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Should China Forgive $5 Trillion Global Debt?
Because of COVID-19, does the buck stop with China? Should China forgive the $5+ trillion debt it is owed by the nations of the world? Who will bear the financial burden of COVID-19 whose initial epicenter was Wuhan, China? Wuhan International Airport had direct flights to 21 countries, including the U.S. that had a monthly average of 4,400 passengers in 2019.
My prayers and thoughts are with those infected and affected. May the Almighty God comfort the families of those who have lost their loved ones. Questions that I ask and probably many are asking are:
As a global citizen, why didn’t China sound an early alarm to warn the World Health Organization (WHO) and other countries about COVID-19 until late in December 2019? Why did Chinese authorities arrest and charge Dr. Li Wenliang and seven others with “spreading rumors” when they sounded an early warning to the world of COVID-19? Why did the Chinese health authorities in 2019 order a company to stop testing and destroy large test samples from Wuhan after the test results indicated the existence of this deadly disease? Dr. Li Wenliang died from COVID-19 in February 2020 and the world doesn’t know yet the fate of the seven.
My international studies degree was focused on the Middle East and Asian countries such as China and Japan. Below are the few facts that I learnt/know about China:
1. China aims to be a superpower. Seven centuries ago, China had the most advanced economy and boasted of a professional navy. The U.S. overtook China’s economy and military, but China has been working tirelessly to regain her position, that is, if it has not yet accomplished this feat. By employing geo-economics strategies of influence, China has grown to be a $14.3 trillion economy as of 2019.
2. When Obama visited Kenya and Ethiopia in 2015, the Beijing Times wrote Obama’s Africa diplomacy policy was aimed at “…off-setting China’s growing influence and recovering past U.S. leverage”. China has since continued to increase her global leverage. Of the $5+ trillion the world owes China, the U.S. obligation to China is $1.07 trillion. China lends at market rates and not concessionary as the Word Bank and IMF.
3. What can a country achieve with $2 trillion under normal conditions? The historic $2 trillion COVID-19 stimulus package, that was signed into law on Friday, March 27, 2020 by President Trump, could have fully paid the $1.07 debt the U.S. owes China! This is assuming an apple for apples scenario and holding other things constant. The balance of $0.93 ($2-$1.07) trillion could have been used to forgive and clear U.S. student loans that currently stands at approximately US$ 1 trillion.
4. China established the Asian Infrastructure Investment Bank (AIIB) in 2014 as Eurasian’s alternative to the U.S. dominated World Bank. AIIB, headquartered in Beijing, began operations in January 2016 and has 102 approved members as of March 2020. Kenya is a prospective member. The AIIB headquarter facilities are provided free of charge by the Chinese government. The U.S. unsuccessfully pressured countries such as Britain, Germany, South Korea and Australia not to join AIIB. The U.S. is yet to honor AIIB’s invitation to join as member state. China is the largest shareholder of the AIIB at 26.06% and still maintains her strong position at the World Bank and United Nations. AIIB had assets worth $22.6 billion as of September 2019. Due to the COVID-19, AIIB has something in the works that will ramp up infrastructure investment in public health, healthcare and information and communications technology to benefit member countries. AIIB plans are going while non-member countries such as the U.S. are fighting the COVID-19 war which, according to President Trump, is an invisible enemy. Still, most of Chinese economic industries have resumed operations while almost the rest of the world is in lockdown, 638,146 confirmed cases and 30,039 dead as of March 30, 2020 according to WHO.
5. While the U.S. has been busy fighting in the Middle East and Afghanistan since 2001, China has been busy expanding her geo-economic influence in the world while subtly challenging U.S. global influence and control. For example, China invests her trillions of surplus dollars gained from trading with the U.S., to economically integrate China with Eurasia and Africa. A good example is the Silk Road Strategy, that aims to tap to Europe’s natural resources and markets by building high-speed railways, transit corridors and pipelines. Russia is the second largest exporter of crude oil to China. On the technology front, China has been expanding her influence in the world through initiatives such as the 5G network. The U.S. has been unsuccessful in dissuading her allies from adopting Chinese 5G network, which is the next generation of super-fast wireless networks. Experts say 5G networks pose security and environmental risks. Despite these facts, President Trump pressure on the British government was unable to stop Huawei from building 5G network in Britain in January 2020.
6. Of course China has invested heavily in Africa through lending! Africa is debt-trapped by China, owing $30 billion plus in infrastructure loans. Kenya owed China $6.5 billion as of 2019.
In my opinion, China should forgive or restructure $5 trillion global debt. China has forgiven and/or restructured debts in the past, she can do it again. This will help the world recover from the COVID-19 pandemic.
George Kariuki
Raleigh, North Carolina
March 30, 2020
