During the midterm, class discussions, and even in previous class presentations we have talked about the World Bank, and how its primary purpose is to provide loans and financial assistance to developing countries across the world. This is not the only form of economic financial assistance that occurs in the global economy though, many developed countries (the United States included) provide aid to developing countries partly in the interest of developing those countries, but also to encourage that developed country’s ideologic dogma on the developings. China, as this article expands on, is now infamous for this.
China’s banks hold over 35 trillion dollars in assets, making it the largest economic holder on the face of the planet. Previously held notions on China’s interest in worldly economic growth would lead academics to believe that China had little to no interest, but this article highlights how that actually could not be further from the case. “In fact the global footprint of China’s banks has grown to rival that of Western lenders.” China has donated to 196 countries out of the globally recognized 216, and was responsible for “7% of total cross-border lending flows” in June. This essentially means that Chinese money can be attributed to 7% of all money transactions that have occurred internationally in that month.
The article next dives into the cultural explanation for why countries are sometimes wary to give away money in the first place. There is a long held culture of most eastern countries not wanting to donate money to places too far outside of their geopolitical borders. It is a fair assumption to make that the closer the lended economy is to the base one, the faster the investor will be able to see a return on that investment. China, however, does not play by these same rules and in many ways mimics the investment strategy of Europe and the United States instead of other countries like Japan.
The biggest reason why this is so interesting though, is because China’s sudden interest has gone almost completely unnoticed by much of the western world, namely the United States. Why? China almost exclusively invests in very poor markets. From here, a huge debate emerges around the ethics of China investing so broadly in so many foreign markets.
I think that this relates very strongly to what we have talked about in class, because a major theme throughout these lectures is the connection and relationship between politics and business. The Chinese Bank has invested money into, interestingly enough, a lot of the same markets that we are studying for our group projects; like renewable energy, sustainable farming, clothing manufacturing, etc. which is great. That being said though, it would be naive to assume that any of this good will is taking place without political motives happening behind the scenes.
The question that I am going to ask the class is whether or not it is ethical for China to weave a web of dozens of developing countries depending on them for their economies instead of leaving these countries in the hands of international organizations like the world bank.
MLA Citation: The Economist Editors. “The Overseas Activities of Chinese Banks Shift up a Gear.” The Economist, The Economist Newspaper, 28 Oct. 2020, www.economist.com/finance-and-economics/2020/10/28/the-overseas-activities-of-chinese-banks-shift-up-a-gear.