I once heard a preacher say,” Money is good, but the lure of money is the root of all evil”. The lure of money is the reason for 95% of corruption on a universal scale. If a local bank started lending money without collateral, people will flock their loan department constantly– notwithstanding these monies will have to be repaid. This situation gets more outrageous when it goes to a national scale and the people in Government are granted large loans from a willing creditor (China) to do projects, ranging from vanity to necessity, under the guise of development, while swindling huge portions into their pockets. While it is the norm for future generation to repay a country’s debt, it is expedient for the present generation to keep abreast with repayment so as to prevent creditors from seizing assets or demanding footholds in the debtor’s nation. When this happens, the debtor’s sovereignty is threatened. Do we blame the creditor for this scenario? I think not.
China may have sinister motives with its easy lending policy, but I can’t recall hearing that they point a gun to the head of any Government official to make them borrow China’s money. A trap is a device set to catch, impede or control an unsuspecting victim. In this era of free will, with learning and intelligence at its zenith, it is difficult to comprehend humans using money as bait to trap their fellow humans. The truth be told, what has been perceived as debt traps are not products of Chinese loans. The debt traps are created by corrupt Governments, which identify colossal vanity projects just for the sake of kickbacks. We have our own examples here. Where is Jagdeo’s “hub for Africa”? Has CJIA expansion at US$160 million brought one more passenger than it would normally have? For a sugar industry that was losing money, 10 million US dollars could have refurbished all the other factories, instead Jagdeo went for vanity, “flagship of the sugar industry”, at a cost of some US 200 million. Chinese loans are tied to Chinese contractors, wherever kickbacks occur, the cost of the project is super inflated so that both contractor and Government officials reap unjust rewards; hence a toilet bowl itemized at $160,000 at CJIA expansion project. A recent letter by Rajendra Bisessar, “The PPP continues to libel me”, gives a full preview of how corrupt politicians operate – they will not allow a stone to be turned in the name of development, through foreign investment, without them getting something significant in their pockets.
Back to the BRI. China has amassed great financial wealth, their economy has been growing rapidly for years. As this happens, the yuan (Chinese currency) rises in strength against the US dollar, making Chinese products less competitive on the US market. As the US debt grows, relative to its GDP; China found it expedient to invest in marketable securities in the US debt- such as treasury notes, bills and bonds for two reasons.
(1) These investments help to strengthen the US dollar- stopping the rise in value of the yuan-keeping Chinese products competitive.
(2) These investments help to keep interest rates down in the US –maintaining the normal flow in the US economy so that the Americans can continue purchasing Chinese goods, keeping the factories in normal production mode in China.
Of the US debt of 21 trillion, 5.7 trillion is held in securities by outside Governments, of which China holds the largest chunk, 1.6 trillion followed by Japan at 1.3 trillion. In addition, the balance of trade between China and the US (the value of goods China sells to the US on a yearly basis is higher than what the US sells to China) has been lopsided in favour of China for over two decades. A lopsided balance of trade, coupled with US debt to China. China/US trading arrangement is becoming very delicate- with the Americans sometimes contemplating taxing Chinese goods in a free trade scenario.
The Chinese are cognizant of the situation. They do not know how long the US can continue to manage their high debt comfortably. As a result, they seem to be pursuing BRI (the old silk route) in the hope of creating markets for an ever increasing volume of Chinese products around the world, in the face of any unforeseen eventuality- disruption of US/China trade relations.
In short, China is trying to find huge alternative markets in the third world by assisting to create connectivity, through BRI. This plan is likely to backfire on China because these connectivity projects do not put more money in the hands of the citizens of these nations to purchase Chinese goods. What these projects will do is to impoverish the citizens more by taxation to repay these loans.
Borrowing is synonymous with repayment, if repayment cannot be made, the creditor exacts collateral from the borrower, it is the modus operandi of money lending around the world. There has to be consequences for failure to repay debts. China’s money did not appear by magic! This is all fourth grade logic. Yet Governments in poor countries around the world, possessed by graft, rarely give a thought to repayment when offered an opportunity to access loans from foreign countries or institutions. If China is perceived as an advantage taker in this situation, it is within China’s ambit to do so. People expect their governments to be wise and honest, not to lead them into financial captivity.
Jan 17, 2019The Georgetown Softball Cricket League (GSCL) Inc and Regal Stationery and Computer Centre cricket competition is set to commence at 09:30hrs on Sunday with matches at several venues in the...
Jan 17, 2019
Jan 17, 2019
Jan 17, 2019
Jan 17, 2019
Jan 17, 2019
We do not need politicians of any particular caste; we need politicians of class. We do not need leaders of high... more
Editor’s Note, If your sent letter was not published and you felt its contents were valid and devoid of libel or personal attacks, please contact us by phone or email.
Feel free to send us your comments and/or criticisms.
Contact: 624-6456; 225-8452; 225-8458; 225-8463; 225-8465; 225-8473 or 225-8491.
Or by Email: [email protected] / [email protected]