You may not have heard of Chinese firm Transsion – but it is currently dominating the mobile phone market in Africa and the Middle East with three brands that have never been sold in China.
Chinese-made phones are calling the shots in Africa as they beat global giants Samsung and Apple::undefined
Part of the reason also has to do with the fact that China will write loans for stupid crap when Western banks and the IMF won’t. You want a loan to build a giant statue in the middle of the desert? Chinese banks have got you covered. Western banks will laugh you out the door. Loan to build a new train line? Western banks want assessments, revenue estimates, feasibility studies, and ten other things. Chinese banks will ask “Are you going to hire a Chinese contractor to build it?” and if the answer is yes, they’ll write the loan.
If we assume the loans will implode either way, the Chinese model at least funnels some of the money back to their own contractors, and ends with some goodwill and infrastructure. It’s an aid programme with extra steps.
I wonder if the western model optimizes for loans doomed to fail to use them as a lever to extract structural and political concessions, or if it’s just a happy accident.
Western banks are privately held so they are only interested in profit. Western governments rarely give big loans to developing countries (except indirectly through institutions like the IMF), but China does, through its state-owned banks.
In many cases, Western banks gamble on junk loans unlikely to be repaid written to these countries and cry to their governments when they lose. Then these governments then pressure the debtor countries to try and extract payment.
I notice that Western nations like to keep these loans separate from aid. If the goal is to make money, it’s called a loan, and if the goal is to help out, it’s called foreign aid. China realised there’s no particular reason to do this and mixes them freely so it has the flexibility to treat it as a loan that needs to be repaid when that suits them or treat it as aid that will be forgiven.
Both are forms of economic colonialism in my book. Just slightly different modus operandi.
Part of the reason also has to do with the fact that China will write loans for stupid crap when Western banks and the IMF won’t. You want a loan to build a giant statue in the middle of the desert? Chinese banks have got you covered. Western banks will laugh you out the door. Loan to build a new train line? Western banks want assessments, revenue estimates, feasibility studies, and ten other things. Chinese banks will ask “Are you going to hire a Chinese contractor to build it?” and if the answer is yes, they’ll write the loan.
This isn’t as absurd as it looks.
If we assume the loans will implode either way, the Chinese model at least funnels some of the money back to their own contractors, and ends with some goodwill and infrastructure. It’s an aid programme with extra steps.
I wonder if the western model optimizes for loans doomed to fail to use them as a lever to extract structural and political concessions, or if it’s just a happy accident.
Western banks are privately held so they are only interested in profit. Western governments rarely give big loans to developing countries (except indirectly through institutions like the IMF), but China does, through its state-owned banks.
In many cases, Western banks gamble on junk loans unlikely to be repaid written to these countries and cry to their governments when they lose. Then these governments then pressure the debtor countries to try and extract payment.
I notice that Western nations like to keep these loans separate from aid. If the goal is to make money, it’s called a loan, and if the goal is to help out, it’s called foreign aid. China realised there’s no particular reason to do this and mixes them freely so it has the flexibility to treat it as a loan that needs to be repaid when that suits them or treat it as aid that will be forgiven.
Both are forms of economic colonialism in my book. Just slightly different modus operandi.