Even before the current economic crisis brought on by the COVID-19 pandemic there were widespread concerns about Chinese lending practices in Africa. The U.S. and other critics contend that Beijing is employing a predatory lending strategy where it intentionally loads up poor countries with unsustainable amounts of debt. When they invariably can’t repay those loans, China swoops in to seize assets.
While this so-called “debt trap” theory remains very popular, there’s simply no evidence to support the assertion according to scholars who’ve looked into thousands of Chinese loan deals around the world.
So, if it’s not a “debt trap” then what are the Chinese doing?
This is a particularly pertinent question now as Angola, Zambia and Kenya are all confronting severe challenges in their abilities to repay Chinese loans. Since this is the first time that African borrowers have encountered this dilemma with the Chinese, no one’s really sure what’s going to happen.
But a similar situation’s been playing out for almost two decades in Venezuela and what’s happened there might help inform how the Chinese will handle their ailing loan portfolios in Africa. Matt Ferchen, head of global China research at the Berlin-based Mercator Institute for China Studies, is one of the world’s leading scholars on Sino-South American relations and has closely followed the Chinese debt crisis in Venezuela.
Matt joins Eric & Cobus to discuss the fate of $20+ billion of outstanding Chinese loans to Venezuela and what African stakeholders can take away from this experience.
- The United States Institute of Peace: China-Venezuela Relations in the Twenty-First Century: From Overconfidence to Uncertainty by Matt Ferchen
- Reuters: Exclusive: Venezuela wins grace period on China oil-for-loan deals, sources say by Mayela Armas and Corina Pons
- Dialgo Chino: China remains quiet and pragmatic on Venezuela crisis by Alicia Hernández
Matt Ferchen’s research focuses on the connections between China’s foreign and domestic political economy. He has written extensively about China’s economic statecraft, China’s developing country diplomacy and debates about the “China Model” of development. He is particularly interested in lessons researchers and policy makers can learn from comparisons of China’s economic and political relations with different regions from Southeast Asia, to Latin America to Europe and the United States.
From 2008 to 2017 Ferchen was a faculty member in the Department of International Relations at Tsinghua University and from 2011 to 2019 he was a scholar with the Carnegie-Tsinghua Center for Global Policy. He holds an MA from John Hopkins School of Advanced International Studies and a PhD from Cornell.
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