Communist Party State of China Uses Creditor’s Rights To Control Poor Country

  • Author: The-world
  • Editor: Ranting

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Researchers in the United States and Germany have just discovered a shocking fact. They dug in-depth online and public administration archives of more than 100 loan agreements that were signed between China and 24 low-income countries between 2000 and 2020, with a total amount of up to 36.6 billion U.S. dollars. These documents are invaluable because people know very little about the loan terms required by the world’s largest creditor country.

Some people believe that this is a trap designed to obtain geostrategic concessions from bankrupt countries. The report hopes to promote discussions among the G20 countries. The G20 held a meeting this week to discuss the debt problems of poor countries. Since the beginning of the economic crisis triggered by the CCP virus, the debts of these poor countries have dangerously increased.

According to the research report “How China Lends” published at the end of March, uncommonly the confidentiality clauses drafted by Chinese creditors far exceed the requirements usually made by creditor countries or development banks. Not only must the loan conditions be kept confidential, but also the amount of money must be kept confidential. This confidentiality poses a serious problem for transparency because borrowing governments must conceal these amounts to be repaid sooner or later from their taxpayers. This opacity also complicates the restructuring process of collective debt. If creditors in a country on the verge of default lack information, how do they assess the debtor country’s ability to pay or repay?

Beyond the sight of other creditors, Communist party state of China also made other unusual demands. Four-thirds of the contracts contained provisions not to participate in the debt restructuring stipulated by the Paris Club. Over the years, this club of major creditor nations in the world has patiently formulated a set of rules for coordinating debt restructuring or debt cancellation. One of them is that one cannot favor one creditor over another. China has completely destroyed this principle, and if problems arise, the debtor can be required to repay it first.

In November 2020, when Communist party state of China joined the common framework for debt restructuring of poor countries established by the G20, did they change its position? Researchers doubt the sincerity of this move. Many Chinese creditors can evade this common framework on the grounds for they can pretend to be only private commercial institutions, not “official creditors” attached to the state. Finally, Communist party state of China uses debt as a tool of influence. Half of the loan agreement signed by the China Development Bank stipulates that any behavior that is unfavorable to the “People’s Republic of China entity” by the debtor country may lead to early repayment of the loan. There is also a provision that destroying diplomatic relations is tantamount to breach of contract. In 90% of the agreements studied in the report, Chinese creditors are allowed to demand repayment when major political or legal changes occur in the debtor country. China’s debt diplomacy is a reality. Current sanctions against CCP are clearly not enough.

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