Beijing [China], Aug 25 (ANI): China, the world’s largest creditor, shockingly uses a confidentiality clause that bars borrowers from revealing the terms of the contract or even the existence of the debt itself.
The International Forum on Rights and Security (IFFRAS) indicates that a recent collaborative study by the Peterson Institute for International Economics, the Kiel Institute for International Economics and the Global Development Assistance Data Center will use these contracts to indebted the country. I reported that I had concluded.
The study mentioned in this article looked at 100 contracts signed between 2000 and 2020 and owned by the Chinese state in 24 developing countries in Africa, Asia, Eastern Europe, Latin America and the United States. ‘Oceania. We have systematically analyzed the legal conditions of the loans which companies and public borrowers obey. Commitment of US $ 36.6 billion.
China’s credit conditions are still heavily skewed in favor of Chinese lenders over other creditors. The credits offered include guarantee agreements, including provisions of the Paris Club and provisions allowing lenders to influence the domestic and foreign policy of the debtor. In general, credit terms are also kept secret from other creditors, including the IMF and other international organizations.
The Paris Club is a group of major creditors whose policies aim to extend coordinated debt relief to developing countries, in addition to ensuring sustainable debt levels.
Apart from this, the Chinese also stress that they keep their credit terms secret from the citizens of the borrowing and lending countries, who otherwise have a legitimate right to know.
Lenders are also free to cancel the loan earlier than expected or have the discretion to request full repayment. Such conditions could clearly allow the lender (in this case the Chinese) to exert influence over the borrower, limiting the borrower’s policy space and canceling adverse loans, or affecting the terms of the Chinese deal. . It allows to issue new environmental regulations that have sex.
According to IFFRAS, all Chinese creditors, including commercial banks, hedge funds, suppliers and export credit agencies, seek to influence borrowing countries to increase their repayment prospects through legal, economic means. and policies. I am.
China has developed a unique way of guaranteeing repayments on a preferential basis by combining standard commercial and official loan terms, which allows it to gain a better understanding of the borrower’s economic and foreign policy.
Thus, the three main lessons that emerge from the analysis of China’s lending models are as follows: a) the Chinese contract contains an unusual confidentiality clause which prevents borrowers from disclosing details, especially since 2015. b) Second, Chinese lenders want to have an advantage over other creditors, including collateral agreements such as managing income accounts. c) Third, the cancellation, acceleration and stabilization clauses in China’s loan agreements are much more common, allowing lenders to influence the domestic and foreign policy of the debtor.
In other words, China’s loan terms, even unenforceable in court, can limit a borrower’s crisis management options and complicate debt renegotiations at any time. This analysis of China’s lending models represents a well-thought-out strategy for managing credit risk and overcoming execution barriers that can arise in any borrowing country, IFFRAS reported.
In fact, the impact of predatory financing from China is as great as Sri Lanka, which has already experienced the loss of strategic loan guarantee resources, as in the case of the Port of Hambantota, where more than 1,500 acres of land has been ceded around the Port. This is not obvious. Traveled to China on a 1999 lease.
A similar situation cannot be ruled out in Pakistan. Despite international warnings of the imminence, Malaysia has followed the same path and been embroiled in the debt cycle.
Like Sri Lanka, Pakistan is devastated by heavy Chinese debt pressure on the China-Pakistan Economic Corridor (CPEC) project, which is worth nearly $ 60 billion. The Pakistani economy has struggled to increase debt in recent years, with a government near bankruptcy and a severe balance of payments crisis.
Recently, IFFRAS reported that the main obstacle to CPEC is that Pakistan can no longer accept debt from China due to rising electricity prices and construction costs.
Therefore, China’s predatory debt policy in the Indian subcontinent like Sri Lanka and Pakistan, or in Indo-Pacific countries like Thailand, Laos, Cambodia and Africa testify problems like Sudan and Ethiopia, to name a few. .. IFFRAS has signaled that the borrower country is on the verge of losing sovereignty but wants to be independent.
BIS opposition cases have increased dramatically in some of the more than 150 countries on China’s credit list. (ANI)