[Opinion] Europe’s China Strategy Is Ready for a Refresh

@balsoft@lemmy.ml

China severely limited double-use exports back in 2023/2024.

This is false.

Here is a brief list of sanctions involving Israel. As you will see, all the sanctions imposed are by the EU, European countries, the U.S., U.K., Australia, Japan, and other democratically governed states. None from China.

This is .. (in fact, it is better) compared to Europe-backed IMF investments, which force countries into capitalism and austerity in ways that Chinese “no-strings-attached” investment just can’t.

This is false, too.

China’s loans come with a lot of “strings attached” if you want to put it that way. Amongst others, one report, How China Collaterizes: New Report Reveals Hidden Structures in Global Lending (pdf), sheds light on the secured lending practices of Chinese creditors in low- and middle-income countries and shows how Chinese creditors secure priority access to cash flows and liquid assets far beyond the IMF or World Bank has ever done, as the report says,

In a typical transaction, debtors [from low and middle-income countries] promise to route their principal commodity export revenues through overseas bank accounts [at banks in mainland China] that remain out of public sight and largely beyond their control until the debts are repaid. The cash balances in these accounts, mostly located in China and controlled by the lenders, can be very large; in low-income, commodity-exporting countries, they average more than 20% of annual public debt service to all external creditors …

Almost half of China’s … lending portfolio, or nearly $420 billion across 57 countries, is effectively collateralized—mostly with deposits in bank accounts abroad … As security, Chinese lenders strongly prefer liquid assets—in particular, cash deposits in bank accounts located in China. They also want visibility and control over revenue streams …

Collateral is often unrelated to the stated purpose of the loan … Instead of relying on infrastructure project assets and future revenues, which may never materialize, [Chinese lenders] seek access to established export proceeds. Exporters commit to route these proceeds through offshore bank accounts over the life of the loan, which gives creditors leverage in the relationship as well as a source of repayment.” The report notes that the World Bank and the IMF have recently raised concerns about “collateralization involving unrelated assets or revenues” and warned that it is “likely to create problems” …

In another report, China as an International Lender of Last Resort (pdf), China’s rescue loans differ from those of established international lenders of last resort in that they

• (i) are opaque
• (ii) carry relatively high interest rates [ the typical rescue loan by Chinese banks requires interest rates of 5 percent, considerably higher than the comparable average IMF interest rate of around 2 percent], and
• (iii) are almost exclusively targeted to debtors of China’s Belt and Road Initiative.

As the researchers conclude amongst others,

We see historical parallels to the era when the US started its rise as a global financial power, especially in the 1930s and after World War 2, when it used the US Ex-Im Bank, the US Exchange Stabilization Fund and the Fed to provide rescue funds to countries with large liabilities to US banks and exporters … Over time, these ad hoc activities by the US developed into a tested system of global crisis management, a path that China may possibly pursue as well.