Tuesday, November 13, 2018

The Ugly Chinaman

In 1963, there was a movie called the Ugly American about a class of people of people who go abroad and run over the poorer countries of the world.  BBC has a reminder of that class of people in a story about Africa having substantial amounts of its debt held by China.  As far as debt goes, it doesn't sound like much when one says China owns 20% of the African debt.  But Djibouti, Republic of Congo and Zambia have concentrations of debt that are higher.  Djibouti owes China 77% of its debt load. 

These are infrastructure projects like roads, dams and the like, which the Chinese link to other commerce.  Buy Chinese trucks to do the transport, Chinese firms to build the dam, use Chinese ports for shipments and use Chinese workers where possible.  That escalates the amounts China makes in return for this debt, and creates leverage on countries which depend on China for their continued support. 

If they can't, or don't pay up on that debt, China is perfectly willing to refinance for a longer term or accept something of value in return - a port or a transport hub or a percentage of the marketplace.  Both the Chinese and the African countries know where this is going. 

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