My Authors
Read all threads
The chickens have come home to roost.

China’s lending to some of the most fragile countries was poorly structured and often not in the best interest of recipient countries.

I will spell out the issues

1/

ft.com/content/5a3192…
The timing of BRI was driven by Chinese self-interest: a country with massive surplus savings, needed new places to invest post-2008 as US could no longer receive as much as before.

So China turned to weak countries that it had influence over.

2/
The weak country leaders saw this as an opportunity to quickly show case some “flashy projects”.

There was no due process. For example, Chinese State-owned enterprises (SOEs) were both lenders and contractors - a situation rife for over-invoicing to boost Chinese returns.

3/
Investments were often in areas that largely serviced domestic consumption or non-tradable sectors.

With little productivity gain for export sector, payback was going to be extremely hard

Plus loans were denominated in dollars - world’s hardest currency in times of trouble.
4/
There was little to no due diligence on the side of borrowing countries.

For example, no analysis of how external shocks might create a financial doom loop for indebted countries.

To make matters much worse, local currency was artificially appreciated while borrowing in $
5/
Meanwhile if someone asked a genuine question, they were labeled “non-patriotic”, or worse.

It is of no surprise then that these loans are creating massive trouble now.

The whole deal was almost designed to collapse- if it were not Covid, it would have been something else.
6/
There was a win-win alternative.

Instead of just exporting capital and it’s SOEs, China could have engaged in technology transfer and strengthening domestic institutions in developing countries.

China could have helped others adopt the “Chinese model” of growth.

7/
For developing countries, the lesson is simple: you cannot import growth, and you cannot borrow your way out of poverty.

Invest in your own people and institutions, and develop your own capacities first.

End/
Missing some Tweet in this thread? You can try to force a refresh.

Enjoying this thread?

Keep Current with Atif Mian

Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Follow Us on Twitter!

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3.00/month or $30.00/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!