How Chinese Loans become unrepayable by Jose Maria Sison

Statement by Prof. Jose Maria Sison
NDFP Chief Political Consultant

November 21, 2018

It is not only the interest charge of 2% to 6% that makes Chinese loans for infrastructure projects ultimately too burdensome and unrepayable. 

More importantly, it is the overpricing of the various parts and aspects of these projects that make these loans unrepayable.

The Chinese construction companies can at will overprice everything: the designs, the engineering services, the use of equipment, the supply of construction materials, the contracting of Chinese labor and so on. 

The overpricing carries the much bigger hidden interest on the loans. The huge overprice allows payoffs to regime officials and translates into unrepayable amortization of principal and interest payment.

What the Chinese imperialists practise is similar to the swindle that Soviet social imperialism used to impose on socialist China in the latter half of the 1950s. 

There was token or no interest at all charged on projects undertaken by the Soviet Union in China but the overprice made bigger profit than any open interest rate.

In contracts with Chinese banks and construction companies, there are provisions for the conversion of unpaid debts to Chinese equity as well as takeover of structures that the Chinese companies have built. 

These are well exposed in Sri Lanka, Pakistan, Maldives, Kenya and elsewhere. Mahatir Mohamad, Malaysian prime minister, has publicly warned against the loan shark operations of China.

Always hungry for natural resources to feed its industries, China is also notorious for holding as collateral the natural resources of its debt-enslaved client-states. 

Thus it has required the Duterte regime to become an open traitor by practically exchanging Philippine sovereign rights over the West Philippine Sea and an estimated USD 60 trillion worth of oil, gas and other resources in lopsided exchange for the few billions of dollars worth of high interest loans for overpriced infrastructure projects.

By allowing China to be a partner and co-owner of joint undertakings to explore and exploit the energy resources in the West Philippine Sea, the Philippines is made to fall silent on and give up its sovereign rights and allow Chinese corporations to explore and exploit oil, gas and other resources, with Chinese corporations monopolizing the findings of explorations and the accounting of costs and outcomes in exploration and exploitation.

Under the traitorous and stupid Duterte regime, the Philippines submits to China’s requirement of giving up sovereign rights and natural patrimony not only by falling for a swindling debt trap but also simultaneously by accepting legal and political provisions that economic and trade and loan agreements are to be governed by and construed in accordance with Chinese laws and that any dispute with the Philippines on the terms of contracts is to be settled through arbitration by the China International Economic and Trade Arbitration Commission. These provisions overrule any Philippine silence or equivocation about the sovereign rights in the West Philippine Sea.

The Chinese debt trap will be sufficient to convert the Philippines into a Chinese debt colony. But the accumulated Philippine debt from its traditional bilateral and multilateral creditors (US, Japan, World Bank, IMF and so on) will automatically increase as a result of the quantitative tightening (increased interest rate) already initiated by the US Federal Bank to counter the excessive US public debt incurred during the period of quantitative easing (low interest regime).

The only reason that Duterte and his cronies are jumping into the Chinese debt trap and the current treasonous act of surrendering sovereign rights and national patrimony to China is because they privately gain from contract shares and finder’s fees and they have apparently already received payoffs in advance in the form of the loans and accommodations already granted by Chinese banks and companies to Dennis Uy, Duterte’s front-man and bagman.