In Taiwan 20 years ago, the owner of an unregistered bank was issuing usurious loans with interest rates of 20, 30 or 50 percent or more. In the beginning, money rolled in, but then 95 percent of debtors started to lag on their payments.
He ordered his thugs to cut off a leg of one debtor. Despite this, the maimed debtor was still unable to pay and the illegal operation eventually ran out of money to pay his men, who turned on him and cut off one of his arms and one of his legs.
Disabled and facing multiple lawsuits, his wife and girlfriends left him.
Sri Lanka has a population of 22 million people, about the same as Taiwan. One-third of Sri Lankans have trouble putting food on the table and even those with some means are barely getting by as the country faces escalating inflation and a shortage of supplies. Basic needs such as rice and electricity are getting more difficult to afford.
With US$51 billion in external debt, the interest Sri Lanka has to pay annually is US$7 billion, which exceeds the government’s annual revenue.
Over the past few years, Sri Lanka has been paying debt with debt, and the main reason for its plight is China’s Belt and Road Initiative.
The infrastructure development strategy works in China’s favor and is not beneficial for borrower nations.
Building infrastructure such as air and sea ports that become white elephants is far from beneficial to a country, especially during an economic slowdown exacerbated by a pandemic.
As Sri Lankan policymakers were engaged in corruption, the projects proposed under the initiative were given the green light while the country was pushed into a full-blown debt crisis.
While about 40 other countries are in the same boat, China itself — the world’s biggest loan shark — has fallen into its own debt trap.
China offered Sri Lanka an 18-year loan with a 3.3 percent interest rate, while Japan offered a 34-year loan at a 0.7 percent. In this way, China is truly an exceptional “underground” bank.
China is not exactly a wealthy nation. At a news conference after the closing session of the Chinese National People’s Congress, Chinese Premier Li Keqiang (李克強) said that more than half of the population — about 600 million low-to-middle-income Chinese — earn only 1,000 yuan (US$148) per month.
Chinese President Xi Jinping’s (習近平) way of addressing bankruptcy and stalled construction projects includes cracking down on rich people and resuming a form of class struggle.
Targeting rich people is an attempt to distract the rising anger and discontent among poor people, which helps to maintain social stability.
When countries that borrow money from China wake up to the harsh reality of such loans, new political parties or alliances would unite to counter Beijing and seek closer ties with Western countries.
This is where Taiwan comes in. The government and the public need to work on further cooperation and partnership with other countries, especially in Southeast Asia.
Max Wang is a construction company director and former chairman of the Rotary Club of Taichung Harbor South East.
Translated by Rita Wang
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