In fact if China extended loans to poor countries in US$
(by recycling its US$ surpluses in trade, which in the past goes to
buying more risky US$ Treasuries) and asking for repayment in Yuan over
an extended period, is actually beneficial for those debtor countries
with the slightly weakening Yuan. This is my two cents worth, so please
pardon me, as I am no economist.
On the other hand, when
countries take US$ loans from the IMF and World Bank, which is to be
repaid in US$ for sure, the debt trap is there, if those countries'
currencies are slowly being devalued, as it is happening today.
Therefore, repayment is getting more and more difficult for them by
having to buy expensive US$ to repay their loans, using their devalued
currencies. That is the debt trap that we are talking about, pure and
simple. Argentina is the perfect example of taking IMF loans.
Mohammed
bin Salman just rubbished the Chinese debt trap narrative espoused by
the West over those BRI projects. Countries that took the loans from
China have all the infrastructures to show - airports, railways, roads,
reservoirs, ports, housing, on top of opening up trade that benefits
economically those countries that took Chinese loans for
infrastructures. Such infrastructures belongs to them and no one is able
to take them away. Those infrastructures that China constructed do not
belong to China anymore, while the surplus US$ in trade as held by China
is a target for sanctions and is subject to the risk involved. The
lessons from Russia, having its Central Bank reserves seized by the USA,
has not gone unnoticed by the Chinese. That was a drop in the ocean
compared to the size of China's foreign reserves of US$3.2 trillion.
The
only take away is that it is a win win situation for China and the
debtor countries, and this is not beneficial for the USA. China
discovers a channel to recycle its massive US$ surpluses, without having
to take the risk of buying more US$ treasuries, while the USA has no
chance of seizing those assets constructed by China, which now belongs
to others and not China. Seizing those infrastructures is impossible,
unlike USA assets held by China, which had alreay been targeted by the
USA neo-Cons during the COVID19 pandemic, right?
Anonymous
China has unleashed another bombshell, restricting the export of graphite for making batteries. That will affect the rising EV industry the most. The EU wants to investigate Chinese EVs and now China is hitting them hard in the groin.
ReplyDeleteThis is going to affect the production of batteries, the most important component for EVs. They are going to the WTO to complain about the restrictions placed by China, but so what? China is investing totally in EVs, and therefore needs graphite in enormous quantities and needs to restrict its export. It is illogical for China to export graphite while there is such a need domestically. Shall we call it a 'National Security' issue for China?
Sure, countries like the USA, Germany, Japan can talk about setting up facilities to counter China's move, but at what cost and how long it is going to take? China again is the major exporter of graphite, and produces the best quality graphite from its years of experience in refining. Globally, Turkey holds the biggest reserves of graphite, followed by Brazil and China.
Talking about taking China to the WTO, what about the restrictions placed by the USA against China in chips and lithography machines? Those are non issues? As I said before, China has plenty of cards to play and if the USA and its allies wants to escalate the tech war, China is not going to remain passive and just tolerate the humiliation. China will hit back where it is going to hurt most. Not the kind of irrelevant rubbish like the sanctions on trees, dogs, music, plays, sports etc that the West placed against Russia.