The embarrassing truth about the US that AidData uncovered: Where did China's loans go?

Everyone, where exactly did our country's loans go? This time the United States has finally figured it out. There is a project at the College of William & Mary that specifically tracks international aid, called AidData. It released a report with very detailed data, turning over every stone of the more than two trillion US dollars in loans China has extended over the past twenty-plus years. If they hadn't looked, fine, but once they did, they dug up something embarrassing: the biggest recipient of official Chinese credit turned out to be none other than the United States itself. It really is ironic. The US has constantly accused us of "debt trap" diplomacy, of lending specifically to countries that obviously can't repay, waiting for them to default so it can then rightfully take over mines and ports. This narrative did scare quite a few countries. And what happened? The US, which tells everyone else to be careful every day, is itself rushing to jump in. The report says that since 2000, China has approved 200 billion US dollars in loans to the United States, more than to anyone else, and more than half of that was approved after 2018—by which time the US had already regarded China as a strategic competitor. In the words of AidData's Parks, this is a tremendous irony. The US uses this money to build infrastructure, such as the high-voltage transmission line from Canada to New York, the super data centers in Virginia, and several terminals at Kennedy International Airport. As for America's prized companies—Amazon, Halliburton, Tesla, Boeing, Qualcomm, Disney—the daily operations of these Fortune 500 firms also rely on Chinese credit lines. Why is this happening? First, the direction of China's overseas lending has changed, shifting from large infrastructure to safe havens. Twenty years ago, 88% of overseas loans went to low-income countries. But in 2023 there was a fundamental change: the shares of loans going to low-income and high-income countries reversed, forming a new 80/20 split. The reason is simple: after the Fed raised interest rates, the balance sheets of Third World countries looked increasingly ugly, and lending risk was too high. Chinese capital is pragmatic, so it put money into developed markets with higher credit ratings and more stable cash flows. As a result, while Capitol Hill in Washington is busy with decoupling and de-risking, the trading floors of New York and the oil and gas fields of Texas are greedily absorbing liquidity from China. US infrastructure lacks money, American tech companies lack money, and we just happen to have some money—and we give it readily. This is not some conspiracy theory about who wants to control whom; this is simply capital's most honest pursuit of profit. When capital pursues profit, it is quite clever. European and American scrutiny has indeed become stricter, but Chinese finance has also evolved. The report found that Chinese capital now not only refrains from openly wiring funds directly as it used to, but has also learned to wear an invisibility cloak—for example, through offshore centers such as the Cayman Islands and the British Virgin Islands, setting up special purpose vehicles (SPVs), or acting as a limited partner mixed in among Western banks like HSBC and Deutsche Bank. You think your semiconductor investment comes from a London fund, but after piercing through several layers of equity structure, you find that the source of the funds is Chinese sovereign capital. This shows that China is no longer the new money of years past, able only to buy, buy, buy in a crude, wealthy manner. Now it is old money, using offshore financial structures with great skill, which shows that Chinese capital has passed that naive, rough stage and become more refined, more concealed, and more adept at using the rules. Of course, this report also issued a warning to the international financial order, saying that China is not buying assets but building a system. The scale of lending is several times higher than previous estimates. In the past, when the whole world ran out of money, only the IMF was the money house that could provide relief, at the cost of surrendering economic sovereignty. Now China's approach is very interesting: when you face a liquidity crisis, China provides emergency funds through currency swaps to help you borrow new money to repay old debts. This is no longer just lending money; as the world's number one official creditor, it is maintaining the stability of the system and preventing these countries from turning to the other side because of bankruptcy. Competition between countries comes down to efficiency and strength. The West is very interesting: in order to deal with us, they have started imitating China. Previously, the OECD had a gentlemen's agreement stipulating that governments could not directly enter the market to do business, but in order to compete with China for turf, they also began using state finances to buy mines, provide subsidies, and acquire shipyards. When opponents abandon their original positions and start entering our rhythm, this game has already entered a new stage.