China recently celebrated the 70th anniversary of the China Council for the Promotion of International Trade. Addressing this council as well as the Global Trade and Investment Promotion Summit, President Xi Jinping called for fairness and justice for business communities across the globe.
The Chinese president insisted on inculcating win-win cooperation and went further to state that the world should “uphold true multilateralism, embrace a global governance vision featuring extensive consultation, joint contribution and shared benefits, and mobilise resources from across the world, to meet global challenges and advance global development.”
Yet, in the face of a global economy recovering from Covid-19, one of these global challenges that hampers global development is international debt.
During the height of Covid-19, several multilateral institutions, including the G20, devised mechanisms that would provide debt relief, especially for least developed countries. The G20’s mechanism was called the Debt Service Suspension Initiative (DSSI).
However, while one would have thought that countries would grab the opportunity to access the benefits of such a mechanism, Professor Meibo Huang, from the African Studies Centre at Leiden University, and her colleague, Niu Dongfang, in their research, found that at least 25 of the 73 countries, who qualify for the debt relief, did not access or apply to the mechanism.
For Meibo and Niu, the problem lies in the fact that debt relief addresses the symptoms but not the actual structural deficiencies, whether internal or external. These countries, which could access the DSSI, were not doing so precisely because it was driven by a western agenda. Professor Meibo and her colleague go on to point out a few challenges with these debt relief mechanisms.
Firstly, debt relief through these mechanisms, such as DSSI, seems to undermine the credit ratings of African countries in debt. Secondly, these mechanisms open the door for international institutions to interfere in the domestic politics and economies of debtor countries. Thirdly, the debt relief promotes or increases the dependency that African debtor countries then have on international financial institutions, and lastly, the debt relief slows down the inflow of international development.
In their brief or primer titled, China’s approach to sovereign lending and debt restructuring: A primer for African public debt managers, the Collaborative Africa Budget Reform Initiative, or Cabri, stated that 32 African countries were in DSSI and that through DSSI, “China’s constitutes the largest contribution of debt relief within the mechanism, covering a combined $2.1 billion (about R33 billion) under the framework, according to China’s Ministry of Finance.”
The brief also points out that while financial institutions in China that grant loans to international recipients have “relative autonomy in decisions of lending, they are accountable to and supervised by a set of political institutions.”
The important message that academics such as Meibo and Niu are sending is that while we, in the developing world, were well aware of the conditions that came with these loans, we are now also learning that conditions will also come through debt relief.
Yet, in both cases, China remains consistent. It will not place conditions on either loans or debt relief that interfere with the domestic politics and policies of recipient countries. China does not place these conditions on either because it understands that by attaching strings on loans or debt relief, China will be contributing to a world that perpetuates injustice and inequality.
Rather, it is the kind of values that were expressed again by President Xi Jinping in ensuring fairness and justice, especially in the global economy, that China aspires to through its granting of loans and debt relief. Whether through loans or debt relief, we must ensure, as President Xi encourages, a joint contribution, shared benefits and a win-win philosophy.
| Seale has a PhD in Chinese foreign policy.