China is paralysing global debt-forgiveness efforts
China may be an economic powerhouse, but its actions in the international arena of debt-forgiveness are holding back progress and keeping many of the world’s poorest countries locked in chronic indebtedness. Its disregard for global efforts to tackle the problematic trend of spiralling debt means that the hopes of those desperate for some financial reprieve may remain unreached. In this article, we explore why China continues to resist international pressure for debt-forgiveness, and how the country is impacting global efforts to address the damaging effects of debt.
1. An Uncomfortable Paralysis – China’s Impact on Global Debt-Forgiveness
The sheer magnitude of China’s economic impact on the world has far-reaching consequences. One under-discussed ramification of Chinese dominance is the difficulty countries have asked for, or received, debt-forgiveness. For example, when Covid-19 caused severe economic disruption globally and many nations found themselves in dire economic positions, the prospect of any debt-forgiveness from China towards those countries wasn’t even an option—in their eyes it simply wasn’t feasible.
The weight of China’s economic might leaves those nations often unwilling or unable to push for debt-forgiveness from their creditors. Many developing countries are in desperate need of debt forgiveness, but are left without a voice in the face of China’s influence. It has resulted in a virtual paralysis for many of these nations, leaving them unable to ask for assistance and often unable to dig themselves out of their debt hole.
- High debt in countries has become a major problem, even before the Covid-19 pandemic.
- China’s economic dominance means that many developing countries cannot so easily ask for debt-forgiveness or call for assistance.
- China’s refusal to forgive debt has left many developing nations with an uncomfortable paralysis, unable to find a pathway out of their debt.
2. Impeding International Progress – China’s Resistance to Debt Relief
China has received immense criticism for its stance on debt relief for poor countries. The nation has gone to extreme lengths to extort money from debt-ridden countries, such as Africa and the Caribbean, who are trying to pay back the outstanding loans. In response to international appeals, China has taken the following actions:
- Refusing to cooperate with creditor-country discussions
- Refusing to reschedule pending loans
- Imposing strict loan-collection procedures
- Continuing to create new debt agreements
The people of developing countries have been left in a state of helplessness as China continues to put its citizens first. As China holds a large majority of international debt, it is difficult for other countries to extend a lifeline to these nations. Countries unable to pay off the loans have suffered huge economic setbacks, leading to a decrease in living standards and an increase in poverty rates.
3. Financial Opportunities Overshadowing Humanitarian Needs – China’s Calculated Position
China’s positions on international conflicts and humanitarian crises have often been subject of conversations and criticism. In various cases, the Chinese government has prioritized financial gains over the need to help tackle the crisis.
China’s questionable behavior has been noticed in its current approach to the COVID-19 pandemic. Despite the alarming spread of the virus within Chinese borders, the Chinese government refuses to reimburse farmers and other companies that have taken a financial hit due to the pandemic. This hesitation to contribute financially is only indicative of their hard line stance on conflict resolution. As diplomatically correct as possible, China often comes off as more interested in their own clout and influence over international conflicts, more than in the actual humanitarian needs of the people.
- China focuses on gaining the upper hand in financial and political gains
- The Chinese government demonstrates an unwillingness to tackle humanitarian needs
4. A Difficult Path Ahead – Facilitating Change in Global Debt-Forgiveness
The path towards global debt-forgiveness is not an easy one, but is necessary to create a more prosperous and equitable world. There are a number of challenges that must be faced in order to successfully facilitate change:
- Political Will:There are many stakeholders that must rally together and demonstrate a unified political will in order to make progress. Businesses, governments, international organizations and banks must coordinate to bring about an equitable solution.
- Data Collection:Accurate and reliable data are fundamental to understanding the scope and severity of the global debt problem. Without clear and trustworthy information, decisions may be biased or inaccurate and the effectiveness of the solution limited.
- Implementation:Creating debt-forgiveness requires sound and widely accepted measures, as well as a well-developed governance structure to ensure compliance and consistency. It is key to distribute decisions equitably and with transparency to create trust and keep stakeholders informed.
Finally, besides these practical considerations, creating a debt-forgiveness mechanism requires a shift in the way we think about debt. Countries and companies are encouraged to think of debt problems as opportunities to improve and progress. We must strive to create a system that captures the social and economic benefits of debt relief, and provides guidance and hope for a more financially secure future. The international community must put itself in a position to apprehend China’s behaviour and counter it by pressuring into debt-forgiveness or at least providing alternative solutions for those who are in debt. Debts cannot be ignored, especially at a global level. If the debt-forgiveness efforts continue to be obstructed by China, then countries must think of their own ways to absolve some of the most vulnerable people from their debts.