China is the second largest economy in the world after the USA. This big country has a vast economy which manufactures low-quality goods and dumps them into the international market at lower price tags to mint the money. By dint of its export based Economy, China was able to develop itself @10% annual growth.
But, the time has changed a lot. Western countries have imposed a lot of restrictions on the low-quality Chinese products and many countries are taking several efforts to protect their Economies from Chinese overtake.
As a result, Chinese Economy is going through a recession. There is overproduction in Chinese factories and no market to dump those low-quality products.
As a result, Chinese President proposed a plan to revitalize the old silk route to connect Asia, Europe, and Africa together by building roads, railway tracks, bridges, ports, etc.
China has invited many countries to join in this initiative and be a party of this development scheme. This plan seems like a game changer for many small countries which are still undeveloped and are desperately looking for bigger investment to make all round progress.
We have already reported that this scheme is a Chinese plan to take over the world financially, create a huge market for Chinese companies to dump their products and provide job opportunities to Chinese workers.
Several small countries such as Pakistan, Srilanka, Myanmar, etc, are already trapped in a huge burden of debt and they are also ignoring its potential dangers.
This one trillion US Dollars scheme is a risky bet for China itself too. Chinese banks that are funding this project want to ensure the recovery of the sanctioned money on the due date. As a result, they want to set tough conditions to loan borrowers. But, the Chinese government is not allowing them to do so.
Currently, China’s Economy is slowing and there is huge Amount of unpaid loans. So far, Chinese banks are not able to recover the borrowed money in full with interest. The pressure to finance the silk route scheme will make them insolvent if the loan is not recovered.
We believe China is burning its reserve currency in an overly ambitious project that is likely to ruin it’s big economy if things go wrong. So, just wait and watch and see what happens with the Chinese money.