China is secretly profiting from coronavirus, in ways beyond selling protective equipment to infected nations, withholding pharmaceutical ingredients, and leveraging reopening for an edge over competitors. Put aside coronavirus origins and the cover-up. China is fleecing the world’s poorest countries, right before our eyes.
In effect, China is borrowing from Peter to fleece Paul, using cheap World Bank loans to re-lend the money and leverage high interest and political concessions from poor nations – to the tune of $200 billion. The offense is compounded by America’s role as a founder and largest shareholder of the World Bank. Here is how China’s usurious scheme works.
As described in a report by the Council on Foreign Relations (CFR), China has cleverly concocted a means – at the height of this pandemic– for profiting on global desperation. Under the rubric of “massive Belt and Road Initiative infrastructure loans to poor countries,” they are “saving” countries with extortionate lending. No suspension of interest, they are tightening the belt – cinching China’s saddle around these nations.
“While the World Bank is disbursing emergency aid to its poorest borrowers, China—a major World Bank borrower, with $16 billion in outstanding loans—continues, effectively, to use cheap World Bank financing to fund its own higher-interest loans to other World Bank borrowers.” Predictable? Yes. Tolerable without mention? No.
Implications are immediate for countries pressured, more serious in the long-term. In effect, China is using lending practices that are illegal in most countries – often called “usury” – to bootstrap desperate borrowers to harsh terms, here political and economic. Doing so with Western dollars only makes more miserable the offense.
This is just the latest example of Communist China throwing the table, misusing multilateral institutions and economic power to broaden their political influence.
We know China intimidated the World Health Organization (WHO) after the Wuhan-origin virus appeared – apparently covering up the source, destroying samples, masking human-to-human transmission, mispresenting lethality, and causing incalculable harm to the world.
We know China improperly used membership in the World Trade Organization (WTO), consciously subverting terms to which all other nations adhered, seeking to game the system, pushing global tolerance, and thus advancing communist political interests.
We know China has resisted global rule of law norms, recently subverting INTERPOL – first installing a Chinese head in 2016, then when he fingered China’s own criminal misconduct, causing that leader – Meng Hong Wei – to disappear. China sentenced him to 13.5 years of prison in January 2020.
Now, China pulls another jaw-dropping affront. China is using the crisis to saddle poor countries with high-interest debt, reapplying low interest World Bank loans. Like a kiting scheme, China played needy debtor only to become usurious lender. Having not been called out, they now strong-arm countries like Pakistan, South Africa, and Ethiopia – each of which owes more to China than the World Bank.
CFR notes China’s lending is “shrouded in secrecy,” but hits almost 70 countries and approaches $200 billion – less than China owes the World Bank. Enriching China, the opportunity cost is infringement on World Bank’s ability to lend at low rates to the same countries and increased risk of country-by-country insolvency.
“Chinese debt could cause emerging markets to implode” as nations struggle to get upright after economic damage from the pandemic. In short, this virus has “brought the world economy to a grinding halt,” foreshadowing negative growth. Chinese insistence on high interest payments from countries with declining currencies only deepens the crisis.
As CFR notes, many countries “had dangerously high debt levels even before the pandemic necessitated massive emergency spending,” such as South Africa, Kenya, and Nigeria. Their peril is higher now. Since global interdependence is a reality, we are all hurt by China’s actions.
The World Bank and International Monetary Fund (IMF) are doing what they can, but China needs to step back from these usurious practices, joining the G-20 commitment to forgive all interest due from poorer country through end of year.
Three take-aways: Communist China is indifferent to settled international norms. These unethical actions corroborate allegations of unethical behavior surrounding coronavirus. Finally, global unity in addressing China’s legal breaches – from coronavirus to misuse of multilateral institutions and indulging usury – has never been more important.
Communism is immoral, repressing individual liberties for the collective. The people of China must find their way out of that maze. But China can still be held accountable for how they interact with the world. The time has come.