Developing countries do not believe the "debt trap" lie fabricated by the United States China | debt | the United States

BEIJING, July 16 (Xinhua) -- Developing countries do not believe in the "debt trap" lies fabricated by the United States

Xinhua News Agency reporter Liu Tiantian Dongdong Han Bing

Some American media have recently hyped up the clich é s of the so-called "debt trap theory" in an attempt to shift the blame of some developing country debt issues onto China. But according to interviews and investigations, the US's denigration of China is simply untenable. The vast number of developing countries do not believe in the lies of the United States, and highly recognize China's positive contributions to helping the economic development of developing countries.

The proportion of loans in China is not high

The so-called "debt trap theory" that Western media has repeatedly hyped up in recent years is a slander against China's provision of large amounts of loans to developing countries, which fall into the "trap" when they are unable to repay their loans, and their resources and even sovereignty are controlled by China. The Associated Press recently published an article claiming that Kenya and Zambia in Africa, as well as Pakistan and Sri Lanka in South Asia, are all victims of the "debt trap".

Is it true that this is the case?

According to data provided by the Pakistani Ministry of Economic Affairs to Xinhua News Agency, as of April this year, Pakistan's total external debt was $125.702 billion, of which loans from China amounted to $20.375 billion, accounting for 16.2% of Pakistan's total external debt. During his visit to Japan earlier this month, Pakistani Foreign Minister Bilawal said to the Japanese media that the accusation of Pakistan falling into China's "debt trap" was "political propaganda". Pakistan accepted both Chinese loans and loans from other countries. Most of the assistance provided by China to the Pakistani side is through investment or soft loans with favorable conditions. Bilawar emphasized that Pakistan's debt problem will not lead to its important infrastructure being taken over by others.

According to data from Sri Lanka's central bank, as of March this year, Sri Lanka has a current external debt of 27.6 billion US dollars, with private creditors accounting for the largest proportion at 53.6%, multilateral creditors accounting for 20.7%, and China accounting for 10.9%. Sri Lanka's Foreign Minister Sabri has repeatedly refuted China's "debt trap theory", pointing out that China respects Sri Lanka's request and has never forced Sri Lanka to lend money; Without China's help, it is impossible for Sri Lanka to achieve development.

Let's take a look at Africa again. According to data from the Kenyan Ministry of Finance, as of March this year, the total foreign debt of the country was 36.66 billion US dollars, of which 46.3% came from multilateral financial institutions such as the International Monetary Fund and the World Bank, and 17.2% came from various entities in China. The situation in Zambia is similar to that in Kenya. According to a report by the African Policy Research Institute in 2022, since 2011, about three-quarters of the debt repayment funds of sub Saharan African countries have been paid to bondholders and commercial lenders. They are the largest creditors in Africa.

In April of this year, then Nigerian Vice President Osimbacho gave a speech at King's College London, saying, "In my opinion, most African countries have no regrets about their close relationship with China. China appears in places and times that the West does not want to appear, Africa needs loans and infrastructure, and China provides them."

Charles Onunaiju, director of the Nigerian China Research Center, said that the so-called "debt trap" created by China is a "political smear" used to divert attention and relieve the West of its rightful responsibilities. We hope the outside world can pay attention to the fact that more African debt comes from Western institutions and private financial institutions.

In a report on the "the Belt and Road" in May 2020, the RAND Corporation, an American think tank, also pointed out that many studies showed that "there is no evidence that China deliberately entangles another country in debt to gain some unfair advantage or take actions such as confiscating the assets of debtor countries".

Western high interest rates are the problem

The Associated Press reported that more than 10 countries, including Pakistan, that have the heaviest debt to China, have found that repaying debt is consuming more and more tax revenue, which is needed to maintain school openness, provide electricity, and pay for food and fuel. "In Pakistan, millions of textile workers have been laid off due to excessive foreign debt and inability to maintain electricity supply and machine operation."

Shahid Sattar, Secretary of the Pakistan Textile Mill Association, refuted this baseless accusation. He stated that there are several reasons for the liquidity shortage faced by the Pakistani textile industry at present, including the sharp drop in the Pakistani rupee exchange rate against the US dollar, which has made it difficult for power plants to purchase fuel for power generation, delayed consumption tax refunds, and cotton crop failures. Blaming the heavy setbacks in the textile industry on China is absurd and ridiculous, as China has been cooperating with Pakistan to continuously help us solve economic problems.

"Our real problem is the external debt from Western financial institutions. These external debts are now causing us real problems. Pakistan does not have the ability to repay these debts because the interest rates on these loans are very high," said Shakir Rama, CEO of the Asian Institute for Ecological Civilization Research and Development in Pakistan

Former Minister of Planning, Development and Special Projects of Pakistan, Assad Omar, stated in 2021 that the average interest rate for energy project loans in the China Pakistan Economic Corridor is lower than the average interest rate given by the World Bank, Asian Development Bank, and other Western institutions.

In fact, the debt problem of developing countries is closely related to Western countries such as the United States. Developing countries have weak economic "hematopoietic" functions and cannot develop without borrowing foreign debt. In pursuit of high returns, Western financial institutions often encourage developing countries to issue a large number of short-term high interest bonds, causing some debtor countries to face enormous debt pressure and have to raise new bonds to repay old ones, creating a snowball that is getting bigger and bigger.

According to the report released by the British Debt Justice Organization last year, according to the World Bank data, 12% of African countries' government debt comes from China, and 35% from the West, especially private institutions. The interest rate for Chinese loans is 2.7%, while for Western loans it is 5%, almost twice that of Chinese loans.

Zambia is an example. Chibeza Mfuni, Vice President of the Zambia China Friendship Association, pointed out that in Zambia's external debt, the proportion of debt from Western and multilateral financial institutions is much higher than that of China, and the loan interest rates of Western and multilateral financial institutions are higher than those provided by China.

"African countries have long been struggling to pay interest on loans from Western financial institutions," said Muffany.

"Western countries are the creators of every 'debt trap' in Africa," Christopher Mutswangwa, Information and Propaganda Secretary of Zimbabwe's ruling party, the Zimbabwe African National Union Patriotic Front, told Xinhua News Agency during a recent event in Beijing. "Before China, for Africa, if you wanted capital, go to Paris where capital was expensive; if you went to New York where capital was even more expensive; if you went to London where capital was' skyrocketing '."

The financial hegemony of the United States is also a significant reason for some developing countries falling into debt crises. Interest groups and financial institutions in the United States have teamed up to create debt crises in emerging market countries several times, seizing huge economic benefits from these countries. In the 1990s, Argentina took advantage of the international low interest rate environment to heavily borrow, and was also intoxicated by the United States with "neoliberalism". By the outbreak of the financial crisis in 2001, its debt had reached billions of dollars, and it was forced to undergo debt restructuring twice in 2005 and 2010 due to inability to repay its debts. It still suffers from debt problems today.

Ye Jianru, Associate Professor at Guangdong University of Foreign Studies and Distinguished Researcher at the African Research Institute, pointed out that the irresponsible monetary policy of the United States is the trigger for the concentrated outbreak of debt problems in developing countries. The United States first implemented an ultra loose monetary policy, allowing a large influx of low interest US dollars into Africa and emerging market countries. Then, it aggressively raised interest rates, attracting the US dollar to flow back to the United States, leading to insufficient liquidity in developing countries, broken funding chains, currency depreciation, and skyrocketing debt pressure denominated in US dollars.

China is a partner in overcoming the "poverty trap"

The essence of the debt problem in developing countries is a development issue. Solving the debt problems of developing countries not only requires addressing the symptoms through debt treatment and other means, but also addressing the root causes and enhancing their ability for independent and sustainable development. China provides loans to developing countries in the "the Belt and Road" cooperation, mainly for infrastructure and industrial construction in developing countries, which is conducive to improving the basic conditions for economic development and enhancing the "hematopoietic capacity" of the economy.

Relevant statistics show that since the proposal of the "the Belt and Road" initiative was put forward 10 years ago, it has boosted the investment scale of nearly trillion dollars, formed more than 3000 cooperation projects, created 420000 jobs for countries along the line, and lifted nearly 40 million people out of poverty. These projects have brought tangible benefits to developing countries: the China Laos railway has transformed Laos from a land locked country to a land linked country; Sri Lanka's Putram power plant has lit up thousands of lights; The Inner Mongolia Railway has driven Kenya's economic growth by more than 2 percentage points

Whether China's foreign cooperation projects contribute to local development and improve people's livelihoods, the local people have the most say. Last June, a study conducted by the University of Helburg in South Africa quantitatively analyzed the impact of Chinese loans on the development of 15 African countries. It was concluded that China's efforts to help Africa develop infrastructure have effectively promoted economic growth in Africa, and China has always been an important force in helping Africa's development.

Xie Shengwen, South Africa's ambassador to China, said recently when attending the Third China Africa Economic and Trade Fair: "Since South Africa participated in the joint construction of the the Belt and Road in 2015, its infrastructure has been greatly improved, which plays an important role in our economic development." He said that more and more Chinese enterprises are increasing their investment in South Africa in various fields, not only helping South Africa improve its transportation infrastructure, but also creating a large number of jobs, playing an important role in promoting South Africa's economic modernization.

In addition, China has fulfilled its responsibilities to effectively implement debt relief measures. According to a study by the World Bank, from 2008 to 2021, China underwent 71 debt restructurings for low-income countries. In 2020, China actively responded to the G20 debt relief initiative, with the amount of debt relief exceeding 1.3 billion US dollars that year alone, accounting for nearly 30% of the total debt relief of the G20, making it the country with the largest contribution among the G20.

"The fact is that China has not caused anyone to fall into the so-called 'debt trap', and our African continent knows what we need," Paul Frimpon, Executive Director of the African China Policy Advisory Center, a Ghana think tank, said at a media forum in June this year. "In the field of infrastructure, for example, China always provides us with more efficient and cost-effective alternative options, which benefits African people immensely."

"We look forward to receiving more investment from China," said Mutswangwa, who previously served as Zimbabwe's ambassador to China. "Because investment from China is modernizing Africa and bringing it onto the global economic stage, which Western countries have never done before."

In April of this year, a spokesperson for the Chinese Ministry of Foreign Affairs responded to the issue of African debt, saying, "China is not the source of the 'debt trap' of African countries, but a partner in helping developing countries such as Africa break free from the 'poverty trap'. Some American and Western politicians weave various discourse traps, attempting to interfere with and undermine cooperation between China and developing countries. Their tricks have been seen through by developing countries and the international community, and there is increasingly no market."