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  • Originally posted by Double Edge View Post
    If China expects to recoup anything from CPEC it requires Pakistan to trade with India.
    With Pakistan manufactured goods or re-routing China manufactured ones (like how China is using ASEAN countries to dump goods to India with zero to little import taxes)?
    Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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    • Originally posted by Oracle View Post
      With Pakistan manufactured goods or re-routing China manufactured ones (like how China is using ASEAN countries to dump goods to India with zero to little import taxes)?
      I mean directly. It's in Chinese interest to pressure Pakistan to trade with India.

      Comment


      • Was listening to a talk and in the Q&A an economist got up and commented that he'd cannot find a connection between infrastructure spending and stimulating growth. That is to say it does not. he quoted several examples.

        America grew at its fastest in the late nineteenth century. Not much infrastructure spending going on then. American didn't grow much when the depression was on and the heavy infrastructure spending advised by Keynes isn't what got the US out of the depression.

        Japan went full tilt on infrastructure after their bubble burst in the late 80s. Over a decade they built & built. Did it help get them back to the growth they had approaching the 80s. No, its landed them even deeper in the hole.

        China's fastest growth was in the 80s & 90s. Not much infrastructure spending in China during this period. Instead, the infrastructure spending starts somewhere in the mid noughts and picks up speed after the financial crisis. Did it help China recover its growth rates of the 90s. Again No.

        its funny when we see these cases yet there is always this belief that infrastructure just has to stimulate the economy, because more business can be done. Roads built mean people move and become more productive. In certain cases but not always. If the pattern remains the same before and after the road got built then the net gain is zero. Just there is a debt to pay back for that road.

        The odds are good therefore that the Paks end up in debt to their eyeballs for decades if CPEC gets fully implemented

        Think about that when it comes to the NE. How economically sustainable is it to build and maintain roads there against the elements. Won't be coming out of budgets in the NE. Will be coming out the central budget. The main driver for this is defense. That's the only reason roads will get built so the army can manouver faster than presently.
        Last edited by Double Edge; 06 Oct 18,, 22:00.

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        • Originally posted by Oracle View Post
          This piece is by Swaminathan Aiyar - Why China can’t win the world with easy money
          He has always been interesting to read. Chinese that don't have their careers tied into BRI would agree with his gist. It seems like a stunning misallocation of resources made possible only because its a diktat.

          The IMF is the lender of last resort across the globe, rescuing many bankrupt countries. The BRI was supposed to provide additional finance, over and above traditional sources. Suddenly Trump’s action shows that borrowing from China can cut you off from the global financial system.
          And that is how the Americans counter BRI : )

          Course the Chinese can always reschedule payments. Means they get to hold on even longer. Sovereign guarantees are all good until the next govt takes over and decides to change things. Amazing how much waves Mahatir has created.

          Repeated BRI fiascos could endanger even the mighty finances of China. It already has the highest (public) debt/GDP ratio in the world of over 300%. The 2008 financial crisis showed that even the richest nations can be felled by bad debts.
          This comes as a surprise because Japan & the UK have run figures like that too. Always figured China would be way ahead.

          What is the source of this Chinese debt ? doesn't everyone pay China more than the other way
          Last edited by Double Edge; 06 Oct 18,, 22:20.

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          • Originally posted by Double Edge View Post
            Was listening to a talk and in the Q&A an economist got up and commented that he'd cannot find a connection between infrastructure spending and stimulating growth. That is to say it does not. he quoted several examples.

            America grew at its fastest in the late nineteenth century. Not much infrastructure spending going on then. American didn't grow much when the depression was on and the heavy infrastructure spending advised by Keynes isn't what got the US out of the depression.

            Japan went full tilt on infrastructure after their bubble burst in the late 80s. Over a decade they built & built. Did it help get them back to the growth they had approaching the 80s. No, its landed them even deeper in the hole.

            China's fastest growth was in the 80s & 90s. Not much infrastructure spending in China during this period. Instead, the infrastructure spending starts somewhere in the mid noughts and picks up speed after the financial crisis. Did it help China recover its growth rates of the 90s. Again No.

            its funny when we see these cases yet there is always this belief that infrastructure just has to stimulate the economy, because more business can be done. Roads built mean people move and become more productive. In certain cases but not always. If the pattern remains the same before and after the road got built then the net gain is zero. Just there is a debt to pay back for that road.

            The odds are good therefore that the Paks end up in debt to their eyeballs for decades if CPEC gets fully implemented
            Interesting. I know of tens of villages here in the NE where building highways and connecting them makes no sense at all. Those people do not need all-weather roads to come and sell their vegetables and local artifacts. But, a tar pitched road would make their life comfortable.

            Originally posted by Double Edge View Post
            Think about that when it comes to the NE. How economically sustainable is it to build and maintain roads there against the elements. Won't be coming out of budgets in the NE. Will be coming out the central budget. The main driver for this is defense. That's the only reason roads will get built so the army can manouver faster than presently.
            Though, this is what has been happening for decades, think of it in the context of business. The money spent will come back if good economic policies back road construction, that links the NE with those countries.
            Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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            • China’s Imperial Project Runs into Resistance

              Grand on ambition but short on transparency, Chinese President Xi Jinping’s marquee project, the Belt and Road Initiative (BRI), seeks to refashion the global economic and political order by luring nations desperate for infrastructure investments into China’s strategic orbit. The BRI is essentially an imperial project aiming to make real the mythical Middle Kingdom.

              The BRI, rolled out in 2013, attracted many countries, as China offered to finance and build major infrastructure projects, including ports, highways, energy plants and railroads. But after a smooth sailing, the BRI is now encountering strong headwinds, as partner-countries worry about China ensnaring them in sovereignty-eroding debt traps.

              China has extended huge loans to financially weak states, only to strengthen its leverage through debt entrapment Indeed, Beijing has converted big credits not just into political influence but also a military presence, as its first overseas naval base at Djibouti illustrates.

              Malaysian Prime Minister Mahathir Mohamad, with Chinese Premier Li Keqiang by his side in Beijing’s Great Hall of the People, recently criticized China’s use of infrastructure projects to spread its influence. By warning China against “a new version of colonialism,” Mr. Mahathir highlighted international concerns over Beijing’s use of geo-economic tools to achieve geopolitical objectives.

              A number of countries have now begun trying to renegotiate their deals with Beijing. Some have also decided to scrap or scale back BRI projects. Mr. Mahathir, during his Beijing visit, announced cancellation of Chinese projects worth nearly $23 billion.

              BRI seeks to export China’s model of top-down, debt-driven development through government-to-government deals. Vulnerable countries are now awakening to the risks of accepting loans that could financially shackle them to Beijing.

              Last December, China acquired the strategic Indian Ocean port of Hambantota on a 99-year lease after the small island nation of Sri Lanka could no longer keep up with debt repayments.

              In fact, China is even replicating some of the practices that were used against it during the European-colonial period. For example, the concept of a 99-year lease emerged from the flurry of European-colonial expansion in China in the 19th century.

              While rates for Japan’s infrastructure loans usually run below half a percent, China offers BRI loans at rates as high as 7 percent, which can place unsustainable financial strain on small countries. For example, China’s renegotiated Hambantota port loan to Sri Lanka carries a 6.3 percent fixed rate. In China’s client state, Pakistan, Chinese state companies have secured energy contracts that guarantee 16 percent or more yearly returns, in dollar terms.

              China has faced accusations in multiple countries of illegally funneling money to authoritarian presidents.

              In the Maldives, China has managed to acquire several islets in that heavily indebted Indian Ocean archipelago. Mohamed Nasheed, the nation’s first democratically elected president who was ousted at gunpoint in 2012, said, “Without firing a single shot, China has grabbed more land in the Maldives than what [Britain’s] East India Company did at the height of the 19th century.”

              Against this background, the BRI is beginning to encounter a push-back in a number of countries. A growing number of governments are seeking transparency in Chinese lending, investment and trade practices.

              However, the BRI is still bagging new contracts in some other countries. One example is the Himalayan nation of Nepal, which became the world’s sixth Communist-ruled country in February. China helped unite warring Communist factions in Nepal and funded the election campaign. Now Beijing is reaping the rewards.

              The new Communist government in Nepal in September reinstated a deal with China for a $2.5 billion dam project that was scrapped by the previous government. China won the contract without an open-bidding process. In fact, it has massively inflated the project cost, which will leave Nepal struggling to repay the Chinese loan.

              Laos, another Communist-ruled nation, is also seeking more BRI financing and investment. In continental Southeast Asia, while Myanmar, Thailand and Vietnam are wary of getting too close to China, Laos and Cambodia see BRI as critical to boosting their economic growth.

              Yet the international reality is that, after a heady first phase, the pace of new contracts under the BRI has slowed, as concerns spread about China’s debt-trap diplomacy and as heavily indebted nations recoil from accepting more Chinese financing in the form of market-rate loans. This trend is likely to intensify in the next few years.

              Even within China, the BRI is facing criticism from those who question the wisdom of plowing hundreds of billions of dollars into overseas projects when the government is still grappling with poverty and underdevelopment in a number of provinces. Critics are concerned that Mr. Xi’s aggressive quest for Chinese dominance is inviting an international backlash. The BRI — the world’s biggest building program, which Mr. Xi has hailed as “the project of the century” — exemplifies how China is flaunting its global ambitions.

              Meanwhile, the financial and security risks of Chinese projects in failing or dysfunctional states are becoming more apparent. Take Pakistan, the largest recipient of BRI financing. The Pakistani military has raised a special 15,000-strong force to protect Chinese projects. In addition, thousands of police have been deployed in some provinces to protect Chinese workers. Yet sporadic attacks on Chinese in Pakistan have underscored the rising security costs.

              The larger push-back against China’s neocolonial practices is likely to intensify in the coming years, putting greater pressure on the BRI. The initiative, however, will continue to benefit from a U.S.-led sanctions approach that seeks to punish countries in the name of human rights or nuclear nonproliferation. Thanks to this approach, the BRI is still bagging major lucrative contracts in countries as diverse as Iran, Sudan and Cambodia.
              Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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              • The China Backlash

                On a recent official visit to China, Malaysian Prime Minister Mahathir Mohamad criticized his host country’s use of major infrastructure projects – and difficult-to-repay loans – to assert its influence over smaller countries. While Mahathir’s warnings in Beijing against “a new version of colonialism” stood out for their boldness, they reflect a broader pushback against China’s mercantilist trade, investment, and lending practices.

                Since 2013, under the umbrella of its “Belt and Road Initiative,” China has been funding and implementing large infrastructure projects in countries around the world, in order to help align their interests with its own, gain a political foothold in strategic locations, and export its industrial surpluses. By keeping bidding on BRI projects closed and opaque, China often massively inflates their value, leaving countries struggling to repay their debts.

                Once countries become ensnared in China’s debt traps, they can end up being forced into even worse deals to compensate their creditor for lack of repayment. Most notably, last December, Sri Lanka was compelled to transfer the Chinese-built strategic port of Hambantota to China on a 99-year, colonial-style lease, because it could longer afford its debt payments.

                Sri Lanka’s experience was a wake-up call for other countries with outsize debts to China. Fearing that they, too, could lose strategic assets, they are now attempting to scrap, scale back, or renegotiate their deals. Mahathir, who previously cleared the way for Chinese investment in Malaysia, ended his trip to Beijing by canceling Chinese projects worth almost $23 billion.

                Countries as diverse as Bangladesh, Hungary, and Tanzania have also canceled or scaled back BRI projects. Myanmar, hoping to secure needed infrastructure without becoming caught up in a Chinese debt trap, has used the threat of cancellation to negotiate a reduction in the cost of its planned Kyaukpyu port from $7.3 billion to $1.3 billion.

                Even China’s closest partners are now wary of the BRI. In Pakistan, which has long worked with China to contain India and is the largest recipient of BRI financing, the new military-backed government has sought to review or renegotiate projects in response to a worsening debt crisis. In Cambodia, another leading recipient of Chinese loans, fears of effectively becoming a Chinese colony are on the rise.

                The backlash against China can be seen elsewhere, too. The recent annual Pacific Islands Forum meeting was one of the most contentious in its history. Chinese policies in the region, together with the Chinese delegation leader’s behavior at the event itself, drove the president of Nauru – the world’s smallest republic, with just 11,000 inhabitants – to condemn China’s “arrogant” presence in the South Pacific. China cannot, he declared, “dictate things to us.”

                When it comes to trade, US President Donald Trump’s escalating trade war with China is grabbing headlines, but Trump is far from alone in criticizing China. With policies ranging from export subsidies and nontariff barriers to intellectual-property piracy and tilting the domestic market in favor of Chinese companies, China represents, in the words of Harvard’s Graham Allison, the “most protectionist, mercantilist, and predatory major economy in the world.”

                As the largest merchandise exporter in the world, China is many countries’ biggest trading partner. Beijing has leveraged this role by employing trade to punish those that refuse to toe its line, including by imposing import bans on specific products, halting strategic exports (such as rare-earth minerals), cutting off tourism from China, and encouraging domestic consumer boycotts or protests against foreign businesses.

                The fact is that China has grown strong and rich by flouting international trade rules. But now its chickens are coming home to roost, with a growing number of countries imposing antidumping or punitive duties on Chinese goods. And as countries worry about China bending them to its will by luring them into debt traps, it is no longer smooth sailing for the BRI.

                Beyond Trump’s tariffs, the European Union has filed a complaint with the World Trade Organization about China’s practices of forcing technology transfer as a condition of market access. China’s export subsidies and other trade-distorting practices are set to encounter greater international resistance. Under WTO rules, countries may impose tariffs on subsidized goods from overseas that harm domestic industries.

                Now, Chinese President Xi Jinping finds himself not only defending the BRI, his signature foreign-policy initiative, but also confronting domestic criticism, however muted, for flaunting China’s global ambitions and thereby inviting a US-led international backlash. Xi has discarded one of former Chinese strongman Deng Xiaoping’s most famous dicta: “Hide your strength, bide your time.” Instead, Xi has chosen to pursue an unabashedly aggressive strategy that has many asking whether China is emerging as a new kind of imperialist power.

                International trade has afforded China enormous benefits, enabling the country to become the world’s second-largest economy, while lifting hundreds of millions of people out of poverty. The country cannot afford to lose those benefits to an international backlash against its unfair trade and investment practices.

                China’s reliance on large trade surpluses and foreign-exchange reserves to fund the expansion of its global footprint makes it all the more vulnerable to the current pushback. In fact, even if China shifts its strategy and adheres to international rules, its trade surplus and foreign-currency reserves will be affected. In short, whichever path it chooses, China’s free ride could be coming to an end.
                Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                • Originally posted by Double Edge View Post
                  I mean directly. It's in Chinese interest to pressure Pakistan to trade with India.
                  And what are those items that Pak would trade? Textiles? The Chinese have destroyed Paks textile industry. Onions, potatoes, tomatoes - well we produce them in adequate quantity. What else?

                  It's the other way round. Indian goods are exported to different countries (SLanka, Dubai) and get re-exported to Pak, sometimes under a new Islamic label.

                  And it absolutely is not in Chinese interest to pressure Pak to trade with India or ask the Paks to stop their official state policy on terrorism.
                  Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                  • To CPEC or not to CPEC
                    Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                    • IMF warns Pakistan against ‘excessive loans’ from China

                      IMF cautions Pakistan against increasing Chinese involvement in economy
                      Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                      • Originally posted by Oracle View Post
                        And what are those items that Pak would trade?
                        Gas from Turkmenistan or Iran among other things. Let the business people from either side figure it out.

                        India has always been open to trade with Pakistan. Unfortunately that sentiment isn't mutual.

                        When Mushraf was in charge there was a plan for a FTA called SAFTA for all of south asia under SAARC

                        Paks refused to sign and that sank the entire deal.
                        Last edited by Double Edge; 11 Oct 18,, 01:50.

                        Comment


                        • Originally posted by Double Edge View Post
                          Gas from Turkmenistan or Iran among other things. Let the business people from either side figure it out.

                          India has always been open to trade with Pakistan. Unfortunately that sentiment isn't mutual.

                          When Mushraf was in charge there was a plan for a FTA called SAFTA for all of south asia under SAARC

                          Paks refused to sign and that sank the entire deal.
                          That gas does not belong to Pakistan. Pakistan will earn transit fees, if those deals do happen, which IMO is a long way out. The thing is nobody trusts the Paks even a tiny amount to whole-heartedly commit anything. I've been hearing TAPI for a decade now. Now there is the US-Russia-Iran angle to consider.
                          Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                          • Pakistan to seek its largest loan package from IMF

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                            Last edited by Oracle; 11 Oct 18,, 13:10.
                            Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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                            • Originally posted by Oracle View Post
                              That gas does not belong to Pakistan. Pakistan will earn transit fees, if those deals do happen, which IMO is a long way out. The thing is nobody trusts the Paks even a tiny amount to whole-heartedly commit anything. I've been hearing TAPI for a decade now. Now there is the US-Russia-Iran angle to consider.
                              Yes but if the Paks want assured transit fees then the pipelines are the answer. We know they don't like to mess with their incomes.

                              How fast or how slow is entirely dependent on the Paks. In any case our outlay is just 4% The Turkmens pick up 95% of the installation cost.

                              I've mentioned already that a cabinet committee has been positive about this development. The Afghans win too. The Taliban are on board.

                              So the Paks can earn from India and it can be an important source to right their economic woes if they were to find the right mindset.

                              We had to go bankrupt until we learnt better ways to manage and grow our economy.

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                              • India went bankrupt and learnt its biggest geo-political lesson. Economic independence. Pakistanis go bankrupt often and KSA or the Chinese or the US bail them out everytime. Even if TAPI is up and moving, the transit fees goes to the state, not to the PA. There will be a coup then, again, like a soft coup now that put Taliban Khan in power.
                                Politicians are elected to serve...far too many don't see it that way - Albany Rifles! || Loyalty to country always. Loyalty to government, when it deserves it - Mark Twain! || I am a far left millennial!

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