U.S. senators urge the Trump administration to prevent the IMF from bailing out several countries that face predatory Chinese loans.

Chanel Holden

2018-02-01 07:38:00 Thu ET

U.S. senators urge the Trump administration with a bipartisan proposal to prevent the International Monetary Fund (IMF) from bailing out several countries that face predatory Chinese loans. These predatory Chinese loans are part of the Belt-and-Road infrastructure development plan for the next decade. Belt-and-Road is a $8 trillion global infrastructure plan that the Xi administration now uses to expand its economic prowess around the world.

In effect, the Xi administration makes productive use of this infrastructure debt to control the economic policies in Asian countries such as Sri Lanka and Pakistan. President Xi intends to transform Belt-and-Road into a new world economic order with fresh and unique Chinese dominance.

U.S. State Secretary Mike Pompeo points out that at least 23 of these 68 Belt-and-Road countries now face financial debt difficulties. This debt distress signals the collective reliance of Belt-and-Road countries on China. Also, China holds about $1.2 trillion U.S. Treasury bonds, bills, and notes and hence can directly influence the U.S. yield curve. Should the Belt-and-Road countries fail to honor their principal and interest payments on their current debt contracts with China in the absence of IMF bailout finance, the Xi administration may unload its Treasury bond positions. In turn, China may effectively use its rich foreign reserves to entrench its current 260% public-debt-to-GDP ratio and Belt-and-Road infrastructure debt distress.

In the worst-case scenario, these ripple effects may inadvertently cause U.S. yield curve inversion. U.S. yield curve inversion reflects a negative term spread between short-term and long-term interest rates, indicates corporate investment sentiments with respect to mergers and acquisitions and capital expenditures, and hence often recurs in the early dawn of a severe economic recession. This red alert poses a major gray rhino, or some obvious highly probable negative incidence, in contrast to improbable black-swan rare events such as the U.S. subprime mortgage crisis, the European sovereign debt spiral, and the Global Great Depression. For these legitimate reasons, the Trump administration's advisors such as Pompeo, Mnuchin, and Kudlow need to alleviate this economic security concern in due course.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

The recent arrest of HuaWei CFO may upend the trade truce between America and China.

Fiona Sydney

2018-12-13 08:30:00 Thursday ET

The recent arrest of HuaWei CFO may upend the trade truce between America and China.

The recent arrest of HuaWei senior executive manager may upend the trade truce between America and China. At the request of several U.S. authorities, Canadi

+See More

Mark Granovetter follows the key principles of modern economic sociology to analyze social relations and economic phenomena.

Charlene Vos

2023-02-21 08:27:00 Tuesday ET

Mark Granovetter follows the key principles of modern economic sociology to analyze social relations and economic phenomena.

Mark Granovetter follows the key principles of modern economic sociology to analyze social relations and economic phenomena. Mark Granovetter (2017) &

+See More

Fed Chair Janet Yellen says the current high stock market valuation does not mean overvaluation.

Jonah Whanau

2017-12-11 08:42:00 Monday ET

 Fed Chair Janet Yellen says the current high stock market valuation does not mean overvaluation.

Fed Chair Janet Yellen says the current high stock market valuation does not mean overvaluation. A stock market quick fire sale would pose minimal risk to t

+See More

What are the mainstream legal origins of President Trump's new tariff policies?

Amy Hamilton

2025-06-13 08:23:00 Friday ET

What are the mainstream legal origins of President Trump's new tariff policies?

What are the mainstream legal origins of President Trump’s new tariff policies? We delve into the mainstream legal origins of President Trump&rsquo

+See More

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance.

James Campbell

2019-05-17 15:24:00 Friday ET

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance.

A Harvard MBA graduate Camilo Maldonado shares several life lessons and wise insights into personal finance. People can leverage stock market investments an

+See More

Stock Synopsis: High-speed 5G broadband and mobile cloud telecommunication

Charlene Vos

2024-04-02 04:45:41 Tuesday ET

Stock Synopsis: High-speed 5G broadband and mobile cloud telecommunication

Stock Synopsis: High-speed 5G broadband and mobile cloud telecommunication In the U.S. telecom industry for high-speed Internet connections and mobile cl

+See More