Debt Diplomacy – Is China the IMF East?

The International Monetary Fund is not the only option for countries most in need of financing. Financial Times I recently reported that China sends tens of billions of dollars in secret “emergency loans” to countries facing financial difficulties.

China and other countries are known to invest in emerging or distressed economies, but China appears to be increasing its aid and providing more money than even the World Bank. AidData revealed that Pakistan, Argentina and Sri Lanka alone have received $32.83 billion since 2017. Former Vice President Mike Pence accused China of using “debt diplomacy” to expand its influence. [China] It provides hundreds of billions of dollars in infrastructure loans to governments from Asia to Africa to Europe and even Latin America. However, the terms of those loans are ambiguous at best, and interest flows heavily to Beijing. Pence has claimed that China will prey on poor nations and take ownership of key infrastructure when they default. Another example of pot-blackening is, so to speak.

Pence used the example of Sri Lanka, which was pushed into default, and opened the way for China to build a military base in the port of Hambantota. Atlantic Ocean He published an article in 2021 to say that Pence’s allegations that China had entered its army into Sri Lanka were a lie, as if China would not jump at such an opportunity. Last month, in August 2022, China sent military ships to Hambantota with the intention of using the port for dual commercial and military use. Remember that Sri Lanka recently overthrew its president and was in complete disarray – Their entire economy collapsed.

Sri Lanka needs financial assistance, and You wouldn’t want to anger China by revoking the permissionJehan Pereira, executive director of the National Peace Council of Sri Lanka, told VOA. At this time, they are not building a military base, but it is possible that Chinese companies entered into a 99-year lease in the area in 2017. Sri Lanka was seeking a loan from the International Monetary Fund, but was not willing to take on such debt risky. Work is work. Sri Lanka was desperate, China was willing to provide its help, but governments are only acting in their own interest and will not take risks if they do not find a way to exploit this risk.

So, yes, China is willing to take risks that the IMF will not. Unlike the IMF, China does not need to disclose its investments. China invests less in US and Western debt and has turned its attention to heavily indebted countries. This may be one of the reasons why our PC predicts that China will become the next financial capital of the world by 2037.25.

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