By Cobus van Stad
The global discussion of the growing debt crisis in some Global South countries has been frustratingly slanted around the assumption that Chinese lending is particularly opaque. This is not to say that Chinese lending isn’t opaque – it is. In fact, some Chinese loan contracts are so secretive they forbid the disclosure of the very existence of the loan itself.
Rather, the issue is the pretense – widespread in discussions of Chinese lending in Western capitals – that this secrecy is somehow unique to Chinese lending.
So it was refreshing to read a new report from the Bretton Woods Committee pointing out that “Although some market participants, notably Chinese institutions, have received the lion’s share of criticism when it comes to creating impediments to greater transparency, the more fundamental truth is that the international architecture for sovereign debt simply does little to promote or require adequate disclosure on a consistent and comprehensive basis.”
This chimed with a conversation we had last year with the loans expert Bradley Parks, about the forensic tools AidData, the research group he heads, developed to track Chinese lending in Africa. He mentioned that they ended up using the same tools to decipher some Western loan contracts because these were no less opaque.
The Bretton Woods report proposes a series of global reforms to lessen opacity across the board. These include linking transparency to a country’s ability to access concessional lending and debt relief, making the publication of loans to foreign governments a part of large financial institutions’ domestic disclosure requirements, and working with sovereign ratings agencies to link transparency to countries’ credit scores.
On the one hand, the wider goal of setting some kind of global transparency standards involving both lenders and borrowers seems like a necessary step towards ensuring a more stable financing environment, which will only benefit the Global South.
But for any of this to work, China would have to be on board. This is where their proposals start running into complications. For example, it suggests that the Organization for Economic Cooperation and Development (OECD) should act as the platform housing a database of global lending, including from Chinese state institutions. Worried yet? So are they: “It has been suggested that the OECD—of which China is an observer, but not a member—may not have the Chinese authorities’ full confidence as a repository of information.” Uh…yah think? “Nonetheless,” it sunnily concludes, “there is no impediment to the OECD’s providing adequate assurances that it will be an impartial aggregator of information.”
Now, I don’t want to sound negative. But I can well imagine that even if the OECD opened a vein and provided such assurances written in its own blood, there’s no chance it’ll overcome China’s suspicions of primarily Western institutions acting as the world’s loan monitor. And if the recent saga of Kenya’s government twisting its local laws into pretzels to avoid disclosing the Standard Gauge Railway contracts is anything to go by, some Global South governments will also decry any such initiative as Western interference. I’d be willing to wager that China will then find it very hard to avoid standing in solidarity with them, even if [as the report points out,] greater global transparency ultimately supports Beijing’s bottom line.
The report provides a set of proposals that, if implemented, would safeguard the populations of the Global South against bad decisions by their own governments. This is both its greatest strength and its greatest weakness, the latter because it might not fully appreciate how on board some Global South governments are with the suffering of their own people. In 2017, when the ratings agencies downgraded South Africa to junk status following then-President Zuma’s firing of ministers opposed to a notoriously shady deal with Russia, a youth leader in his African National Congress party placidly said the ANC isn’t worried about any junk status, because if the economy falls, they’ll just wait for it to rise again.
This is a broken world, and there are many more such people in positions of power than one would like to admit. And nobody knows this more than China.
Credits | The ChinaAfrica Project