Only Western powers are allowed to do that!

After all Africa is their playground. How dare anyone else meddle with it?

If the African nation in question defaults on big loans to China, their economy is going down. Millions of people will be severely harmed, possibly for decades. It's not just China that loses some money. To say nothing of the fact that China often requires repayment in physical assets of the country (such as taking physical ownership of a port for their own use, or oil, or cocoa), they don't just walk away if they're not getting cash repayments.

First the country straps itself trying to repay China. That means they start missing payments on other smaller debts, they start squeezing the funding of their welfare systems and basic government functions. Everyone begins to suffer.

Redirected government funding - which they can't afford to redirect - begins to harm the economy. Their credit rating gets downgraded, nobody will lend to them at this point. Only China is left, and they want harsher terms now, more of the national resources (see: the Venezuela model). Their currency tanks, inflation skyrockets, the people suffer immensely. The economy goes into perma recession, no foreign capital trusts the situation, investment plunges.

Cycle and repeat the downward spiral, until you reach a point of social catastrophy.

Well, we had that here in Europe too, but through EU/IMF loans. They enjoyed pushing countries to a "social catastrophe". So it happens in the best of "families" too.

https://www.independent.co.uk/news/world/europe/greek-debt-c...

https://www.nytimes.com/2015/07/12/world/europe/greece-debt-...

https://www.theguardian.com/business/2013/jun/05/imf-underes...

Banks typically don't want to see you go out of business when you borrow their money, such that they have to take your collateralized assets or similar. They'd prefer you fulfill the terms of the original loan. Regardless, it still happens routinely that debtors default; sometimes the creditor also lends more good money after bad, hoping the situation turns around. Ethiopia would be considered a risky or subprime debtor, as are most of the very newly developing countries like that which China is lending large sums to. They're not lending money to borrowers like Germany or Canada, with many decades of consistently sound economic operation and stability. Those types of economies don't much need China's capital. The nations that have weak access to global capital markets, or generally weak foreign investment, are drawn to China's money for obvious reasons. China is frequently a lender of only resort (particularly at the scale they're willing to deal).

If Ethiopia cannot repay the loans, by definition the Chinese are losing out in economic terms, even if they get control of physical assets etc. If the assets were worth more than the loans, someone else would be willing to bid more for them than the Chinese. If they are worth less, the Chinese would have been better off just buying them outright.

88 : 40 = 2.2. At the ratio of 2.2, Africa does better on trade balance with China than most of Western nations...

>It is also afraid of buying assets in the US and Europe as it cannot guarantee that these assets will not be seized if need be for political reasons. Furthermore, it does not want to do anything that would reduce the value of the remaining dollars it holds. Trying to establish a resource base in Africa where they can build relationships, influence, enforce their property rights and protect trade routes, seems like a reasonable choice.

Have you come to that conclusion yourself?

On resource exports:

The logic that resource economies must have positive trade balances as a rule did not stand reality check.

One may think that the amount of imports a resource economy can afford is not elastic in relation to their main export because they don't have any industry to produce basic living necessities.

In reality, what happens is the opposite: once few rich run away with what little hard currency the country had, the remaining people can't even buy those basic living necessities with debt, as their debt is worthless. Example: Venizuela

And reverse, when rich in those countries bathe in cash from resource exports, they spare no money for dumb excesses like gold plated Rolls Royces, and vaporize their trade surpluses very fast. You had to see Moscow in the time when oil was hitting $130...

And... quite a few African countries without any resource exports do have neutral trade balances with China, despite China being their biggest trade partner

Yes, I should have been more clear that this is just my opinions/speculation.

I'd said it's unexpectedly insightful for a talk on an internet forum. That's a very subtle line that I think only one out of 50 academicians around picked up.

One fact that can be made for sure is that China been preparing for a scenario as bad as North Korean trade isolation for decades. Not puny tarrifs that they are under now.

The whole arrangement of political alliances, preferred classes of assets abroad, currency swaps, infrastructure planning confirms that.

May I know, what is your day job?

They're following the West's playbook of buying influence at the UN, etc. It's Chinese "soft power".

> If China loans more to African nations than they can repay, it is a loss for China, not for the African nations.

Yeah tell that to the African countries that have struggled to repay debts on loans from the West for years. You might want to read "Confessions of an Economic Hitman" or Chomsky's "Hegomony or Survival".

Chinese firms own commercial properties, ports, highways, and bridges across Europe and the United States. A common, although wildly exaggerated, meme is that Chinese interests buying up property in cities such as Vancouver and San Francisco drive house prices up to extreme levels.

Wait, increased relative to what?

Their ppp has increased like 4x in recent memory, as have a lot of obvious visual indications of consumption.