shut off from all other nations, can it sustain or survive? Taking a look at the big picture view, we can fairly assess that economic strength is a factor of the nation(s) capability to have sustenance and aid itself first and foremost. If a country is dependent on other nations who are independent, then that dependent nation is not that strong after all. Therefore, almost everyone doesn't really realize that China is an exorbitantly dependent country.

When Chairman Xi announced the "One-Road/One-Belt" initiative (now banned from in Beijing for discussions); in combination with a imminent trade dispute with Pres. Trump; This was China's stratagem to play because the CCP is aware their economy is very vulnerable simply because of too being dependent only on exports and manufacturing.

1 ( +1 / -0 )

Five years on, Xi has found himself defending his treasured idea as concerns grow that China is setting up debt traps in countries which may lack the means to pay back the Asian giant.

Look what happened to Sri Lanka:

Sri Lanka has already paid a heavy price for being highly indebted to China.

Last year, the island nation had to grant a 99-year lease on a strategic port to Beijing over its inability to repay loans for the $1.4-billion project.

It's the 21st century version of the old colonial land grab - remember, Hong Kong was also a 99-year lease forced by Britain on China when it was the British doing the colonizing

The huge endeavour brings much-needed infrastructure improvements to developing countries, while giving China destinations to unload its industrial overcapacity and facilities to stock up on raw materials.

*Stevenson-Yang said China's loans are quoted in dollar terms, "but in reality they're lending in terms of tractors, shipments of coal, engineering services and things like that, and they ask for repayment in hard currency."

Standard & Poor's said Beijing structures the infrastructure projects as long-term concessions, with a Chinese firm operating the facility for a period of 20 to 30 years while splitting the proceeds with the local counterpart or government.

Pretty much this - the companies they hire are Chinese companies, and the workers are Chinese workers. It's China exporting their unemployed for job placement. The receiving countries get much-needed infrastructure, but the local companies don't get the jobs and the local workers don't earn much-needed career skills. Yet China gets repaid in hard currency

And the new infrastructure, though helps the locals, often end up helping Chinese export companies the most - by making it faster and even cheaper to transport overproduced Chinese goods to sell to the locals, driving out local industries who can't compete with the lower prices. And it doesn't help the locals that it only goes one way - it doesn't make it faster and cheaper for local companies to transport goods to sell in China because China isn't looking to buy their goods

Furthermore, it's loans without a conscience - China doesn't care how their loans are used, whether for good or bad, such as autocratic governments tightening their grip of control of their people (e.g. better equipment to spy on citizens). Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, and often little or no environmental- or social-impact or risk assessments (how well the receiving country could even pay back the loan)

3 ( +3 / -0 )

Eat Chinese bait and get eaten by China.

2 ( +2 / -0 )

All these worried countries could avoid the debt trap by signing a document that declares that their country has been an integral part f China since ancient times and offers it as a Chinese province to be ruled by the CCP. Very simple.

6 ( +7 / -1 )

Debt trap tactics are a form of "soft imperialism". Debt default enables the next level of intrusive entanglements. Project development is often conditionally awarded to firms of the creditor country which recaptures much of the project's value chain.

5 ( +5 / -0 )

"Extra territorial rights would make China's life a lot easier in terms of controlling the movement of its goods and also avoid (in the eyes of China) the meddling of unreliable democratic governments who may have a change of heart in the matter."

We're in 2018, yer no?!

This happened in the 19th century with China on the receiving end; no longer applicable.

If there's a default, China is really and truly "effed"; as simple as that.

-6 ( +0 / -6 )

The walking dragon burning what it touches.

yeah well I think Chinas got a long way to go before it passes all the destruction that has come from what America touches

-8 ( +0 / -8 )

We’re going to see either a lot of red ink on China’s books or a lot or red blood on the streets where China is intruding economically.

6 ( +6 / -0 )

The waking dragon burning what it touches.

1 ( +4 / -3 )

Get it built and just don't pay it back. Problem solved.

0 ( +3 / -3 )

They should be thankful

-2 ( +1 / -3 )

It will be interesting to see what happens when one of these countries defaults on its loan! I suspect somewhere in the corridors of power in Beijing this has been discussed, and may involve China taking control of the infrastructure already built, ports, railways, highways...etc. Extra territorial rights would make China's life a lot easier in terms of controlling the movement of its goods and also avoid (in the eyes of China) the meddling of unreliable democratic governments who may have a change of heart in the matter.

The additional upside is that China then has the potential to expand its harder power across the network without fear of issues developing. Its happened before, South Manchurian Railway anyone, It will happen again, this time, less through force and more through the modern financial markets! Clever if you ask me!

8 ( +8 / -0 )

The New TPP. Even the UK is joining.

Hardly. The UK might not even exist in a few years, so highly doubtful it can engage in any trade talks while Brexit either dismantles the union or reforms it into another shape (without Scotland? without NE?)

2 ( +7 / -5 )

All of the nations signed up to Chinas "Belt and Road" partnership, should cancel the membership. They can join the biggest and most democratic free trade pact, led by Japan. The New TPP. Even the UK is joining.

-3 ( +6 / -9 )

China knows that as the climate changes vast swaths of their country will be desert so they need investments in other countries to grow food and have economic ties. The Yangtze river is supported by glacial melt after all and is declining. As that declines to a tipping point, then things get interesting as they try to keep their country food sources together. I think I had read here about countries in Africa having Chinese farms.

Also if you have a huge population on the coast, and that coast is under threat, decisions have to be made. While transparency on this might not ruin their ability to act this way, they are no guarantees so this scenario isn't discussed in case it ruins their ability to proceed. A history of not used to playing well with others isn't helping matters but based on the climate model predictions it is understandable why China is in a rush.

1 ( +6 / -5 )

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