Chinese companies have built or financed $1.5 trillion in roads, dams, mines, power plants and other projects around the world in recent decades. The projects have had enormous environmental impacts.
The environmental and human rights consequences of China’s Belt and Road Initiative are obscured by design.
This is a very important issue whenever you deal with China. It is sometimes said - also in the linked article - that Chinese loans ‘come with a few strings attached,’ but terms come with exclusively opaque terms designed for the Chinese party-state to reap benefits at the cost of borrowers.
One very good analysis comes from the Economic Institute in Kiel, Germany, that investigates how China collateralizes. This is of particular importance as almost half of all public and publicly guaranteed (PPG) loans to emerging market and developing economies (EMDEs) - $420 billion in collateralized debt across 57 countries - is collateralized.
[…] As security [for the loans], they use liquid, easily accessible assets, such as cash in bank accounts located in China. They rarely take infrastructure project assets as collateral, but often rely for repayment on established commodity revenue streams unrelated to the project. Typically, EMDE governments and state-owned enterprises commit to route foreign currency proceeds from commodity sales through bank accounts controlled by the lender. The cash balances in these accounts can be very large; in low-income, commodity-exporting countries, they average more than 20% of annual PPG debt service to all external creditors. The same revenue source can secure multiple successive borrowings over many years […]
One major new insight in this entire (highly recommended read) is what is called revenue ring-fencing, a previously undocumented pattern where a significant share of commodity export receipts never reaches the exporting countries.
Revenues routed overseas secure priority repayment for the creditor; they remain out of public sight and largely beyond the borrower’s reach until the secured debts are repaid. These findings raise new concerns about debt transparency, fiscal management, fiscal autonomy, and the quality of macroeconomic surveillance, particularly in commodity-exporting EMDEs.
[Emphasis mine.]
So the argument that Chinese loans would come without strings attached isn’t true. It’s just that the strings are not publicly visible.
This is a very important issue whenever you deal with China. It is sometimes said - also in the linked article - that Chinese loans ‘come with a few strings attached,’ but terms come with exclusively opaque terms designed for the Chinese party-state to reap benefits at the cost of borrowers.
One very good analysis comes from the Economic Institute in Kiel, Germany, that investigates how China collateralizes. This is of particular importance as almost half of all public and publicly guaranteed (PPG) loans to emerging market and developing economies (EMDEs) - $420 billion in collateralized debt across 57 countries - is collateralized.
The Kiel Institute says (opens pdf):
One major new insight in this entire (highly recommended read) is what is called revenue ring-fencing, a previously undocumented pattern where a significant share of commodity export receipts never reaches the exporting countries.
[Emphasis mine.]
So the argument that Chinese loans would come without strings attached isn’t true. It’s just that the strings are not publicly visible.