[Part 4] Questions and answers on China : Could China lend differently?

26 February by Eric Toussaint

China has been demonized by several commentators: it is said to be the main creditor of many countries of the South and to take advantage of them through ruthless exploitation, whereas the World Bank, the IMF, and the Paris Club, which comprise traditional creditor powers, allegedly do their best to help those countries burdened by too much debt.

China uses propaganda of its own. It parades as an ally of countries of the South, regularly announces debt cancellations and debt relief, and claims that it does not enforce neoliberal conditionalities as do the IMF and the World Bank. It also stresses its efficiency. This is the fourth part of our analysis in the form of questions and answers.

Could China change its lending policy from what it is currently?

China’s discourse regarding South-South solidarity is in contradiction with the reality of Chinese policy in recent decades

China has the economic power to become a true alternative to the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

and the major imperialist countries. But it has not acted to do so. China’s discourse regarding South-South solidarity is in contradiction with the reality of Chinese policy in recent decades. The situation is the opposite of what it was in the 1950s, at the time of Mao Zedong and Zhou En-lai and the non-aligned nations movement stemming from the Bandung Conference, when the Chinese government took an orientation that was opposed to capitalist-imperialist programmes and ideology and, beginning in the early 1960s, harshly criticized Moscow’s strategy of peaceful co-existence.

That was a long time ago, and the perspective of promoting an anticapitalist, anti-imperialist revolution has been abandoned. But if we really want to find the way out of the global capitalist crisis, the environmental catastrophe, and the barbarity of the Zionist State toward the Palestinian people, for example, we must return to defending a revolutionary socialist, self-managed, environmentalist, feminist and truly internationalist perspective.

We should be inspired by the words of Ernesto “Che” Guevara during the Algiers conference in February 1965 [1] regarding the type of relations that should be established between developing countries, imperialist developed countries and the so-called socialist countries of that period. His speech was delivered during the second economic seminar on African-Asian solidarity. The conference, held in Algiers, brought together representatives of 63 African and Asian governments, as well as 19 national-liberation movements. The meeting was opened by Algeria’s president, Ahmed Ben Bella. Cuba was invited to the conference as an observer and Ernesto Che Guevara, who represented the Cuban government (in which he served as Minister for Industry), was part of the presiding committee. He stated that between countries who were supposed to be fraternal and in solidarity, there should be no question of applying worldwide capitalist market prices. Che Guevara declared: “How can it be ‘mutually beneficial’ to sell at world market prices the raw materials that cost the underdeveloped countries immeasurable sweat and suffering, and to buy at world market prices the machinery produced in today’s big automated factories? If we establish that kind of relation between the two groups of nations, we must agree that the socialist countries are, in a certain way, accomplices of imperialist exploitation.” Che Guevara was referring mainly to the bloc of countries led by Moscow.

During the conference, Che Guevara proposed cancellation of debts and argued for grants in place of loans. He said: “We could begin a new stage of a real international division of labor, based not on the history of what has been done up to now but rather on the future history of what can be done. The states in whose territories the new investments are to be made would have all the inherent rights of sovereign property over them with no payment or credit involved.” Che Guevara also affirmed: “Foreign trade should not determine policy, but should, on the contrary, be subordinated to a fraternal policy toward the peoples.”

The states in whose territories the new investments are to be made would have all the inherent rights of sovereign property over them with no payment or credit involved.” From Che Guevara’s speech in Algiers in February 1965

One last quotation from Che’s Algiers speech: “We must advocate the establishment of new relations on an equal footing between our countries and the capitalist ones, creating a revolutionary jurisprudence to defend ourselves in case of conflict, and to give new meaning to the relations between ourselves and the rest of the world. We speak a revolutionary language and we fight honestly for the victory of that cause. But frequently we entangle ourselves in the nets of an international law created as the result of confrontations between the imperialist powers, and not by the free peoples, the just peoples, in the course of their struggles. For example, our peoples suffer the painful pressure of foreign bases established on their territories, or they have to carry the heavy burden of massive foreign debts. The story of these throwbacks is well known to all of us. Puppet governments, governments weakened by long struggles for liberation or the operation of the laws of the capitalist market, have allowed treaties that threaten our internal stability and jeopardize our future. Now is the time to throw off the yoke, to force renegotiation of oppressive foreign debts, and to force the imperialists to abandon their bases of aggression.” Che’s words in Algiers unleashed fury in Moscow and Washington, but were well received in the Arabic region, in sub-Saharan Africa and in Beijing. His proposals should again become part of the agenda of the peoples of the world.

One year before the speech in Algiers, in March 1964, at the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

(UNCTAD) in Geneva, Che Guevara also made declarations that are still just as valid. Here is an excerpt:

It is inconceivable that the underdeveloped countries, which are sustaining the vast losses inflicted by the deterioration in the terms of trade and which, through the steady drain of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments, have richly repaid the imperialist powers for the value of their investments, should have to bear the growing burden of indebtedness and repayment, while even more rightful demands go unheeded.

The Cuban delegation proposes that [...] all payments of dividends, interest, and amortization should be suspended .” [2]

Sixty years after Che Guevara’s speech in Geneva, it is high time that the proposals he made were compared with Chinese foreign policy and its effects in the area of credit and investment. It is not acceptable to say that Chinese policy constitutes an alternative to the destructive policies of the USA, Western Europe, Japan, the World Bank and the IMF and an element of the struggle against them.

Chinese credits and investments perpetuate the capitalist model of exploitation of nature and of peoples

Chinese credits and investments in fact perpetuate the capitalist model of exploitation of nature and of peoples. And that model only strengthens the dependence of so-called “developing” countries on industrialized countries, including China. That model exhausts natural resources, imposes low wages, aggravates the environmental crisis, and keeps a majority of the population in poverty.

Of course, the ill-intentioned and disingenuous attacks on China by the USA, Western Europe, Japan and their allies must be denounced, but not to the detriment of an untrammelled right to critique the model promoted by China, which prolongs and reinforces the same model followed by the very powers who demonize China.

China could develop solidarity with the peoples of the Global South and adopt another development model that is also in the interest of the Chinese people

Loans granted by China, like those from other countries, should be subject to audit with active participation of the citizens of the debtor countries concerned. Their effects on the living conditions of the population and on nature must be evaluated. The purpose of this audit with citizen participation is to identify illegitimate debt the country is supposedly required to repay in order to cancel it.

China should set an example by making public the content of all loan contracts it has entered into. This would challenge the countries of the North to do the same, which would greatly assist in fighting corruption and illicit enrichment by the elites in power.

China, which has at its disposal 3,000 billion USD in official foreign-exchange reserves and a further equivalent amount via other channels, is perfectly capable of handling cancellation of the illegitimate debts that it holds in countries of the Global South, especially since a considerable share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of these debts is denominated in Chinese currency and held by the Chinese central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
and other public entities. China could maintain currency swap lines in renminbi. China could, if it truly wanted to, develop solidarity with the peoples of the Global South and adopt an alternative development model that is also in the interest of the Chinese people.

The author would like to thank Gilbert Achcar, Maxime Perriot and Claude Quémar for document research and/or proofreading.

Translated by Snake Arbusto


Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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