It's Payback Time For a Lot of Those Chinese Loans
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Hello and welcome to another edition of the China in Africa podcast, a proud member of the Seneca Podcast Network. I'm Eric Olander, and as always, I'm joined by CGSP's managing editor, Kobus Venstaden, in beautiful Cape Town, South Africa. A very good afternoon to you, Kobus. Good afternoon.

Kobus, it's been a while since we've talked about the debt issue. That was a topic that we covered at length in 21, 22, 23, but it's kind of fallen off the radar a little bit, but it's a very important issue. Let me just bring everybody up to date on where we are specifically in Africa. As of 2023, Africa's total external debt stood at about 1.15%.

That's expected to go up to $1.2 trillion this year. Now let's talk about the Chinese part of that portfolio because oftentimes it's overstated. It's a share of the portfolio that is actually getting smaller and smaller. At one point, China accounted for about 20%.

of Africa's external debt, but now that's down to about 12% and falling as Chinese lending for the most part has curtailed off and lending or borrowing from other creditors has gone up considerably. So we got some new data just this week in fact about

China's overall lending in 2024 that came from Boston University's Global Development Policy Center. They again show the trend we've been seeing over the past several years, a sharp drop in Chinese overseas development finance lending. Last year, according to their report, China's development finance institutions, which are the China Exim Bank and the China Development Bank, they issued just $6.1 billion in loans for 20 different initiatives.

Now you notice I use the word initiatives because in the old days they would lend to countries, a lot of bilateral lending. More and more the Chinese are lending to regional development banks and national development banks and that's a trend that we've been hearing about for the past couple of years. Part of that de-risking is going on but also one of the reasons is that a lot of these developing countries simply

cannot carry the dead anymore. A new report that came out earlier from Lowy Institute, which we're going to talk about today.

really highlights the scale of the problem in many of the world's poorest countries who are just dealing not only with a Chinese debt repayment problem but also to Eurobond creditors, multilateral creditors, and even their own domestic creditors. But Kobus, get this: in 2025, according to Lowy, developing countries are going to repay $35 billion of loans to the Chinese. Of that, $22 billion is going to come from 75 of the world's poorest countries.

Now, another reason for why the Chinese are cutting back on their lending is because, well, they don't have the cash to throw around like they did a few years ago.

Let's just look at the debt-to-GDP ratios in China. Now, when you look at the central government, that is just Beijing, their debt-to-GDP ratio is about 77%, which puts them right on par with a lot of other major economies. But that number goes skyrocketing up when you take into account local or provincial debt, then it goes up to 120% debt-to-GDP.

to GDP ratio, and then when you factor in the private sector, Kobus, it goes up to 300%. So China has its own debt problems that it has to contend with, and the politics today, and we've talked about this also previously, are not really that conducive in China to issue billions of dollars of loans to developing countries around the world. That being said, and this is where I'd like to get your take, Kobus,

All of this comes at a terrible time for countries in Africa and other developing regions who both need to have access to affordable capital to finance their own development, particularly infrastructure, but at the same time, they are struggling to repay their loans to all of their creditors. So they're really caught in a vice right there. What do you think of all this?

You know, obviously, this comes at a moment when foreign assistance is also being cut very sharply. So these countries are facing a huge development gap, which is particularly an infrastructure gap, on top of a climate crisis, where they frequently also have to build a lot of additional infrastructure to deal with growing climate threats and the need for electrification. So because all of this work is frequently debt financed, what we're seeing in the larger sense

You know, China is obviously, I tend to see China as a global south country. I mean, that's obviously a controversial, I have, you know, an argument. But, you know, so there is the lending from China to a certain extent, you know, south-south lending. You know, but the larger landscape in which this is happening is we're seeing massive transfers of wealth from the global south to the global north.

with many of the traditional lending countries making a lot more money, you know, than they ever lent out. So this compounds a global north-south power split, you know, and which is one of the key reasons why increasingly when I think and talk about the future of geopolitics, I increasingly don't see it as an east-west split, but as a north-south split. I think that is really where kind of like future geopolitical tensions are going to lie.

And clearly with the money flowing from south to north, at least in the repayments issue. Well, I mentioned that Lowy Institute report. We're thrilled to have the author of that report, Riley Duke, who's a research fellow at Lowy in Sydney. And the report is Peak Repayment, China's Global Lending, China's Transition from Lead Bilateral Banker to Chief Debt Collector of the Developing World. Riley, thank you so much for taking the time to join us. We really appreciate it. Thanks for having me on, Eric.

Riley, let's get the headline, which is $35 billion this year is going to be repaid from the global south to China. Help us put that number in context. It seems like a huge number. I mean, it just pops off the page. But put it in the context of compared to previous years that debt repayments were happening to China, and also in terms of what your research found in terms of overall repayments that are going to creditors, not just the Chinese, but also the IMF, the World Bank, the

The Paris Club lenders. Help us put that number in context. I think the headline number, 35 billion to developing countries, is obviously the catchy top line. But our report really focuses on the 22 billion of that that is owed by or being paid by the world's poorest and most vulnerable countries. So these are the IDA countries, the 75 countries. They're either low-income countries.

high vulnerability, and typically countries that have low credit access. So they're the ones that took on a huge amount of Chinese debt and are facing very high repayments. So I think the picture of total debt owed to China and those repayments, when we look at all developing countries, is typically overstated.

But when we look at these lowest income countries, the ones that really through the mid 2010s took on an enormous amount of Chinese lending, Chinese debt through the BRI, they're the ones that are really feeling the pinch. So this year was record payments by those countries.

I mean, we look at all debt payments for those countries. China is 25%. So China is larger than the combined payments to private creditors and the bondholders, and it's larger than any single multilateral player. So it is big, and I think it does sit alone as a bilateral creditor, but it is important to focus on those lowest income credit constrained countries. In terms of the

now they are at record levels uh they have been for the 2024 2025 period and the why now of that is really about the lending surge the bri landing surge the belt and road landing surge in the mid 2010s and so

So lending peaked around 2016, 2017. It was about $50 billion a year going out in new loans in those periods. And when you pair that with the lending terms that China typically puts out, five to eight years pauses before the payments kick in, that meant that this period, the sort of mid to early 2020s, was always going to be a crunch period.

So in that sense, does that kind of increase, is it basically a kind of a historical anomaly or like, you know, historically unique kind of moment that will eventually kind of like ease off by the time we reach the 2030s? Yeah, I think that's right. I mean, it's going to stay high for the large part up until about 2030 because, you know, as you've already mentioned, Eric, lending has been falling for China.

But I do think that, you know, it's sort of been the timing of it is very unfortunate. I mean, you talk about these other headwinds, the COVID effects, the need for climate financing and the pullback in China's extension of credit has been procyclical. So just when financing was growing up through a COVID period in the years since, China's broader lending has also come off just as its payments have risen.

And I think, you know, the kind of beyond the top headline of our report, the thing that I was most interested in was China's transition from a net capital provider. So more money going out in loans to this to a net capital drain. And so when we look at that group of sort of lowest income, high vulnerability countries, China is a net drain of about $7 billion on their financing and then over 20 billion, sorry, I think it's 34 billion for all developing countries.

And to me, that is a very significant transition. And I don't think that's going to change even as we hit the 2030s. We're going to see China predominantly be a financing drain on these countries' budgets.

- Yeah, and that kind of flips the script a little bit on the debt trap narrative where everybody was saying that the borrower was in the debt trap, but it's turning out in many respects that the creditor, China, is in a debt trap because it's having to not only, as you pointed out, pay the $7 billion, but also there's a number of emergency loans that the Chinese are issuing in order, particularly to countries like Argentina and Pakistan, to keep them from defaulting on parts of their debts as well. And we'll get to the debt trap

question later because you did address it, but I just want to talk about the consequences for a lot of these poor countries that you looked at in your report in terms of the money they're using to repay, say, Chinese loans is then being drained from their national treasuries that would go to other things, you know, social insurance, infrastructure, maintaining their functioning government. But I guess the question comes to me is that, and you did not come to any conclusion about this in your report, but

Should these countries have taken on these loans or did they get into a bad deal? As you talked about, they oftentimes are credit starved and they don't have access to affordable capital. Kobus mentioned that development finance from the West has gone down. The IMF, the World Bank are out of doing major infrastructure. So when we look back at the situation that they're in today and look back to where they started from, do you think it was a mistake that they took out these loans?

I mean, it is a mixed bag. I think ultimately there is responsibility with the country taking on the loans. I mean, you can't just focus on who's extended the credit. I mean, countries need to have their own practices around responsibly taking on debt. That's right. There's agency on both sides here. I mean, this is not just a Chinese issue. Of course, of course. And I think the thing is, is that China extends a lot of credit and I think it was a spree. I mean, it's

the volume of loans that went out in the mid 2010s are astonishing by any measure. I mean, I think the stat we had in the report, which is not new, which is in 2016,

China extended more credit than all Western countries combined. I mean, that is historic levels. And I think China releasing the updated debt sustainability measures, these new initiatives that it's launched in recognition of the sort of lacking sustainability at times in their lending, I think that in itself acknowledges that China probably extended in some situations to countries that shouldn't have taken on the debt.

And the other proof point for that is just the presence of China as a big creditor in several countries' debt restructuring situations. I mean, responsibility for China there is about how it deals with those situations once they go south. And again, it's been a mixed bag. I mean, there's been cases where China has been a cooperative partner in debt restructuring, but there's also been cases where China has been firmly a break on the process of restructuring debt.

In all of these respects, how does Chinese lending compare to Western private sector lending in terms of kind of the repayment of the interest, the renegotiation problems and so on? Well, compared to the private sector, I mean, it kind of depends, right? There's no uniform bondholder rate that's extended, but I guess it depends individually.

Because, I mean, largely the private sector debt does come from the West or from Western institutions. But also, you know, the gray areas of China's lending are often forgotten about. So China's Ex-Im Bank is typically seen as being its trademark.

It's treated as a public institution, so it's a state debt, but China Development Bank self-describes as a commercial entity. So, debt owed to China's commercial bank fit into this weird gray area, and very often in debt restructurings, the terms, the manner in which they engage is identical to private Western lenders. Is that a problem?

I think the gray area is the challenge. And I mean, again, this is not my opinion. I think the words of developing country governments time and again, there is a lot of evidence to suggest that the gray areas in dealing with whether the loans extended by China are state or commercial, I mean, it's an old story. And I think the opacity rears its head. I mean, it causes problems. Again, when

the downside scenarios are being felt. During restructurings, when they can't clearly delineate what is bilateral, what is commercial, and what is multilateral, that in the process of restructuring debt causes problems because the bilaterals need to agree first, the privates come last, the multilaterals get preference in between. And so if you don't know who's in what camp, then it makes things very complicated.

But just in addition to these complications, so recently, earlier this year, Kenya took out a euro bond at...

more than 10%, around 11% interest. Some of the studies that we've read over time have emphasized the elevated risk perception and quite, you know, kind of sometimes a lot of African stakeholders have said like kind of outsized kind of risk premiums kind of put on private Western lending to Africa that frequently actually outstrip

Chinese interest rates. So I wonder if you could just in more detail kind of like put that in the context. How does someone like BlackRock, for example, compare to their Chinese equivalent or to Chinese state banks in both the rates and in terms and in the process of renegotiation?

I mean, I can't speak to BlackRock's rates. I'm not a specialist on that front. I think what I can talk to, I guess, is that, you know, the bulk of the Chinese debt that is being dealt with now is what was extended by its Ex-Im Bank. And the standard terms that they offered were what you'd call semi-concessional. So they are not the same as what is often offered, is offered by, say, the Asian Development Bank.

or the World Bank in its lending post 2005, let's say, in the more recent era, right? So China's loans that it describes as highly concessional, you know, they're more, they're close to the private sector line. But when it comes to, you know, the options on the table for bondholders, the rates get extremely high. I mean, you know, the specific case that you cite there, I'm not across that, but we see many developing countries in a financing pinch take on

very, very, very non-competitive rates in private markets. And again, it's challenging. It's hard to compare that with China's state-backed lending because the responsibilities and I guess the constraints on sovereign, on bilateral debt are very different to that, to the private sector. What you will hear from the Chinese insiders and even to some extent African stakeholders, and I'm sure it's the same in other developing countries,

The Chinese will tell you that the bottom 75 countries in terms of economic development are oftentimes some of the riskiest to lend money to. And so one of the reasons why those semi-concessional terms are a little bit higher than, say, a traditional concessional loan is because the risk is higher. There is a certain risk premium. We know this because private creditors and even multilateral creditors often don't loan to a lot of these countries, which is why they're so starved of capital. Is there any...

rationale to the fact that they are charging a little bit more because they're lending to countries that are financially much more vulnerable and therefore they need to charge a slightly higher premium on those loans? Yes. I mean, I think that's fine. It really is case by case. But when China was extending credit to those countries, as you said, they were the credit constrained countries. Debt is a dirty word to people, but developing countries need to finance their development. However, it

But extending that credit at a semi-concessional rate, again, is not necessarily a negative thing to do. But once the country is in debt distress, how it is managed from that point in time is really the key issue to me. And I think that China extends loans that it describes as from the state.

then later described as being commercial. And I think that's okay. It can operate like many Western private institutions do, or its state or semi-state arms can do that. But there is a responsibility to developing countries and all lenders put pressure on countries or on entities that have borrowed for them to get returns on their money. I mean, and everyone that extends credit operates the same way. It doesn't matter if it's a country or a bank, they all want to recoup and ensure as much repayment as they can. So I think...

I am not that negative on a lot of the Chinese lending, but there are cases where it's trying to have its cake and eat it too. I think that the complications there have been proven out many times.

I wonder if you could talk a little bit about the different kinds of Chinese lenders. So, you know, obviously we've seen that, like, you know, so far we've discussed state banks and they remain at the heart of this conversation. But, you know, we've seen a lot of, a very rapid move towards, you know, different kinds of public-private partnerships and capacitation or like pulling in more private capital from some Chinese private, you know, entities as well into project mixes. And it

we've also seen in the process a proliferation of the number of Chinese lenders. So, you know, in Zambia, famously, there was, I think, 13 different Chinese entities involved. So, which kinds of entities are we talking about in addition to the state banks? Yeah, I mean, I actually can't speak to that because the work I do focuses on sovereign debt. And so, all of our work focuses on developing countries reporting of what they say they owe China, the government level. So, it

I would say the vast majority of what my work focuses on is Ex-Im Bank and then China Development Bank and then some of the other government entities that extend loans. So when it comes to those other newer forms of creditors, I really don't know.

Kobus, that's the trend that Becky Ray at Boston University Global Development Policy Center is talking about now, how the CDB and Ex-Im Bank are really pulling back from serving as primary creditors now. And you're seeing a lot more coming out of state-owned enterprises, out of provinces, out of these non-state actors and subnational actors. And

the diversity of creditors is getting much wider. So, Riley, I think you're gonna have a challenge going forward in terms of only measuring the sovereign lending, 'cause that is going down. You mentioned in your report though that while lending has curtailed quite a bit, and that's also what Boston University has shown and many other research institutes have also shown, but you said that there are two groups that are still continuing to receive some degree of financing from the Chinese. Maybe you can talk about those two groups and why they're important.

So the two groups we identified were what we call the strategic or the political diplomatic, and then the other ones were sort of focused on minerals and commodity exporters. So talk about that first group, you know, while China's lending collapsed or went through a huge period of downturn from 2018, 2019 and into the pandemic.

The lending was actually very resilient in China's close border countries. So, you know, talking about, say, Pakistan and Laos, Mongolia, most of the Central Asian countries. They made up, I think, between about a third of China's continuing lending and a bulk of its disbursements up until the contemporary period. So, you know, where there was available credit to extend, clearly those countries very quickly

close to China geographically. That also means they matter strategically. They were outsized in that ongoing lending. And then the other group within the sort of strategic category that we identified was countries moving over from recognizing Taiwan to recognizing China. So countries, you know,

like Honduras, Nicaragua, the Solomon Islands, you know, in the Pacific in my patch, and a number of others over the last half decade. You know, when they swapped recognition within 18 months, a new large loan was typically part of the deal that China used to sort of sway diplomatic recognition. So that's the strategic group. And then the other group where we saw, you know, resilient lending were key battery metals and strategic or

critical minerals exporters. So in countries like Argentina and Brazil, they produce battery metals, things like lithium and cobalt. And so Xin continued very strong Chinese lending to projects in those countries. We've spoken about the huge repayment burden on these countries. Is it possible to trace

what the actual development impact has been. Like, is there a way to show whether these loans have actually kind of increased the amount of actual revenue that the government is getting in, in order to then ease some of the repayments? Or is it like, you know, I was wondering if your work, you know, also focuses on that aspect of it?

It's a great question. It's sort of the trillion dollar question, but being able to take a specific project or a specific loan and then attach economic growth or prosperity to it is something that, I mean, very, very, very storied development economists have tried many times. And there are some great reports out there with certain case studies that show growth from particular projects. But in the general case, it's just too hard to weed out all the other factors that might pull positively or negatively on

on growth. But I do think that certain principles around projects tend to result in growth, or at least that's what the track record suggests. And good quality infrastructure that lasts, that's well-made and makes sense, that is actually fit for purpose and fit for the economy it's in. Typically when that is built and the terms are solid for the loan, then it will pay itself off. I mean, it's a huge generalization, but that's as close as we can do with a direct statement.

I mean, you need infrastructure to grow economy and you can't necessarily trace a railroad, which may lose money, but also create economic activity. So is that loan worth it for that railway or not? You know, it's again, very hard to tell. Let's touch on this very sensitive issue of the debt trap. It's a meme that is durable, even though there hasn't been really any evidence whatsoever to back it up. Let me just read from your report and I'd like to get your take on it because this

This is it right here. This is what critics predominantly in the United States and India and other places will say is exactly what the debt trap is. You write, some argue that China's lending boom in the 2010s reflected an intentional effort as, quote, debt trap diplomacy aimed at pushing countries into debt problems so that geopolitical concessions could later be extracted. You go on to say there is limited evidence to suggest that this was the purpose of the Belt and Road Initiative lending surge.

When you said limited evidence, does that imply there is some evidence? What did you mean by limited evidence? Yeah, this is the unavoidable thing. You cannot talk about Chinese debt without debt traps getting mentioned. I guess I'd say that in the thousands and thousands of studies put out trying to attack this question, there's a lot of people that have presented evidence that they think suggests debt traps exist.

I think, I think my statement there saying that there is limited evidence is really just saying that we don't want to touch that because I mean, the purpose of our report is dealing with, you know, developing countries reporting on actual debt payments, but you know, the intent behind the loans, how they may or may not be used or whether they result in pressure. I mean, these are questions that have largely been unanswerable.

And I think that my general feel on the debt trap debate is that it's limited, more important discussion of the effects of debt and the need for loans, but also the need for restructuring developing country debt. It's almost obvious.

operators are sort of straw man on both sides of the debate. There's responsibility for Western lenders, there's responsibility for multilaterals, and China has responsibilities to the bulk of countries that are in debt distress. And I think the debt trap narrative tends to just take all this focus without actually progressing the situation and really making any meaningful movement towards

clear resolutions that are needed. When you look at the burden on developing countries from a range of creditors, it's enormous and it's slowing development. And talking about debt traps doesn't really move us any closer to a solution. The headline of the report calling China a debt collector drew a lot of attention.

and also got pushback from the Chinese government. So I was wondering if you could talk a little bit about the choice of the title and then what the reaction was like for you. I mean, I think China is receiving billions and billions of dollars from the world's lowest income and high vulnerability countries, right? Now, that doesn't necessarily mean that it's a malicious or malign actor. It is collecting an enormous amount of debt.

Now, our report, I think if you, you know, for people that do read it is pretty clear about it being part of a broader trend. And, you know, we have done work looking at private creditors and multilateral debts as well.

And I think the broader picture there is about China being one of many creditors that has put developing countries in a situation that needs resolution. And I think, you know, there's a line in that report that says that China's current lending practices are mirroring the extended pretend practices of the United States in the 1980s that led to huge indebtedness in developing countries and required huge restructurings in the 90s and early 2000s.

And so I think that in the historical record, China is operating like many Western countries have. And in all those situations, they are collecting debts. Well, we've talked a lot about the difficult situation that many of the borrowing countries are facing, but you also talk about in the report

that this all puts China into a very difficult situation as well. So on the one hand, if they push too hard for debt collection, they could force some of these countries into debt distress and or they could then impact China's perception as a fellow global South country, as Kobus pointed out. At the same time, many of these debts are either

private, semi-private, somewhat, and they're accountable to various stakeholders back in China. So a lot of it is taxpayer money as well. And taxpayers in China have a right to be repaid for these loans. So there's accountability within China on this. And then there's also accountability outside of China in terms of its global reputation. Talk to us a little bit about the difficult position that China finds itself in today as this debt collector. It

It is a real bind. I mean, China's dilemma here is that having to recoup this money and sometimes these projects are, I mean, very often they're 15, 20 years ago. So the current political establishment in the developing country probably didn't sign it, probably has long forgotten or got used to the site of that piece of infrastructure, but

on their current books, weighing on their current budgets, are these payments, right? So they're in this situation where the government of the day might not necessarily still feel that connection to the signing of the deal, but they are dealing with the burden of it. And, you know, having to recoup debts for any entity is not diplomatic by nature. And so China has this balancing act. It wants to maintain good relationships. It wants to continue to be a key partner, what it describes as a South-South partner to these countries.

But it also, at the institutional level, whether it be at Exim or CDB or one of those many entities that China lends through, they want to recoup their money. I mean, they're credit constrained, they have their own balance sheets to manage, and so

How that plays out is going to happen at the country to country level, but it will be a challenge for China. And this is already happening. I mean, I think even in very small examples, close to home in Australia, you know, in Tonga right now, one of the major political issues is the topic of Chinese debt. And this was for a loan that was taken out in 2008.

So it's a lifetime ago, but how to deal with that has been a huge political football, and to the point that the Chinese embassy in Tonga has released a statement defending its lending practices and its commitment to the Tongan government. In doing this work, I wonder what kind of impressions it gave you of the global

like development finance landscape, you know, because like in our, you know, we obviously, we focus on the China side of the global south situation, which means we're always talking about China. And there's also a tendency, I think, in talking about Chinese debt, particularly Chinese development lending, to silo China in the discussion. You know, there's a lot of political reasons why a lot of Western stakeholders prefer to highlight China, right? That's one of the reasons why the debt trap will never go away as a meme.

Because it's partly a way to not talk about how incredibly dysfunctional development finance is on the systemic level. So I was wondering what your takeaways were about a situation that, to my mind, is now a full-blown crisis.

Yeah, it's a mixed bag. I would say specifically on the restructuring front, you know, offer some optimism amongst what is a very pessimistic picture overall. I do think the debt restructuring infrastructure, I think it's improved in recent years. I think it's managed that. I think China has at times, you know, been a focus point for that. But, you know, as you say, there are many other actors and many other players causing many issues. And so I

Between the Paris Club and the multilaterals and China, that you're right, is siloed. I do think there has been progress there. I think the pace of restructurings, particularly the last few sort of very well-policized cases out of Africa, do suggest that some movement and a faster resolution is happening. But the broader picture is bleak. I mean, there's not really any other way to put it. COVID has had an enormous effect

Ukraine war for its impact on energy prices, trade war, the tariffs, all these headwinds. And as this is happening, the climate risks are increasing. So the broader picture is very ugly. And I think behind all of this, debt risks are rising when countries really need to be able to take on more debt because there are huge development needs to finance and the capital is drying up. It's going the wrong direction.

In a broader view, a longer term view, I think the health of the multilateral institutions is going to have a massive role to play. I think that they are, it looks likely, and we don't know that the US is going to be putting pressure on the multilaterals and there's going to be less money going towards them. I would say that the announcement we saw today that, uh,

the NATO 5% of GDP across Europe agreement. I mean, I imagine that there's going to be less money going towards- The money's got to come from somewhere, right? It's got to come from somewhere. And we've seen already the UK, it halved its aid budget to put money into defense. So we see that story across Europe and across other Western countries. There is going to be less development financing available. And so I think the picture's bleak and I can't really offer more than that.

And there are also murmurs coming out of Washington that the United States will severely cut its contribution to the International Monetary Fund. And it just doesn't believe in this type of multilateral type of engagement. So if it's bleak now, it might get a lot bleaker later on. The report is Peak Repayment, China's Global Lending, China's Transition from Lead Bilateral Banker to Chief Debt Collector of the Developing World, an Absolutely Essential Read as Part of the Collection and Understanding Report.

Where we are in terms of Chinese debt has been a topic that we've been talking about for years, and it's not going away anytime soon. Written by Riley Duke, a research fellow at the Lowy Institute in Sydney. Riley, thank you so much for your time today and for joining us on the show. We really appreciate it. Thank you, Beth.

Again, I cannot recommend this report enough because as we try to understand the debt issues, too often they get overwhelmed by the debt trap discussion. They get overwhelmed that who's to blame? Is it China? Is it the aggressor and the victims of the developing countries? Again, we have to remember that agency is spread online.

all around in this discussion. And it's important to recognize that, yes, $22 billion from the world's poorest countries is a lot of money, but we also have to recognize that these countries made strategic decisions at the time in many cases that said, either we go with the Chinese loan or it's nothing. Let's go back to the standard gauge railway debate from the early 2000s. When they were looking for money, they went knocking on all the traditional doors. None of them opened.

Only the Chinese were there to finance the railway. The deal in the end, as we've learned, not the best deal, but it was the only deal available. And I think that part of the discussion gets overlooked in this debate, that many of these countries just do not have a lot of options for creditors. And so the question is, do they take a risk in borrowing from China or do they do nothing? And doing nothing oftentimes is worse.

Yes. I mean, you know, in one way, $22 billion is a lot of money. In another way, it's nothing. It's, you know, Elon Musk could pay that out of his back pocket. So it's part of a larger kind of like wealth disparity, you know, between the global south and global north that's being replicated within global north countries.

you know, very kind of like rapid polarization of wealth, you know, like in a smaller and smaller number of hands. And that was a larger kind of like multi-decade process, you know, as part of neoliberalization, you know, and so on. And China kind of stepped into that space as a newcomer to financing. So that has been a messy process and it's had kind of a lot of kind of like

you know, fall out kind of like impacts on global South countries, on China, on the rest of the world. You know, but it doesn't kind of, it doesn't take away from the space, from the fact that China is one of the few newcomers into that space.

you know, kind of at a time during an era when the rhetoric from all of these lenders was like relentless, you know, like, oh, Africa's the future, you know, the world's youngest population, blah, blah, blah. You know, like that discourse, you know, came on top of a full kind of like indifference to actual kind of development outcomes. You know, so I think that has to be, I think, the wider context, you know, is that, you know, we're at a moment where the vast majority of the world's population

is making do with almost none of its resources, while absorbing a massive climate impact that they didn't cause, while also transferring even more wealth to the global north in order to then deal with that climate crisis that the global north caused. So,

So in that sense, China is a relatively, is a side player to this entire drama. You know, and what it is, you know, kind of its kind of global south politics is, you know, kind of a canny kind of wielding, I think, of what I think it sees as this kind of huge crisis that's coming on the horizon. Well, when we talk about the $22 billion, I think a lot of people will see that as somehow extractive.

that the Chinese are profiting from this, which I mean, there's interest on these loans, so there's no doubt that they are and they deserve to profit from it because loans entail risk. There's no two ways about it. But I had a conversation last week with an Australian friend of mine, and I got kind of frustrated because he was, again, focusing on China as the exploitative power in Africa. And I pointed out to him about, look how much in terms of actual physical resources,

that a company like Rio Tinto, which is an Australian mining company, extracts from Africa and brings into its supply chain. We see the same from Ivanhoe and the Canadians and the British and whatnot. When we see the quantities of resources that leave Africa every year by Australian, Canadian, UK, Swiss mining companies, and then you see the amount of development finance that goes back in from these countries, huge discrepancies.

I mean, just so when we talk about exploitation, it's just glaring, but yet they get a pass. And I find that very, very frustrating. And then you look at a country like Norway, which has a trillion dollar pension system because of stat oil selling basically hydrocarbons to the world. I think it's the fourth or fifth or sixth largest oil producer in the world, and yet only commits 1% of its GDP to foreign development assistance.

1%? Yes, I mean, Norway is a climate criminal pretending to be a great development helper, right? But Australia is not much different as a major coal exporter. So is Canada. I mean, let's just be very clear, and Canada as well. These are hydrocarbon exporters. And yet, so when we talk, and again, I'm not saying this, I know some people are going to interpret this as defending China. That's not what this is. What this is, is that, I think to your point, there is this extraction from the South of

to the north. And China is by no means alone in doing this. And so when we look at this, we have to put it within that larger context of exploitation that continues to this day. Yeah, absolutely. Like, you know, on top of that... We're never going to get invited to the Lowy Institute to speak, by the way. Just want to let you know that right now. I mean, in addition to the

you know, to just the resources that's being exported. If you look at just from Africa alone, financial, like illicit financial flows out of Africa stands around $2 trillion per year. Corruption makes up a small part of that, a surprisingly small part of that, actually.

The bulk of that is foreign companies simply not paying taxes. You know, a lot of it is tax avoidance and other, like, misreporting other forms of avoiding the actual payments that they have to make to these countries. You know, like that, if you, again, like, 2 trillion per year, compared, like, the 22 billion that these countries are struggling, like, giving their health budgets up to try and repay to these countries. I mean, you see the disparity. You know, so there we are.

Well, I'm going to put links to both the Lowy report and also the latest BU data. And we're going to have a column on our website from Becky Ray at Boston University as well. These guys are following this so carefully. And again, once the Lowy research is very, very important. And I think if you use this as part of a matrix approach,

of data sources to understand the debt issue that will help. And so much going on. And then at the same time, wanna make sure that everybody checks out the great work that Kobus and the team are doing over on the website and with our newsletter. Indispensable work right now to be able to connect the dots in terms of what's going on with China across the global south. And when we talk about these debt issues,

One of the problems that has emerged when we look back at the autopsy of how we got into this is the China literacy problem, that a lot of the people who were negotiating these loans and negotiating with the Chinese just did not know much about who they were talking to.

The service that we are providing is exactly designed to close that literacy gap, to help you better understand what China's doing in a nonpartisan, non kind of extreme way. We really just kind of follow where the facts are going. If you want to find out more, go to ChinaGlobalSouth.com and

And then you can subscribe at chinaglobalsouth.com slash subscribe. And remember, if you are a student or a teacher, email me eric at chinaglobalsouth.com and I will send you half off links to sign up for our service. And we really appreciate all of your support and also want to thank all of our Patreon supporters as well. So for Cobus Van Staden in Cape Town, I'm Eric Olander. We'll be back again next week with another edition of the China in Africa podcast. Thank you so much for listening and for watching.

The discussion continues online. Follow the China Global South project on Blue Sky and X, a China GS project, or on YouTube at China Global South and share your thoughts on today's show or head over to our website at chinaglobalsouth.com where you can subscribe to receive full access to more than 5,000 articles and podcasts. Once again, that's chinaglobalsouth.com.

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