What is the “debt trap” and its risk of the global financial crisis?

China has long been accused by the West of using it “debt trap” affect other countries. The argument is that China is lending money to other countries in the long run, which will eventually have to relinquish control of key assets if they fail to repay them. Beijing denies the allegations, arguing that its loans are aimed at alleviating poverty.

“There is a really serious danger”

“It simply came to our notice then (trigger) another major debt crisis in the global south associated with loans from China, which in itself does not have a big picture due to the many actors involved., said German Chancellor Olaf Scholz. during the debate at the Catholic Congress in Stuttgart. “It would throw China and the southern countries into a major economic and financial crisis and, moreover, it would not save the rest of the world.”the leader insisted. “So this is a serious concern. »

How to prevent it?

In order to counter China’s influence, the European Union unveiled a development aid plan called the “Global Gateway” a few months ago. In this context, the EU intends to invest more than € 150 billion in infrastructure, transport and renewable energy projects in Africa over the next few years.

The initiative is seen as a European response to “New Silk Roads”an extensive Chinese lending program in dozens of countries for the development of ports, roads, railways or digital infrastructure.

The editors advise you

Scholz said he wanted to persuade China to join the Paris Club, an informal group of official creditors whose task is to find coordinated solutions to countries’ payment problems through debt forgiveness negotiations or a translation of the repayment schedule. “One of the big ambitions we have is to integrate China at this club, he said.

Elliot Frost

"Pop culture maven. Analyst. Writer. Wannabe food evangelist. Organizer. Friendly internet lover. Incurable troublemaker. Entrepreneur."

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