"One Belt One Road" cause "debt crisis"?
According to the "Economist" report, Africa as a whole currently has a debt ratio of 50%. According to international standards, this number is not very high. However, due to the decline in global commodity prices last year and the slowdown in economic growth, the tax revenues of African countries seem to be difficult to repay debts and interest rates are increasing year by year. Therefore, the International Monetary Fund (IMF) recently issued a warning that sub-Saharan African countries are falling into a "debt crisis." In this regard, India and Western countries habitually associate this with the “Belt and Road” initiative.
At the end of 2017, Professor Brahma Chellaney from the Policy Research Center in New Delhi, India wrote a review article entitled "China's Creditor Imperialism", outlining China's borrowing of sovereign debt to force other countries to depend on it. The "image of imperialism". The article mentioned China’s “One Belt One Road” heavy asset projects in recent years, such as Hambantota in Sri Lanka, Piraeus in Greece, Djibouti, Mombasa in Kenya and other maritime ports, exclaiming that China is making “from Argentina to Namibia again”. Many countries such as Laos have fallen into a debt trap."
The logic of the article is: China compels these countries to painfully choose to let China control its own resources and lose its sovereignty in order to avoid debt default. The author described China as "a new empire giant with an iron fist hidden in velvet gloves and suppressing those small countries." The final conclusion is that the "Belt and Road" is essentially an ambitious plan for the realization of Chinese imperialism.
The "Belt and Road" is a "new type of globalization", which is different from "traditional globalization." The latter is the Western modernization described in the theory of the world system, and the “Belt and Road Initiative” must realize common modernization. The world system theory is the first theory put forward by American sociologist Wallerstein. He believes that "integration" and "inequality" are the two most important characteristics of the capitalist world economy. First of all, the two main lines of the global division of labor system and the global commodity exchange relationship firmly bond each country in the huge world economic network. However, integration does not equal equalization. On the contrary, the center-semi-periphery-periphery hierarchical structure shows the extreme inequality of the world economy. Developed countries such as the United Kingdom, the United States, and Japan are at the "center" of the system. Some moderately developed countries are at the "half-periphery" of the system. Some Eastern European countries and a large number of backward developing countries in Asia, Africa and Latin America are at the "peripheral" of the system. The "center" has the dual advantages of production and exchange, and economically exploits the "semi-marginal" and the "marginal", thereby maintaining its political superiority with the right of institutional discourse.
The “Belt and Road” is a “new globalization”, and the basic logic is “decentralization”, which activates the edges as nodes and completely eliminates “islands”, thereby connecting the nodes into a global grid, thus embodying fair and inclusive development. Therefore, the "Belt and Road" is essentially opposed to dependency or alliance politics, and it is even more opposed to colonialism, imperialism, and hegemonism. In the past five years, the “Belt and Road” construction has an obvious feature, that is, most of the projects are built in peripheral or semi-peripheral countries, such as the five countries in Central Asia and the sixteen countries in Central and Eastern Europe. Many of these countries are "internally locked countries" (Laos, Ethiopia, Czech Republic, etc.), that is, locked in the hinterland of the mainland, unable to connect to the ocean, and unable to enjoy the benefits of globalization. Turning into a Lu Lianguo makes it an indispensable node in the global grid, which fully reflects the principle of extensive consultation, joint contribution and shared benefits emphasized in China's global governance concept.
Why is "Chinese creditor's imperialism" a false proposition? We need to focus on the following issues:
First, how to look at the infrastructure projects of the “Belt and Road”: Infrastructure interconnection is a priority area, but it is not the only area. In the past, as far as Western countries are concerned, foreign direct investment (FDI) does not necessarily mean that multinational capital invests in other countries to build factories. A lot of funds may flow into other countries just for tax avoidance or for the purpose of seeking highly leveraged income. China’s “One Belt, One Road” construction hopes to focus on points, not only to go out, but also to go in, that is, to help relevant countries improve their industrial foundation and sustainable development capabilities. Therefore, it can be found that after infrastructure projects such as roads, railways, power stations, and ports, Chinese companies are committed to promoting production capacity cooperation projects, as well as health, medical, education and other livelihood projects, such as the construction of industrial parks, to help these countries develop their industrial foundations. Domestic market demand, but export-oriented, helps these countries in exchange for foreign exchange. At the same time, Chinese investment will drive local private sector investment, promote the development of the private sector, and realize economic modernization.
The author went to Ethiopia in June to investigate and let Ethiopian officials choose, but in their minds, the following items, their satisfaction is the highest: 1. Yaji Railway; 2. Addis Ababa Light Rail; 3. Oriental Industrial Park; 4. Others. The most chosen by the other party is the Yaji Railway. The reason is that the Asia-Djibouti Railway, in the view of the other side, has truly realized the connection between the countries, connecting the landlocked country Ethiopia with Djibouti, and thus has an outlet to the sea. Ethiopia is a landlocked country. 95% of the import and export goods are transshipped through the port of Djibouti. The Yaji Railway has opened up a sea channel for Ethiopia, which greatly improves the logistics efficiency. The transportation time from Addis Ababa to Djibouti is from road transportation. The 5-7 days is reduced to 15 hours. For Djibouti, the Ya-Djibouti Railway will effectively expand the radiation range and throughput efficiency of the Djibouti Port, and establish its position as a logistics hub in the Horn of Africa. The Asia-Djibouti Railway is a representative project of regional infrastructure interconnection in Africa, and has been praised by the media as the "Tanzania-Zambia Railway in the New Era".
With Chinese enterprises and Chinese industrial parks, relevant countries have not only solved employment, but also gained foreign exchange. For example, Huajian International Light Industry City is a very popular enterprise in Ethiopia. Most African parks do not provide food and lodging, while Huajian provides employees with food, accommodation, and vehicle transportation and other benefits.
The people of Ethiopia love to eat Ingira (Ingira is a traditional staple food in Ethiopia. It has a history of 3000 years, looks like a big cake, and tastes slightly sour). There is no upper limit here. You can eat as much as you want. There are two upper and lower bunks in the staff dormitory room, which can accommodate up to four people. (During my stay in Ethiopia, the capital was homeless and street-sleepers).
As of the end of 2017, Huajian has become China's largest private enterprise in Ethiopia. It has accumulated more than US$122 million in foreign exchange earned through exports, and has provided employment for more than 7,500 local people. With an annual output of more than 5 million pairs of women's shoes, the company is Ethiopia's largest footwear export company, accounting for more than 65% of Ethiopia's footwear exports.
As far as the relationship between debt and development is concerned, there are three models: the first one is debt and development. The second type is debt and no development. The third type is no debt and no development. The construction of the “Belt and Road” does not want to see the second and the third, but to work hard to achieve the first model. Not afraid of debts, the key is that debts can solve key problems. There are also many cities in China, and there are also a lot of government debts during the critical period of development, and even many leaders were questioned at first. However, time must be allowed to test the effectiveness, that is, whether investment can pinpoint the development "pain points", so that the common people have a real sense of gain, and can cause "chemical reactions" in related projects. Economic development cannot solve all problems, but without economic development, problems cannot be solved.
Second, how to look at the financing of the “Belt and Road” initiative: Without investment, there will be no economic recovery without healthy cross-border capital flows. After the financial crisis broke out in 2008, global capital flows entered a trough period.
According to a report by the McKinsey Global Institute in August 2017, global cross-border capital flows (including foreign direct investment, bond and stock investment, bank lending and other investments) have shrunk by 65% compared to 2007, and the scale of foreign investment by developed countries has increased from 1.8 The trillion dollars dropped to nearly 1 trillion dollars. In an era of "de-globalization", the old-brand capitalist countries no longer go to all parts of the world to invest generously as before, and have put forward the slogan of "XX priority" one after another. The employment of domestic workers is more important than overseas investment. The momentum of foreign investment in developed countries has stalled, while the scale of China's foreign direct investment is increasing day by day, stabilizing at a scale of 120 billion U.S. dollars.
The author went to the Netherlands, the Czech Republic and Austria for research in December 2017. Austrian economists are generally optimistic about the prospects of cooperation between China and Austria and China and Central and Eastern Europe. They believe that there are several main reasons for the economic development of Central and Eastern Europe: First, as far as the entire region is concerned, the lack of investment in the past few years is due to lack of confidence. Now the overall economic situation is improving, so investment has increased. Second, companies have postponed investment for a long time, but they have to invest, and now they are entering the turmoil of investment. It can be seen that investment and healthy capital flow are important ways to get rid of the economic crisis. On the contrary, the launch of an "epic" trade war by the United States is not only detrimental to companies' letting go of investment, but also weakens the economic stickiness of various countries, which will inevitably lead to the rise of political conservative and populism, which is "worse worse" for the global economy.
"Sheep shearing" is not a healthy capital flow, but a concrete manifestation of American hegemony. To put it simply, international financial capital first invests a large amount of "hot money" in a certain country to speculate on the country's real estate, stock market, futures market, foreign exchange market, etc., and then quickly evacuates the hot money when the bubble blows, causing people to panic and follow suit. This caused the country’s stock market and housing market to plummet, triggering an economic crisis. These financial capitals then purchase the country’s core assets at very low prices, looting the country’s accumulated wealth, and international financial capital earns a lot of money.
Finally, through "shearing wool", international financial capital will also control the country's economy in order to achieve the purpose of indirect control of the country's politics. In practice, the United States alternately uses quantitative easing and interest rate hike policies to maintain its dollar hegemony and harvest other countries through the dollar "shearing wool."
First-hand, quantitative easing, that is, continuous injection of liquidity and a large amount of currency into the market. Since the 2008 global financial crisis, government loans in low-income and low- and middle-income countries have surged from US$57 billion to US$260 billion in 2016. The main reason is that the quantitative easing policies implemented by Western countries have influenced international investment institutions to shift their business directions to developing countries. Among them, African countries are the top priority. Lending institutions hope to provide more loans to African countries in order to obtain higher interest rate returns.
Secondly, the US dollar's interest rate hike, that is, the appreciation of the US dollar leads to shrinking foreign reserves. The appreciation of the U.S. dollar since April is having a significant impact on some emerging market countries such as Argentina, Turkey, Russia, and South Africa, especially Argentina. In order to stabilize the exchange rate, the Argentine government raised interest rates three times in eight days and raised its benchmark interest rate from 27.25% to 40%, but the market still shows no obvious signs of stabilization. In history, Argentina has experienced three severe debt crises, the first at the end of the 19th century, the second in the 1980s, and the third in 2001.
Whether it was the Argentine debt crisis in the 1980s or this time, it all occurred during the period of dollar interest rate hikes and balance sheet reduction (reduction of the balance sheet). The Federal Reserve recently stated that it will raise interest rates three to four times in 2018; at the same time, the US 10-year Treasury bond yield, which is the wind vane of the global bond market, has also exceeded 3%. A strong US dollar will put the United States in a global capital battle. The dominant position has accelerated the withdrawal of the U.S. dollar from emerging markets and flowed to the United States.
Recently, a data released by the Jubilee Debt Activity Research Institute in the United Kingdom showed that the debt of some countries in southern Africa has increased by 50% in the past two years, the highest level since 2005.
The data pointed out that the main reasons for the previous debt crises were the decline in commodity prices and the rise in U.S. interest rates. “History seems to be repeating itself. Since 2014, the commodity price index has fallen by more than 40%, and the dollar has risen by as much as 15%".
For all emerging markets, the US dollar interest rate hike means that their financing costs in the international financial market will continue to increase, and foreign investment will accelerate the withdrawal of some emerging market countries, and their currencies are likely to depreciate sharply in the short term. There is no foreign exchange from the international market. The market purchases the required products and directly stops them from going abroad, and the economy presents a vicious circle.
While in Ethiopia, the author learned that Chinese car companies have landed in the Ethiopian market. Ethiopia imports about 18,000 vehicles of various types each year, most of which are second-hand cars. Among the few sales of about 3,000 new cars, Lifan Motors accounts for about one-third of the total sales.
However, Lifan has shut down the production line for a long time. In fact, the company does not lack orders, nor does it lack local demand. Lifan’s factory in Ethiopia has an annual production capacity of 3,000 to 5,000 units, but the actual annual output is only about 1,000 units. This is mainly because Ethiopia’s current lack of foreign exchange makes the company unable to Apply for enough foreign exchange imported parts and components.
Third, how to view the radiation scope of the "Belt and Road": The "Belt and Road" basically has no projects in the United States, India and other countries, but the debts of these countries are also high. April 2018. The International Monetary Fund said that the scale of global debt has swelled to a record 164 trillion U.S. dollars. This trend may make it more difficult for countries to deal with the next economic recession, or even more difficult to repay debt when financing conditions are tightened. The IMF pointed out that global debt is now more than twice the value of goods and services produced each year, accounting for 225% of global GDP, and is now 12% higher than the debt level of the last debt peak in 2009.
Many countries worry that developments in the United States are worrisome, because in addition to increasing debt at a faster rate, the country is also raising interest rates, leading to rising borrowing costs and possibly leading to a surge in defaults. This is also an increase in the debt burden of developing countries. Important reason.
On June 26, 2018, the U.S. Congressional Budget Office (CBO) released the latest long-term budget outlook report, stating that the U.S. public debt currently accounts for 78% of GDP, the highest level since the beginning of World War II. One year after U.S. President Trump took office, the scale of U.S. debt increased by more than one trillion, and the nation's debt exceeded the $21 trillion mark for the first time.
The latest IMF report shows that by 2023, the US debt to GDP ratio is expected to expand to 116.9%, while Italy will shrink to 116.6%; in terms of fiscal burden, the US will also "lead" Mozambique and Burundi; Japan debt and GDP The ratio is the highest in the world and is expected to narrow for the sixth consecutive year, but it will still rank first in 2023, reaching 229.6%.
With the economic slowdown, a large number of Indian companies have been unable to repay their loans, especially power, steel and telecommunications companies. According to data from India's NSDL, as of the end of April 2018, India's net outflow of capital was US$244 million. At the same time, many banks, including the Bank of India and the Industrial Development Bank of India, are selling their assets to deal with high debts and serious non-performing loans.
In a word, the debt levels of the United States, India and other countries are not low, but they blame the debt problems of developing countries on the "Belt and Road", which is a typical "unkind".
Fourth, how to view the actuality of the “Belt and Road”
Practicing effect: The “Belt and Road Initiative” should create a “win alliance”, not “falling into trouble”, but “sending charcoal in the snow”. China has been backward and poor, and it feels like "being beaten when being backward, and being scolded when being poor." Only colonialism or imperialism hopes to establish a "dependency relationship." China hopes to cooperate and win-win. This is not China's strategy, but China's view of history, pattern, and values.
More and more international organizations believe that Africa cannot avoid this crisis on its own. Western capital is to "run away if anything happens", while the Chinese hope to share weal and woe, and look at the gains and losses from the long-term overall picture.
At present, Africa will still need a lot of investment to build infrastructure and promote development. However, Africa is currently the continent with the lowest ratio of global fiscal revenue to GDP. The large amount of capital required for infrastructure investment is difficult to rely on Africa to be self-sufficient, and it needs to find a responsible partner.
In Guinea, China Weiqiao joined hands with Singapore Winning International Group, Yantai Port, and Guinea UMS to form the Weiqiao Win Alliance Economic Consortium to build a bauxite export base in the Bokai region of Guinea. Most of the rural areas surrounding the mining area have no electricity or water. In the past, the villagers drank rainwater and pit water. Win Alliance drew a well for the local villagers and drank clean water. Many people in the village worked in the mines, earned money and built houses. Chinese companies also held a technical training class for women in the village to learn electricians.
In terms of environmental protection, a cashew tree is planted every three meters in the mining area where the mining is completed, with an average tree height of 50 cm and a survival rate of more than 80%.
Before mining the ore, the Win Alliance piled up the surface soil. After the mining was completed, the surface soil was refilled, and cashews, mangoes and other economic trees were planted before the rainy season. The total reclaimed area reached 850,000 square meters. The person in charge of the Weiqiao Africa project said: "After the trees have grown, Chinese companies will give this cashew forest to the villagers for free."
In the past three years, Win Alliance has built roads, bridges, water wells, installed street lights, and repaired school houses for local residents. In just over two years, it has built more than 80 water pressure wells in 137 surrounding villages. Weiqiao plans to invest 8 million US dollars in the next three years to solve the difficulties of electricity and draft in 200 villages around the company.
The Prime Minister of Guinea was interviewed by reporters, “The Belt and Road Initiative is an important channel for multilateral cooperation. China’s economy has a profound impact on the world’s economic development, and China’s participation has enhanced the execution of international actions. The investment of Chinese companies in Guinea has stimulated the interest of other investors. confidence."
Statistics show that the proportion of government debt in sub-Saharan Africa is 38% from commercial banks, 36% from multilateral institutions such as the World Bank and the International Monetary Fund, and 26% from other governments. The financial support provided by China in the construction of the “Belt and Road” mainly belongs to the latter. The amount of debt is not large, but it has a significant role in driving economic and social development.
On the occasion of the fifth anniversary of the “Belt and Road” initiative, many negative comments came and went. It was not that the “Belt and Road” had a problem, but that the mentality of Western countries had a problem. Of course, for China, the “Belt and Road” construction should not give the international community the impression that they are all asset-heavy and hard-connected projects, but also need more asset-light, soft-connected projects, especially with solid academic support and the right to speak. support.