The biggest fish caught in China’s “debt trap”

The US is the “victim” as the largest recipient of Chinese official credits and loans

An Indian by the name of Brahma Chellaney, employed by Center of Policy Research based in New Delhi and funded by US State Department, coined the term “debt trap” to demonize Chinese loans for the Belt and Road Initiative (BRI) across developing countries.

It’s clear, just by the origin of the term, that it was a smear job by a dimwit sour grape. His argument has since been roundly debunked by researchers and analysts from John Hopkins, Harvard, and the Chatham House. None of them can be described as trolls for China.

For example, research by the New York-based Rhodium Group and John Hopkins University has shown no instance of China seizing strategic assets due to debt defaults, a core claim by Chellaney and the “debt trap” advocates.

Studies done by London-based Chatham House (The Royal Institute of International Affairs), a very anti-China outfit by its track record, contrast China’s debt management with that of Western bondholders and institutions.

Their analysis demonstrate China has shown far greater willingness to provide debt rescheduling and relief, while Western lenders such as the World Bank and IMF are quick to resort to legal measures.

Western loans also often come with conditionalities that negatively affect a country’s economic productivity – such as deregulation and privatization.

Ironically, while India sounds the alarm on “debt trap”, the country itself is the largest recipient of loans from the Asia Infrastructure Investment Bank (AIIB), a financial institution funded primarily by China.

Of course, the Indians are presumably so “smart” that they are immune to any “debt trap”. Their lenders and creditors are the ones who need to worry about being “trapped”.

Very predictably, such a discredited lie is not too low for most Western governments to adopt as the holy script since it fits their geopolitical narrative.

And the term has become a regular in the official lexicon of western governments and media.

A recent study on Chinese official lending done by the College of William and Mary (W&M) in Virginia, the second oldest university in the US, is very telling and goes to show the disparity of Western claims and empirical evidence on the ground.

The AidData research lab at W&M found that China is the largest creditor nation in the world and its global lending since the turn of the century has been “vastly” larger than previously understood, with loans and grants increasingly going to developed countries.

The US is by far the largest recipient – nearly US$202 billion of the US$2.2 trillion disbursed by China’s “official sector” between 2000 and 2023 went to projects in the US.

Note the data excludes China’s purchase of US Treasury.

“Our data demonstrate that the US – a high-income country – is the single largest recipient of official sector credit from China. This finding is both unexpected and counterintuitive,” wrote researchers of the study released earlier this month.

“This is an extraordinary discovery, given that the US has spent the better part of the last decade warning other countries of the dangers of accumulating significant debt exposure to China, and accusing China of practicing “debt trap” diplomacy,” said Brad Parks, AidData’s executive director.

The study, compiled over 36 months using more than 246,000 sources, covered a wide range of Chinese official lenders, including state policy banks, state-owned commercial banks, state-owned companies, state-owned funds, and the central bank.

Some of the Chinese lending in the US involved the construction of “critical infrastructure”, helping to bankroll the construction of major liquefied natural gas pipelines in Rio Grande, Port Arthur and Freeport, the Dakota Access oil pipeline, an electric power transmission line feeding New York City, data centres in Virginia, and airport terminals in New York and California, among other projects.

Official Chinese lenders also financed the merger and acquisition of hi-tech companies in the US and provided liquidity support – via working capital and revolving credit facilities – to a wide array of Fortune 500 companies.

The research lab described most Chinese loans to the US “are guided by the pursuit of profit rather than the pursuit of geopolitical or geoeconomic advantage”.

While China is well known for lending to Global South countries via BRI, the report found that 10 of the 20 largest destinations between 2000 and 2023 were high-income countries, including the UK, Singapore, Germany and Switzerland.

Russia was the second largest recipient after the US, with a cumulative US$171.78 billion in loans and grants over the period, followed by Australia with a total of US$130 billion.

According to AidData, China’s total overseas lending portfolio is two to four times larger than previously published estimates, making China the world’s biggest official creditor by a large margin.

Its lending portfolio has evolved significantly over time – in 2000, 88% of China’s lending went to low-income countries; by 2023, financing going to developed countries rose to 76%.

China had approved loans and grants for more than 30,000 “projects and activities” worldwide between 2000 and 2023. A total of 9,764 of those projects and activities were in high-income countries.

The AidData report claims China offers debt, equity and grants in “flexible, innovative and complementary ways to advance its geostrategic and commercial interests”.

China is increasingly seen as an “international creditor of first – and last – resort”, according to the report summary.

The disconnect between the Western propaganda and the reality on the ground is revealing – the hypocrisy of calling Chinese lending “debt trap” while engaging in a feeding frenzy in trough of Chinese money.

Western governments and media’s twisted narratives about China live on a hotbed of cynicism and stupidity.

For such narratives to be believed, one of two things must be true – either the readers are so cynical they are willing to swallow patently false narratives to feed their bigotry, or the readers are so dumb that they don’t possess basic faculty for critical thinking.

This reminds one of other similarly ludicrous talking points. For example, Western pundits regularly claim China’s domestic economy precarious because of persistent “deflation”.

While it’s true that prices have been stable or falling slightly in the last 2 – 3 years, how is it a bad thing for consumers?

Why should consumers welcome “rising prices” – as the wide-spread inflation in much of the West?

Shouldn’t prices of goods fall when manufacturing scale and efficiency improve and companies compete for consumers in an open marketplace?

Why is high corporate profit margins as a result of higher prices a good thing for consumers?

In China, average real household income growth in 2024 was 5.4%, 0.2% higher than the nominal growth rate 5.2% due to lower prices. Isn’t this better than negative real income growth in most Western countries?

In China, the effective interest rate for 30-year mortgage is 3.1% on average, and 2.65% for first time buyers. Isn’t this better than paying 6 to 9% as in other countries?

You have to be a real retard or cynically shut down any critical thinking to believe in the garbage from the lying media.

And it’s more than the media. A prime source of such garbage comes from “elected leaders”.

Ted Cruz, the 3-time US Senator from Texas, wrote in a recent op-ed that Chinese AI dominance would mean “state-run surveillance and coercion”, while an American win would guarantee a technology anchored by “liberty, human dignity, and the rule of law”.

If this self-serving propaganda comes from someone with a modicum of credibility, it might carry some weight. But coming from Ted Cruz, one of the most despised men in his home country the US, the irony is overwhelming.

This is Ted Cruz talking. The same Ted Cruz, christened “lyin’ Ted” by the Donald, who became Trump’s most loyal lapdog three months after Trump insulted his wife’s looks (whom Cruz claimed as “the love of my life”) and hinted his father helped kill JFK.

This is the same Ted Cruz who was voted as “the most unlikeable person” by former classmates (including his college roommate) and fellow Republican colleagues.

The same Ted Cruz who fled to a Ritz in Cancun when his voters were frozen to death during the Texas freeze in ’21.

John McCain, late warmonger par excellence and Cruz’s fellow senator, was quoted saying: “if you killed Ted Cruz on the floor of the senate, and the trial is in the senate, nobody would convict you”.

Even Lindsey Graham, who is a worthy contestant as the most despicable human with Cruz, said “if you shot Ted Cruz, it would be a hung jury”.

For this Ted Cruz, who failed to defend the honor of his own wife and father, to take the moral highroad and defend “human dignity” is the equivalent of a two-peso prostitute to lecture on chastity and virtue.

So, the question is – are those vile creatures like Cruz and Graham going to save the US from China’s “debt trap”?