Are China's cheap loans to poor nations a development boost or a debt trap?

[Shankranthi]

Right now I m still using something that you claim being banned in China, that means you lied, simple logic, right?

No, it just means you are desperate to claim a strawman victory

Truly pathetic. lol.

 

[beijingwalker]

No, it just means you are desperate to claim a strawman victory

Truly pathetic. lol.

Oh, maybe that logic doesn't work in India, now everyone can see who is pathetic, don't lose it.

 

[beijingwalker]

........... ..........

Right now I m still using something that you claim being banned in China, that means you lied, simple logic, right?

 

[Shankranthi]

Right now I m still using something that you claim being banned in China, that means you lied, simple logic, right?

lol..... how long will you keep trying ?

 

[beijingwalker]

lol..... how long will you keep trying ?

You are not able to explain your lie, aren't you?

 

[Shankranthi]

You are not able to explain your lie, aren't you?

Another victory for you

 

[beijingwalker]

ok, liar. lol..

 

[Shankranthi]

ok, liar. lol..

If the truth is free in china, why do you need VPN "truthful chinese" ?

 

[beijingwalker]

If the truth is free in china, why do you need VPN "truthful chinese" ?

Why do you lie about VPN, if you can't explain this lie, anything you say in the future automatically loses all credibility.

 

[JSCh]

WORKING PAPER
Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries
MAIN REPORT

Date Published

Sep 11, 2018​

Authors

Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, Michael Tierney​

Citation

Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, Michael Tierney. Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries. AidData Working Paper #64. Williamsburg, VA: AidData at William & Mary.​

Abstract
How do development projects influence the geographic distribution of economic activity within low-income and middle-income countries? Existing research focuses on the effects of Western development projects on inter-personal inequality and inequality across different subnational regions. However, China has recently become a major financier of economic infrastructure in Africa, Asia, Latin America, the Middle East, and Central and Eastern Europe, and it is unclear if these investments diffuse or concentrate economic activity. We introduce an original dataset of geo-located Chinese Government-financed projects in 138 countries between 2000 and 2014, and analyze the effects of these projects on the spatial distribution of economic activity within host countries. We find that Chinese development projects in general, and Chinese transportation projects in particular, reduce economic inequality within and between subnational localities. Our results suggest that Chinese investments in “connective infrastructure” produce positive economic spillovers that lead to a more equal distribution of economic activity in the localities where they are implemented.


AidData | Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries

AidData releases first-ever global dataset on China’s development spending spree
Chinese infrastructure investments reduce inequalities in developing countries
A new AidData working paper analyzes Chinese infrastructure's impacts using the most comprehensive dataset of Chinese development project locations ever assembled.

September 11, 2018
Soren Patterson, Bradley Parks

The India-Pakistan border in 2015, as viewed from the International Space Station. Photo by the ISS Crew Earth Observations Facility and the Earth Science and Remote Sensing Unit, Johnson Space Center, in the public domain.

We’re going on a trip. Let’s travel straight up in the air, until we reach a height of 36,000 km or so above the Earth’s surface. We find ourselves orbiting the planet, along with most of the world’s weather satellites. Now look down. What do you see?

If it’s daytime, you can enjoy our world’s natural features—including oceans, forests, and deserts—in all their color. Cities aren’t as easily discerned. But change our view in space from day to night, and the Earth below transforms into black marble studded with jewels of light. Most of the marble is dark and inscrutable, except for cities. The lights of Earth’s cities and towns, and the transportation networks that connect them, reveal a grand pattern of human settlement and activity across the planet.‍

Explore the interactive project page with maps of nighttime lights and economic inequality.
Let’s imagine we stay up here for a while, orbiting. As time passes, you notice something interesting. The Earth’s natural surface in daylight, moving on geologic time scales, doesn’t seem to change much over time—at least not to the naked eye. Earth at night is another story. The torches of urban centers expand to blaze brighter; rivers of light flow out into new suburbs; the “connective infrastructure” of new highways, railways, bridges, and roads twists into glowing webs across the black; and deep-water ports pop up on coastlines, drawing swarms of ships like fireflies. With each year, this network of human industry is both brightening the landscape and more closely connecting the features on it.

By analyzing high-resolution satellite imagery of nighttime light intensity in a given area, researchers are able to estimate economic output at the local level. This measure is especially useful in remote, poor, and conflict-prone areas that lack reliable census, survey, and administrative data. However, since economic progress is often uneven, it’s not just the average level of nighttime light within a geographic region that matters. The geographical dispersion of nighttime light within a subnational locality also tells us something about how widely or narrowly the benefits of economic growth and development are being shared. As some geographic regions explode into luminescence, others stay dim or even recede into darkness—visual representations of economic stagnation and loss—and a growing body of research demonstrates this kind of spatial inequality can have far-reaching consequences. It can increase political polarization, slow economic development, provoke social unrest, and elevate the risk of violent conflict and terrorism.

Many governments, aid agencies, and development banks claim that they are making efforts to promote “inclusive growth,” especially within economically disadvantaged regions. But there is a need for rigorous evaluation of which groups within low- and middle-income countries reap the biggest economic benefits from these development projects—and which groups get left behind.

Unlike some of its peers, China has said very little about whether it expects its development projects to reduce economic disparities within host countries. However, there are some reasons to think that Chinese development projects could be part of the solution. Beijing has demonstrated that it is both willing and able to address the unmet infrastructure financing needs of developing countries. These development projects—in particular, investments in highways, railways, roads, bridges, tunnels, and ports—could strengthen economic ties between rural and urban areas and thereby help to spread the benefits of economic growth to more remote and traditionally disadvantaged areas.

In a new AidData Working Paper released today, a team of economists and political scientists from William & Mary, Leibniz University Hannover, Heidelberg University, Helmut Schmidt University Hamburg, and Harvard University leverage a new geolocated dataset of Chinese Government-financed projects worldwide to evaluate how these investments alter the geographic distribution of economic activity within provinces and districts in low- and middle-income countries.

To consistently measure economic inequality from year to year in more than 32,000 subnational localities around the world, they calculate a Gini coefficient using annual data on the geographical dispersion of nighttime light. The Gini coefficient is a measure of inequality that varies from 0 to 1. A value of 1 represents perfect economic inequality (for example, a province in which a single 1 km x 1 km grid cell within that subnational jurisdiction harbors all economic activity) and 0 represents perfect economic equality (a province in which every 1 km x 1 km grid cell within that subnational jurisdiction has the same level of economic activity). ‍

Read the study on Chinese infrastructure projects and the diffusion of economic activity in developing countries.​

The findings from the study are encouraging: Chinese development projects—in particular, “connective infrastructure” projects like roads and bridges—are found to create a more equal distribution of economic activity withinthe provinces and districts where they were located. The study also measures the impact of Chinese development projects on economic inequality between provinces and districts, and here too the results provide grounds for optimism: Chinese Government-financed projects appear to reduce, rather than widen, economic disparities between regions.

This analysis was made possible by a far-reaching effort at AidData to assign precise geographic coordinates to AidData’s first global dataset of Chinese development projects, released last October. The result of thousands of hours of geocoding by dozens of research assistants is a first-of-its-kind dataset that pinpoints the locations of 3,485 Chinese development projects worth USD $273.6 billion that were implemented in 6,184 locations in 138 countries over a fifteen-year period (2000-2014).‍

Download the geocoded dataset of Chinese Government-financed projects worldwide.​

Many of those 138 low- and middle-income countries suffer from high levels of spatial inequality, where most economic activity is concentrated in a few cities and little economic activity exists in the rural towns and villages. Therefore, a significant implication of the study is that, by helping households and companies in rural areas access goods, services, and jobs in more distant markets, China’s investments in connective infrastructure are spreading economic activity to rural areas that have historically suffered from benign neglect or active discrimination. By reducing spatial inequality, Chinese development projects are also helping to address a root cause of global instability.


https://www.aiddata.org/blog/chines...s-reduce-inequalities-in-developing-countries

 

[JSCh]

Understanding poor-country debt: How do poor countries finance their development?

OPINIONS | Shantha Bloemen
2018-11-16 16:23 GMT+8

Editor's note: Shantha Bloemen has worked in international development for more than two decades. The article reflects the author's views and not necessarily those of CGTN.

There has been much news lately about the impact of debt in poor countries. China has borne the brunt of the coverage, being criticized for a strategy labeled "debt diplomacy".

Focusing on the big infrastructure projects, from high-speed trains in East Africa to ports in Sri Lanka, the critics argue that these ambitious endeavors are financially nonviable and leave countries vulnerable to China's influence.

While debate and discussion is needed, the issue of debt is not new for poor countries, especially those in Africa. Much of the recent analysis has been a historical, and a large part of it is infected with bias towards the lender.

It is not surprising that after decades of being the masters of lending and the power that accrues with it, many in the West have been rattled by China's growing position of financier in the global South.

The China-Africa Private Economic Cooperation Summit opens at the Hangzhou International Expo Center in Hangzhou, east China's Zhejiang Province, September 6, 2018. /VCG Photo

The impact of China's disruption is felt both in the conditions and size of its loans. Instead of fueling consumption, the outcomes have been new roads, trains, bridges, airports, and parliaments.

For many poor countries, whose infrastructure was in decay with cities overwhelmed by population growth and congestion and transport expensive and limited, the prospects of finance to build was understandably welcome.

A recent report by the Jubilee Debt Campaign demonstrates that many African countries indeed face a growing debt burden. It highlights that external debt payments have doubled in the last two years from an average of 5.9 percent of government revenue to 11.8 percent in 2017.

Yet, only 20 percent of that debt is owed to China, while a much larger 35 percent is owed to multilateral institutions, such as the World Bank, and 32 percent to private creditors. The International Monetary Fund (IMF) estimates that 22 African countries, up from 10 in 2013, now have unsustainable debt levels of more than 50 percent of their gross domestic product.

For most African countries, debt has been part of their life since independence. In 1999, when working on a documentary on the impact of third world debt in Zambia, I interviewed then President Kenneth Kaunda.

He recounted the challenge at independence in 1964 of how they were going to build a nation with only a handful of college graduates and an economy designed to benefit the former colonial master. Colonized for their copper and dependent on it as their major export at the time, Zambia needed to build new industries and grow its economy while fostering its human capital and it was proving difficult.

The launching ceremony of the research report on China's aid to Africa's agricultural projects was held at the United Nations Headquarters in New York, US, on October 29, 2018. /VCG Photo

When the price of oil escalated in the 1970s, the oil-dependent and landlocked country had to borrow financing to meet its energy needs. While the IMF and World Bank were happy to lend at the time, most of it was spent on keeping the economy afloat.

This was the time of Cold War politics, so the country was gripped with the additional burden of being the frontline state against the wars going on in apartheid South Africa and Southern Rhodesia at the time.

By the 1980s, Zambia was crippled by enormous debt and had no choice but to comply with the structural adjustment and the harsh austerity that the IMF and World Bank imposed on many countries in a similar top-down approach.

The formula of structural adjustment forced governments to balance their budgets by cutting government spending, including for health and education, impose user fees on social services and open up their economies to foreign investment. The toll on human development for the majority was enormous.

Debt relief for most of the poorest countries, like Zambia, only came two decades later due to enormous pressure from a coalition of churches, civil society, and activists, called Jubilee 2000.

In 2005, the Group of 8 agreed to write off 77 billion US dollars for 18 of the world's poorest and most indebted countries. They agreed to give countries a fresh start and create a fairer system for poor countries to finance their development.

Zambia had a chance to arrest the more than two decades of worsening social indicators, like primary school enrollment and child mortality, when the 6.7 billion US dollars of debt was canceled by public institutions under the Highly Indebted Country Initiative (HIPIC).

Yet, the promised foreign direct investment – a reward for the austerity – did not materialize, and the country's efforts to diversify the economy have not led to the growth they needed to sustain their population or balance their budget. While it gave temporary relief, it did not solve the macroeconomic challenge of how to finance the development of the country.

Today, while we need to be wary of poor countries again carrying loans they can never pay back and spending more on servicing interest payments than on desperately needed services for their people, the big question is, how, without borrowing, can poor countries invest in the infrastructure and human capital they need to grow their economies?

China's entry into the role of financier, especially since 2006, represents what is possible on the continent when financing for infrastructure is available.

The Beijing Summit of the China-Africa Cooperation Forum held its opening ceremony in the Great Hall of the People, Beijing, China on September 3, 2018. /VCG Photo.

After decades of decline, the very act of building provided momentum to believe that Africa was no longer going to be left behind. While not all the infrastructure projects may have been a priority or will bring an instant economic return, they illustrate the possibility of transformation and create new aspirations for the future of the continent.

Unhindered by a colonial or paternalistic attitude, the Chinese and their long-term perspective informed from their experience of transforming their country and lifting millions out of poverty, know how to think big and envision a continent united by high-speed trains and new transport hubs.

The irony is that, despite their vocal concerns from the West about China's debt diplomacy, the United States has launched its own infrastructure fund, BUILD, and the Australians have just announced a new infrastructure lending facility for the Pacific. This is potentially all good news for poor countries who need infrastructure but also access to cheaper financing.

In Africa there is much demand for better roads, bridges, and infrastructure – the available financing is only a fraction of what is ultimately needed for large-scale economic transformation. The African Development Bank estimates the continent's infrastructure needs amount to 130–170 billion US dollars a year, with a financing gap in the range 68–108 billion US dollars.

The problem is that without large-scale catalytic investment, the economic return needed may not materialize quickly enough to repay the loans on the terms the creditors demand.

There is also much to do in Africa to cope with the demands of climate change, provide jobs and opportunities for growing young populations and to build sustainable viable economies. Long-term, visionary and patient investment and financing will be vital to this success.

African governments need to do better to attract and manage investment and financing. Countries like Ethiopia and Rwanda demonstrate how better domestic political leadership, a national long-term vision, tackling corruption head-on, investing in human capital through quality and accessible health care and education, creating supportive policies for local business can help bring economic return from infrastructure investment.

The blame game between creditors needs to stop. It is not only counterproductive but distracts from the more important question: How do we provide poor countries fair, sustainable and catalytic financing so they have a chance to develop and to create prosperous and sustainable economies?

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com.)

 

[Shankranthi]

Understanding poor-country debt: How do poor countries finance their development?

OPINIONS | Shantha Bloemen
2018-11-16 16:23 GMT+8

Editor's note: Shantha Bloemen has worked in international development for more than two decades. The article reflects the author's views and not necessarily those of CGTN.

There has been much news lately about the impact of debt in poor countries. China has borne the brunt of the coverage, being criticized for a strategy labeled "debt diplomacy".

Focusing on the big infrastructure projects, from high-speed trains in East Africa to ports in Sri Lanka, the critics argue that these ambitious endeavors are financially nonviable and leave countries vulnerable to China's influence.

While debate and discussion is needed, the issue of debt is not new for poor countries, especially those in Africa. Much of the recent analysis has been a historical, and a large part of it is infected with bias towards the lender.

It is not surprising that after decades of being the masters of lending and the power that accrues with it, many in the West have been rattled by China's growing position of financier in the global South.

The China-Africa Private Economic Cooperation Summit opens at the Hangzhou International Expo Center in Hangzhou, east China's Zhejiang Province, September 6, 2018. /VCG Photo

The impact of China's disruption is felt both in the conditions and size of its loans. Instead of fueling consumption, the outcomes have been new roads, trains, bridges, airports, and parliaments.

For many poor countries, whose infrastructure was in decay with cities overwhelmed by population growth and congestion and transport expensive and limited, the prospects of finance to build was understandably welcome.

A recent report by the Jubilee Debt Campaign demonstrates that many African countries indeed face a growing debt burden. It highlights that external debt payments have doubled in the last two years from an average of 5.9 percent of government revenue to 11.8 percent in 2017.

Yet, only 20 percent of that debt is owed to China, while a much larger 35 percent is owed to multilateral institutions, such as the World Bank, and 32 percent to private creditors. The International Monetary Fund (IMF) estimates that 22 African countries, up from 10 in 2013, now have unsustainable debt levels of more than 50 percent of their gross domestic product.

For most African countries, debt has been part of their life since independence. In 1999, when working on a documentary on the impact of third world debt in Zambia, I interviewed then President Kenneth Kaunda.

He recounted the challenge at independence in 1964 of how they were going to build a nation with only a handful of college graduates and an economy designed to benefit the former colonial master. Colonized for their copper and dependent on it as their major export at the time, Zambia needed to build new industries and grow its economy while fostering its human capital and it was proving difficult.

The launching ceremony of the research report on China's aid to Africa's agricultural projects was held at the United Nations Headquarters in New York, US, on October 29, 2018. /VCG Photo

When the price of oil escalated in the 1970s, the oil-dependent and landlocked country had to borrow financing to meet its energy needs. While the IMF and World Bank were happy to lend at the time, most of it was spent on keeping the economy afloat.

This was the time of Cold War politics, so the country was gripped with the additional burden of being the frontline state against the wars going on in apartheid South Africa and Southern Rhodesia at the time.

By the 1980s, Zambia was crippled by enormous debt and had no choice but to comply with the structural adjustment and the harsh austerity that the IMF and World Bank imposed on many countries in a similar top-down approach.

The formula of structural adjustment forced governments to balance their budgets by cutting government spending, including for health and education, impose user fees on social services and open up their economies to foreign investment. The toll on human development for the majority was enormous.

Debt relief for most of the poorest countries, like Zambia, only came two decades later due to enormous pressure from a coalition of churches, civil society, and activists, called Jubilee 2000.

In 2005, the Group of 8 agreed to write off 77 billion US dollars for 18 of the world's poorest and most indebted countries. They agreed to give countries a fresh start and create a fairer system for poor countries to finance their development.

Zambia had a chance to arrest the more than two decades of worsening social indicators, like primary school enrollment and child mortality, when the 6.7 billion US dollars of debt was canceled by public institutions under the Highly Indebted Country Initiative (HIPIC).

Yet, the promised foreign direct investment – a reward for the austerity – did not materialize, and the country's efforts to diversify the economy have not led to the growth they needed to sustain their population or balance their budget. While it gave temporary relief, it did not solve the macroeconomic challenge of how to finance the development of the country.

Today, while we need to be wary of poor countries again carrying loans they can never pay back and spending more on servicing interest payments than on desperately needed services for their people, the big question is, how, without borrowing, can poor countries invest in the infrastructure and human capital they need to grow their economies?

China's entry into the role of financier, especially since 2006, represents what is possible on the continent when financing for infrastructure is available.

The Beijing Summit of the China-Africa Cooperation Forum held its opening ceremony in the Great Hall of the People, Beijing, China on September 3, 2018. /VCG Photo.

After decades of decline, the very act of building provided momentum to believe that Africa was no longer going to be left behind. While not all the infrastructure projects may have been a priority or will bring an instant economic return, they illustrate the possibility of transformation and create new aspirations for the future of the continent.

Unhindered by a colonial or paternalistic attitude, the Chinese and their long-term perspective informed from their experience of transforming their country and lifting millions out of poverty, know how to think big and envision a continent united by high-speed trains and new transport hubs.

The irony is that, despite their vocal concerns from the West about China's debt diplomacy, the United States has launched its own infrastructure fund, BUILD, and the Australians have just announced a new infrastructure lending facility for the Pacific. This is potentially all good news for poor countries who need infrastructure but also access to cheaper financing.

In Africa there is much demand for better roads, bridges, and infrastructure – the available financing is only a fraction of what is ultimately needed for large-scale economic transformation. The African Development Bank estimates the continent's infrastructure needs amount to 130–170 billion US dollars a year, with a financing gap in the range 68–108 billion US dollars.

The problem is that without large-scale catalytic investment, the economic return needed may not materialize quickly enough to repay the loans on the terms the creditors demand.

There is also much to do in Africa to cope with the demands of climate change, provide jobs and opportunities for growing young populations and to build sustainable viable economies. Long-term, visionary and patient investment and financing will be vital to this success.

African governments need to do better to attract and manage investment and financing. Countries like Ethiopia and Rwanda demonstrate how better domestic political leadership, a national long-term vision, tackling corruption head-on, investing in human capital through quality and accessible health care and education, creating supportive policies for local business can help bring economic return from infrastructure investment.

The blame game between creditors needs to stop. It is not only counterproductive but distracts from the more important question: How do we provide poor countries fair, sustainable and catalytic financing so they have a chance to develop and to create prosperous and sustainable economies?

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com.)

Your article focused on Zambia to make a point.

Here is the counter narrative about zambia.

https://www.economist.com/leaders/2...bt-crisis-is-a-warning-for-the-rest-of-africa

Zambia’s looming debt crisis is a warning for the rest of Africa


https://zambiareports.com/2018/09/27/guest-article-zambias-debt-trap-perspective/

 

[JSCh]

Your article focused on Zambia to make a point.

Here is the counter narrative about zambia.

https://www.economist.com/leaders/2...bt-crisis-is-a-warning-for-the-rest-of-africa

Zambia’s looming debt crisis is a warning for the rest of Africa


https://zambiareports.com/2018/09/27/guest-article-zambias-debt-trap-perspective/

You article said that Zambia debt is "perhaps a quarter to a third of Zambia’s external debt". Country do sometime get in trouble financially, so why blame China for "debt trap" while the majority is owe to the west. And we all know who the IMF & WB work for.

And the article also demand that China should backup IMF for demand of austerity measure, the same old measure like before that led to the "debt trap" and then the Washington consensus. China is at least building something that could be productive.

 

[Shankranthi]

You article said that Zambia debt is "perhaps a quarter to a third of Zambia’s external debt". Country do sometime get in trouble financially, so why blame China for "debt trap" while the majority is owe to the west. And we all know who the IMF & WB work for.

And the article also demand that China should backup IMF for demand of austerity measure, the same old measure like before that led to the "debt trap" and then the Washington consensus. China is at least building something that could be productive.

IMF and WB debts are usually at very low interest rates.

So their burden is almost negligible.

Chinese loans have very high interest rates and even stricter conditions regarding using chinese companies and employees.

That is a double whammy. The comparison is not apples to apples, its apples to oranges.

In any case, its zambias problem, I am only highlighting it so that other nations can take a more educated and wiser decisions.

 

[JSCh]

IMF and WB debts are usually at very low interest rates.

So their burden is almost negligible.

Chinese loans have very high interest rates and even stricter conditions regarding using chinese companies and employees.

That is a double whammy. The comparison is not apples to apples, its apples to oranges.

In any case, its zambias problem, I am only highlighting it so that other nations can take a more educated and wiser decisions.

Most Chinese loans are either commercial or concessionary, they are at normal rate, not very high interest rates as you said. Condition regarding using Chinese companies are part of condition for loan for project.

I am quite sure most country are professional and far more aware of the interest rate and conditions when they took out a loan then you could possibly can, they don't really need your lecture.

Anyway, Zambia has not default on its debt.