As China concluded its One Belt and One Road Initiative Summit in Beijing last May 14-15, criticisms abound, mostly questioning China’s hegemonic intentions and portents of failures ahead but speculating only based on past anomalous deals, without realizing China’s initiative may be the only viable alternative to the financial bubble building up anew that will be worse than the 2008 financial crisis and the escalation of conflicts that could lead to a possible nuclear war of global proportions.
On doubting China’s sincerity. There is every reason to doubt or question China’s sincerity owing to many past botched deals locally like the controversial ZTE-NBN and North Rail projects and China’s control over the National Grid Corporation of the Philippines (NGCP), which manages our power transmissions lines, although much of the corruption-ridden failures here are blamed on past leaders.
Malou Mangahas of the Philippine Center for Investigative Journalism (PCIJ) calls the China ties a “Trojan horse trap,” citing UP Political Science professor Jaime Naval as saying China loans are tied to an “extractive” relationship of “digging minerals, lumber and the harvesting of natural resources.”
She also quoted Dr. Renato Castro, a China expert of De la Salle University, to beware the Chinese, because like the Greeks, they bring gifts, which are a trap, making us dependent on Chinese aid, Chinese market, and vulnerable strategically and politically to Chinese agenda.
Corr’s figures go off-course? Another critic, Anders Corr of Corr Analytics, claims the P8.2 Trillion (about $167 billion) in infrastructures will put the country into “virtual debt bondage.”
Corr recklessly assumed this will all be funded by China, thus “increasing total Philippine debt to $290 billion (P14.4 trillion). He also assumed interest rate of 10% interest, raising new debt to $452 billion, and our debt:GDP ratio to 197%, the second-to-worst in the world.”
On record, China’s loan projects amount to $4.5 Billion, and excludes the numerous grants. China will not fund all as government will spend almost 80% of infra spending. Moreover, interest rates are as low as 0.25% and not 10%, which is totally off-course.
Instead of saying kinder words for China for its massive global infrastructure program and gathering 29 heads of states and top representatives of 130 countries, including the U.S., critics from bastions of neo-liberal economics led by the British “Economist” magazine even sarcastically sour-graped and called “One Road, One Trap.” Whether it succeeds or not remains to be seen, but why tear it down if critics cannot provide a better alternative.
China’s generosity solves own problems? China’s aggressive investments globally is not really done out of generosity, but is intended to solve its internal excess productive industrial capacity, otherwise they shutdown operations. So instead of exporting finished manufactured goods, which dominated global trade the past decades, it is exporting industrial capital goods (i.e., bus assembly plant in Nigeria, and other factories, fast railway networks, huge canals like the Kra in Thailand and in Nicaragua, power and water systems in Asia, South America and Africa, etc.).
This mutually beneficial relationship is what Xi Jiping calls its“Win-win” agenda. Recipient countries gain infrastructures and industrial productive capacity, which is much better than being dumping grounds of finished traded goods, while at the same time it solves China’s over capacity.
Physical wealth reverses financial bubble. The solid development in physical wealth creation reverses the empty growth in the financial sector, which is often plagued with boom-bust cycles, ever since it was liberalized in the name of free trade with the repeal in 1999 of Glass Steagall Act of 1933, which protected and separated commercial and universal banking.
Ever since the last financial bubble burst in 2008, massive liquidity pumping was done thru quantitative easing, bailouts, lower reserves, interest rates close to zero, etc., but only increased corporate debt from $8 Trillion in 2008 to $14 Trillion today, a 75% increase which was spent mostly to buy up their own stocks to drive up prices, triggering financial growth on paper while the real economy collapses. This dangerously building up another financial bubble that could burst again, triggering anew more desperate pressures from war-mongers to go to war to boost demand thru more arms sales and extract more value from their ravaged countries.
`The monetary bailouts have only ballooned Wall Street’s derivatives or fictitious debts to an estimated $750 Trillion, way above US GDP of $15 Trillion a year, or even bigger than global GDP of $70 Trillion. Ironically, while the bailouts simmered down volatile financial markets, they are fueling another financial bubble, while the real economy has been collapsing from neglect. While big banks were rescued, small banks lending to small businesses creating real physical wealth were forced into bankruptcy. From 2007 to 2012 alone, scores of these small American banks closed shop.
Fear China loans or welcome new Marshal Plan? Executive Intelligence Review (EIR) estimates that if the US joins with its proposed massive National Water and Power Alliance (NAWAPA) that has been ignored by Pres Obama along with the shelving of the US Space shuttle program, total development projects could hit $20 Trillion, or 20 times the Marshal Plan rehabilitating Europe after the war.
While many express wariness against China’s massive loan offers, claiming these are just baits for their hegemonic intentions in exchange later for territory and more natural resources, this may be baseless and speculative as so far there are no strings attached to Xi Jiping’s “win-win” offer.
These concessional loans are far distinct from most of the IMF/WB loans we got the past decades, which were mostly program loans to shore up our budget deficits, not to mention the strings attached, unlike China’s project loans, which are really pumped into solid projects that create physical wealth and productive jobs.
There are no fears therefore that foreign borrowing here at low interest rates of 0.25 percent could result in foreign exchange risks in the future like the peso devaluations in the past decades that resulted in 250-350 percent effective interest rates as we are forced to raise more pesos today to pay the same dollar of debts for past projects like LRT, power plants and dams, etc.
It’s wise to learn from history. Perhaps, it is wise to learn from history that every time there are solid developmental projects for the good of humankind, the ruling financial oligarchs of this world bank bankroll conflicts and world wars (i.e the British oligarchs and Wall Street like the Rothschilds, Harriman, Prescott Bush, et al funded Hitler initially). It is said they are not interested in increasing the economic pie for everyone’s benefit as they can get a slice of a stagnant pie by control money.
It is surprising while 130 nations were glued on the China initiative, western media has still been pounding hard on Trump and raising the bogey monster that is Russia, or North Korea’s nuclear threat and British Prime Minister Teresa May’s move to get parliament’s approval to attack Assad’s Syria.Turkey’s President Edrogan declares the China initiative will help kill terrorism, echoing statements of Helga Zepp Larouche of the Schiller Institute, who is known widely in China as the “New Silk Road Lady.
History shows that when Abraham Lincoln built the trans-continental railway from East to West Coast, cutting travel from six months to six days, the British empire opposed it as it will develop America’s inland and kill its colonial maritime trade that is port-based, from which the word opPORTtunity and other words like imPORT, exPORT, rapPORT, supPORT, Report, deport were derived. The British egged on the south into the American Civil War that killed 600,000 lives.
Today, we must be wary of the propaganda of pitting our people and nations against each other against a baseless bogey monster like Russia or the emerging hegemonic China. Of course, be wary and always push for our national interests, but always build on what is mutually beneficial and what is the common good, but never be crippled by fears that prevent us from moving forward.