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New study uncovers China's massive hidden lending to poor countries
New report shows the extent of China's hidden power as the developing world's creditor.
- Over 50 developing countries' Chinese debt accounts for on average 15 percent of their individual GDP.
- New report shows that the majority of the world's developing country's debt to China is considered "hidden."
- China's loans for poor countries are primarily for crucial infrastructure.
China's overseas lending, which was virtually zero before the turn of the century — well, about $500 billion in 2000 — stands today, ostensibly, at around $5 trillion. Indeed, they are now the world's largest creditor, being twice as large as both the World Bank and the International Monetary Fund, combined.
As much of what China does is under a veiled curtain of secrecy, it's been difficult to track how all the money is flowing. A new comprehensive study though, by Sebastian Horn and Christoph Trebesch of the Kiel Institute for the World Economy, and Carmen Reinhart of Harvard University, has provided some new insights about China's official credit lending empire. What did the researchers discover? More than half of China's lending to developing countries is what they term "hidden" money — loans that haven't been reported to any of the international funds, such as the World Bank.
Indeed, economist and author of the report, Tresbesch, recently told Germany's Spiegel in an interview following the release of the study's findings, that compiling all of the information was like "a kind of economic archeology." Their information came from numerous financial world databases, along with some documents provided courtesy of the CIA.
It's no secret that China would like to keep this type of information occluded from the international scene. Opponents of China's secretive lending practices fear that Beijing is engaging in predatory debt diplomacy and using their worldwide Belt and Road Initiative to create a new kind of economic colonialism over Africa and other parts of the developing world.
China’s creditor strategy for economic growth
China is in a state of further economic evolution. Long gone are the days of being the world's impoverished manufacturer. With a thriving consumer market boosted at home, China is now flexing their influence over vast swathes of the world. One of their strategies is by becoming the world's most involved lender to poor countries.
This can be problematic for a number of reasons. Countries that take this deal, end up grossly indebting themselves to China's policies in a number of ways, both monetarily and culturally. An example on the extreme end of the spectrum is Djibouti, whose Chinese debt is equivalent to 70 percent of the country's GDP. On average, the top 50 of China's borrowers owe somewhere near 15 percent of their GDPs, which, still, on a global scale is quite a lot.
The authors also found that China has never officially disclosed any loans to Iran, Venezuela, or Zimbabwe, which on other records it's been shown that China is a major creditor. The report speculates that one of the ways to avoid these international cross-border crediting claims, is by the Chinese government disbursing loans straight to Chinese contractors rather than the developing governments themselves.
A great deal of these loans aren't subject to credit rating agencies, because most of China's foreign loans flow straight from their government. China's lending practices take on another interesting dynamic, as the country is lending much more than just money: it is also helping build crucial infrastructure in these developing nations. In doing so, China exports a healthy dose of its culture and influence.
Growing influence in Africa
China's investment in Africa takes the form of loans in exchange for infrastructure development. Oftentimes, Chinese companies and citizens reap the benefits and profits of these large projects. While many Africans welcome the much needed investment into their countries, it's not clear how much the continent is benefiting from this Chinese influence.
One major issue a lot of countries are facing is that almost the entirety of their country's debt load comes from China. For example, of Kenya's $50 billion in debt, more than 72 percent of it is from China. In Senegal, highways, industrial parks and other crucial developmental projects for a functioning country are all funded by large, risky Chinese loans. Again, much of this value goes back to China. They're not doing this for humanitarian reasons. The Chinese expect a capital and cultural return.
Tim Wegenast, who wrote a report about Chinese mining in Africa states:
"It's more or less safe to say that Chinese companies employ less local labor than other companies because they bring over many Chinese workers, and when they develop local infrastructure, they provide countries with loans which are being used to pay for it, which is then constructed by Chinese companies and Chinese labor."
A future of Chinese credit
According to The Economist, China's lending prowess is more of a mixed bag. While many new loans from China were offloaded with debt relief by Western creditors after defaulting, China has in the past put forth some debt restructuring plans on 140 of their foreign loans. Although at other times, they've taken their collateral with ruthless abandon, for example when they seized the Hambantota Port in Sri Lanka.
Many Chinese loans have higher extended interest rates and short maturities, with heavy collateral that includes commodities, or even important strategic foreign infrastructure.
The authors of the report note that China has started talking about being more transparent and sustainable on their loans in the future. But no clear evidence of this taking place has yet to materialize.
- China's Markets Are Very Unstable. Its 'Shadow Banks' Are Not ... ›
- China is investing 10x more in Africa than the U.S. - Big Think ›
Why mega-eruptions like the ones that covered North America in ash are the least of your worries.
- The supervolcano under Yellowstone produced three massive eruptions over the past few million years.
- Each eruption covered much of what is now the western United States in an ash layer several feet deep.
- The last eruption was 640,000 years ago, but that doesn't mean the next eruption is overdue.
The end of the world as we know it
Panoramic view of Yellowstone National Park
Image: Heinrich Berann for the National Park Service – public domain
Of the many freak ways to shuffle off this mortal coil – lightning strikes, shark bites, falling pianos – here's one you can safely scratch off your worry list: an outbreak of the Yellowstone supervolcano.
As the map below shows, previous eruptions at Yellowstone were so massive that the ash fall covered most of what is now the western United States. A similar event today would not only claim countless lives directly, but also create enough subsidiary disruption to kill off global civilisation as we know it. A relatively recent eruption of the Toba supervolcano in Indonesia may have come close to killing off the human species (see further below).
However, just because a scenario is grim does not mean that it is likely (insert topical political joke here). In this case, the doom mongers claiming an eruption is 'overdue' are wrong. Yellowstone is not a library book or an oil change. Just because the previous mega-eruption happened long ago doesn't mean the next one is imminent.
Ash beds of North America
Ash beds deposited by major volcanic eruptions in North America.
Image: USGS – public domain
This map shows the location of the Yellowstone plateau and the ash beds deposited by its three most recent major outbreaks, plus two other eruptions – one similarly massive, the other the most recent one in North America.
The Huckleberry Ridge eruption occurred 2.1 million years ago. It ejected 2,450 km3 (588 cubic miles) of material, making it the largest known eruption in Yellowstone's history and in fact the largest eruption in North America in the past few million years.
This is the oldest of the three most recent caldera-forming eruptions of the Yellowstone hotspot. It created the Island Park Caldera, which lies partially in Yellowstone National Park, Wyoming and westward into Idaho. Ash from this eruption covered an area from southern California to North Dakota, and southern Idaho to northern Texas.
About 1.3 million years ago, the Mesa Falls eruption ejected 280 km3 (67 cubic miles) of material and created the Henry's Fork Caldera, located in Idaho, west of Yellowstone.
It was the smallest of the three major Yellowstone eruptions, both in terms of material ejected and area covered: 'only' most of present-day Wyoming, Colorado, Kansas and Nebraska, and about half of South Dakota.
The Lava Creek eruption was the most recent major eruption of Yellowstone: about 640,000 years ago. It was the second-largest eruption in North America in the past few million years, creating the Yellowstone Caldera.
It ejected only about 1,000 km3 (240 cubic miles) of material, i.e. less than half of the Huckleberry Ridge eruption. However, its debris is spread out over a significantly wider area: basically, Huckleberry Ridge plus larger slices of both Canada and Mexico, plus most of Texas, Louisiana, Arkansas, and Missouri.
This eruption occurred about 760,000 years ago. It was centered on southern California, where it created the Long Valley Caldera, and spewed out 580 km3 (139 cubic miles) of material. This makes it North America's third-largest eruption of the past few million years.
The material ejected by this eruption is known as the Bishop ash bed, and covers the central and western parts of the Lava Creek ash bed.
Mount St Helens
The eruption of Mount St Helens in 1980 was the deadliest and most destructive volcanic event in U.S. history: it created a mile-wide crater, killed 57 people and created economic damage in the neighborhood of $1 billion.
Yet by Yellowstone standards, it was tiny: Mount St Helens only ejected 0.25 km3 (0.06 cubic miles) of material, most of the ash settling in a relatively narrow band across Washington State and Idaho. By comparison, the Lava Creek eruption left a large swathe of North America in up to two metres of debris.
The difference between quakes and faults
The volume of dense rock equivalent (DRE) ejected by the Huckleberry Ridge event dwarfs all other North American eruptions. It is itself overshadowed by the DRE ejected at the most recent eruption at Toba (present-day Indonesia). This was one of the largest known eruptions ever and a relatively recent one: only 75,000 years ago. It is thought to have caused a global volcanic winter which lasted up to a decade and may be responsible for the bottleneck in human evolution: around that time, the total human population suddenly and drastically plummeted to between 1,000 and 10,000 breeding pairs.
Image: USGS – public domain
So, what are the chances of something that massive happening anytime soon? The aforementioned mongers of doom often claim that major eruptions occur at intervals of 600,000 years and point out that the last one was 640,000 years ago. Except that (a) the first interval was about 200,000 years longer, (b) two intervals is not a lot to base a prediction on, and (c) those intervals don't really mean anything anyway. Not in the case of volcanic eruptions, at least.
Earthquakes can be 'overdue' because the stress on fault lines is built up consistently over long periods, which means quakes can be predicted with a relative degree of accuracy. But this is not how volcanoes behave. They do not accumulate magma at constant rates. And the subterranean pressure that causes the magma to erupt does not follow a schedule.
What's more, previous super-eruptions do not necessarily imply future ones. Scientists are not convinced that there ever will be another big eruption at Yellowstone. Smaller eruptions, however, are much likelier. Since the Lava Creek eruption, there have been about 30 smaller outbreaks at Yellowstone, the last lava flow being about 70,000 years ago.
As for the immediate future (give or take a century): the magma chamber beneath Yellowstone is only 5 percent to 15 percent molten. Most scientists agree that is as un-alarming as it sounds. And that its statistically more relevant to worry about death by lightning, shark, or piano.
Strange Maps #1041
Got a strange map? Let me know at email@example.com.
The potential of CRISPR technology is incredible, but the threats are too serious to ignore.
- CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) is a revolutionary technology that gives scientists the ability to alter DNA. On the one hand, this tool could mean the elimination of certain diseases. On the other, there are concerns (both ethical and practical) about its misuse and the yet-unknown consequences of such experimentation.
- "The technique could be misused in horrible ways," says counter-terrorism expert Richard A. Clarke. Clarke lists biological weapons as one of the potential threats, "Threats for which we don't have any known antidote." CRISPR co-inventor, biochemist Jennifer Doudna, echos the concern, recounting a nightmare involving the technology, eugenics, and a meeting with Adolf Hitler.
- Should this kind of tool even exist? Do the positives outweigh the potential dangers? How could something like this ever be regulated, and should it be? These questions and more are considered by Doudna, Clarke, evolutionary biologist Richard Dawkins, psychologist Steven Pinker, and physician Siddhartha Mukherjee.
Measuring a person's movements and poses, smart clothes could be used for athletic training, rehabilitation, or health-monitoring.
In recent years there have been exciting breakthroughs in wearable technologies, like smartwatches that can monitor your breathing and blood oxygen levels.
But what about a wearable that can detect how you move as you do a physical activity or play a sport, and could potentially even offer feedback on how to improve your technique?
And, as a major bonus, what if the wearable were something you'd actually already be wearing, like a shirt of a pair of socks?
That's the idea behind a new set of MIT-designed clothing that use special fibers to sense a person's movement via touch. Among other things, the researchers showed that their clothes can actually determine things like if someone is sitting, walking, or doing particular poses.
The group from MIT's Computer Science and Artificial Intelligence Lab (CSAIL) says that their clothes could be used for athletic training and rehabilitation. With patients' permission, they could even help passively monitor the health of residents in assisted-care facilities and determine if, for example, someone has fallen or is unconscious.
The researchers have developed a range of prototypes, from socks and gloves to a full vest. The team's "tactile electronics" use a mix of more typical textile fibers alongside a small amount of custom-made functional fibers that sense pressure from the person wearing the garment.
According to CSAIL graduate student Yiyue Luo, a key advantage of the team's design is that, unlike many existing wearable electronics, theirs can be incorporated into traditional large-scale clothing production. The machine-knitted tactile textiles are soft, stretchable, breathable, and can take a wide range of forms.
"Traditionally it's been hard to develop a mass-production wearable that provides high-accuracy data across a large number of sensors," says Luo, lead author on a new paper about the project that is appearing in this month's edition of Nature Electronics. "When you manufacture lots of sensor arrays, some of them will not work and some of them will work worse than others, so we developed a self-correcting mechanism that uses a self-supervised machine learning algorithm to recognize and adjust when certain sensors in the design are off-base."
The team's clothes have a range of capabilities. Their socks predict motion by looking at how different sequences of tactile footprints correlate to different poses as the user transitions from one pose to another. The full-sized vest can also detect the wearers' pose, activity, and the texture of the contacted surfaces.
The authors imagine a coach using the sensor to analyze people's postures and give suggestions on improvement. It could also be used by an experienced athlete to record their posture so that beginners can learn from them. In the long term, they even imagine that robots could be trained to learn how to do different activities using data from the wearables.
"Imagine robots that are no longer tactilely blind, and that have 'skins' that can provide tactile sensing just like we have as humans," says corresponding author Wan Shou, a postdoc at CSAIL. "Clothing with high-resolution tactile sensing opens up a lot of exciting new application areas for researchers to explore in the years to come."
The paper was co-written by MIT professors Antonio Torralba, Wojciech Matusik, and Tomás Palacios, alongside PhD students Yunzhu Li, Pratyusha Sharma, and Beichen Li; postdoc Kui Wu; and research engineer Michael Foshey.
The work was partially funded by Toyota Research Institute.