Hobson’s,choice:,China’s,loans,to,poor,countries,do,not,undercut,the,west:poor choice

　　“China is a very aggressive and pernicious economic competitor with no morals. China is not in Africa for altruistic reasons. China is in Africa for China primarily.” This was the argument put forth by a confidential US State Department memo in February 2010, later published by Wikileaks.
　　The secret memo reinforced Western perceptions, not often publicly voiced, that the reform efforts of their development banks in poor countries are pervasively undermined by China. Rather than accept loans which require salutary political and economic reforms, developing country governments instead plump for cheap,“no strings attached” loans from China. In return, China secures a steady supply of oil and other resources to feed its energyhungry economy back home.
　　Strings attached
　　But scholars of China’s international relations have long argued that the threat is vastly overblown. Now evidence from a new study of Chinese loans to Latin American countries by the Inter-American Dialogue adds heft to their claims.
　　China’s lending in Latin America is massive: In 2010 it loaned more to the region than the World Bank, Inter-Amer- ican Development Bank (IDB) and the US Export-Import Bank combined.
　　But on the whole these loans had higher interest rates than those offered by the World Bank and IDB. Lending channeled through China Development Bank –82% of the total dished out since 2005 – is set at more or less commercial rates. Only the minority of loans extended via China Export-Import Bank are cheap, with interest rates about 1-2% lower than comparable loans from US Export-Import Bank. But the contracts often require borrowers to use Chinese companies and equipment for their construction projects, adding to the overall cost.
　　The report turns the usual question on its head: Why would poor countries pass over the World Bank and IDB in favor of more expensive loans from China? To some extent, it is because they are not really competing. Chinese loans are on an altogether different (much larger) scale, and almost exclusively focused in the energy, mining, infrastructure, transportation and housing sectors. The World Bank and IDB, by contrast, focus more on smaller health, social and environmental projects. Where they do overlap, collaboration can be as likely to result as competition: Witness the joint fund announced in March between IDB and China’s Eximbank, which is expected to focus on medium-sized infrastructure and natural resources projects.