Independence Day… I’m sure there are going to be plenty of “happy 4th” items posted, but here is a “one off” from that path, but a path I believe is important. Too many people are sleepwalking about debt.

Independence defined: noun

  1. The state or quality of being independent.
  2. Sufficient income for comfortable self-support; a competence.
  3. The state or quality of being independent; freedom from dependence; exemption from reliance on, or control by, others; self-subsistence or maintenance; direction of one’s own affairs without interference

Does the United States fit this part of the definition of “independence”? “Freedom from dependence; exemption from reliance on, or control by, others; self-subsistence or maintenance; direction of one’s own affairs without interference”

Visual Capitalist is an interesting site. I don’t always agree with some of their “takes” but always worth a glance or a deeper dive.

Here is a deeper drive on their post: Ranked: The Top 20 Countries in Debt to China

When I saw the graph, I immediately thought “Belt and Road Initiative”. If you aren’t aware, here is a quick take:

The Belt and Road Initiative (BRI), known in China as the One Belt One Road and sometimes referred to as the New Silk Road, is a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in more than 150 countries and international organizations.

“Belt” refers to the proposed overland routes for road and rail transportation through landlocked Central Asia along the famed historical trade routes of the Western Regions; “road” is short for the 21st Century Maritime Silk Road, which refers to the Indo-Pacific sea routes through Southeast Asia to South Asia, the Middle East and Africa.

It is considered a centerpiece of the Chinese Communist Party (CCP) general secretary Xi Jinping’s foreign policy. The BRI forms a central component of Xi’s “Major Country Diplomacy” strategy, which calls for China to assume a greater leadership role in global affairs in accordance with its rising power and status. As of early 2024, more than 140 countries were part of the BRI.  The participating countries include almost 75% of the world’s population and account for more than half of the world’s GDP.

The initiative was incorporated into the constitution of the Chinese Communist Party in 2017.

In this graphic, we ranked the top 20 countries by their amount of debt to China. These figures are as of 2022 and come from the World Bank (accessed via Yahoo Finance).

Could China be in Trouble?

China has provided developing countries with over $1 trillion in committed funding through its Belt and Road Initiative (BRI), a massive economic development project aimed at enhancing trade between China and countries across Asia, Africa, and Europe.

Many believe that this lending spree could be an issue in the near future.

Couple this with the real estate issue in China, this doesn’t look promising for the Chinese.

According to a 2023 report by AidData, 80% of these loans involve countries in financial distress, raising concerns about whether participating nations will ever be able to repay their debts.

While China claims the BRI is a driver of global development, critics in the West have long warned that the BRI employs debt-trap diplomacy, a tactic where one country uses loans to gain influence over another.

Debt-Trap diplomacy… Here is a list of countries who “owe” the US from their purchase of the US debt.

Hard to find a current graph but here is one just a year old or so.

My question for you:

What happens if one of two of these countries use that debt in the form of a default as a financial weapon?

Would love to hear your thoughts…

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