cross-posted from: https://feddit.org/post/2595239

Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.

The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry's plans for forex interventions implied that the central bank's daily yuan sales would plunge in the coming month to the equivalent of $200 million.

The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft's 15 billion yuan bond placement, which also sapped liquidity from the market.

"We cannot lend in yuan because we have nothing to cover our foreign currency positions with," said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market. The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients. Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.

Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.

Vanke had a short-term refinancing gap of about 12 billion yuan ($1.69 billion) at the end of June due to a spike in long-term debt within a year, according to Bloomberg calculations based on company data. That’s the first time Vanke’s cash balance has failed to cover interest-bearing debt maturing in less than a year since at least 2014.

As a bellwether for China’s real estate crisis, Vanke’s debt troubles underscore how even the highest quality developers have been ensnared by the unprecedented property downturn. While it’s managed to avoid a default so far, Vanke’s connections with the nation’s financial and government-backed entities means its distress could eclipse the turmoil wreaked by defaults at rivals China Evergrande Group and Country Garden Holdings Co.

[...]

China’s housing rescue package in May is losing steam as home sales slump deepened in August and prices are expected to plummet further. Concerns intensified in recent weeks after a string of disappointing earnings reports from consumer companies and a cut to China’s growth forecast by UBS Group AG. The downgrade reflects an emerging consensus that the country may miss its growth target of around 5% in 2024.

[...]

Vanke’s earnings report on Friday showed how much the extended housing slump is taking its toll on China’s fourth-biggest developer by sales. The company posted a net loss of 9.85 billion yuan for the six months ended June 30, its first semi-annual loss since at least 2003. That’s higher than the upper range flagged by the firm in July, and compares with an annual profit of 12.2 billion yuan last year.

Vanke’s loss signals its finances took a sharp hit in the second quarter, considering it lost just 362 million yuan in the first three months. The slowdown in China’s market has deepened since then, as sales and prices continue to fall. Local governments are dialing back intervention over pricing of new residential projects, driving developers to offer deep discounts to lure buyers.

[...]

cross-posted from: https://feddit.org/post/2261331

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Hungarian media outlet 444 has compiled a list of the outstanding debts of the state of Hungary, primarily using data from the Public Debt Management Centre (ÁKK). Their findings show that in just three years, the Hungarian government has accumulated considerable debt to China. By the end of the second quarter of this year, Hungary owed HUF 71.79 billion (EUR 182 million) to the Asian Infrastructure Investment Bank, a debt first incurred in the last quarter of 2022.

Earlier, in the second quarter of 2022, Hungary secured a loan for the construction of the Budapest-Belgrade railway line. So far, they have drawn down HUF 341.6 billion (EUR 866 million) for this project. The total investment for the railway amounts to HUF 750 billion (EUR 1.9 billion), of which 85% is being financed by loans and 15% by co-financing. Additionally, in the spring of this year, Hungary requested a loan of EUR 1 billion in complete secrecy by the end of the second quarter, according to the ÁKK’s accounts.

On top of these loans, Hungary also has CNY 3 billion worth of foreign currency bonds due for repayment to Chinese investors this year and next, which equates to around EUR 380 million at the current exchange rates. In total, 444 estimates Hungary’s debt to China now exceeds HUF 1,000 billion (EUR 2.536 billion), although they caution it could be even higher.

If anyone here is interested in a more technical interview, here are two socialists with doctorates in economics talk about why after two hundred years of talking about fixing the housing market haven’t gotten anywhere.

cross-posted from: https://feddit.org/post/1975503

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The most important part of the [International Monetary Fund] IMF’s latest assessment of China is—alas—the appendix on China’s new methodology for calculating China’s trade balance.

It at least explains why China’s balance of payments trade surplus diverges from China’s customs trade surplus, and why the gap started to explode around 2022 [...] China’s data doesn't agree with itself. One measure of the goods deficit is a lot bigger than another measure of the goods surplus.

[...]

You might think that a foreign firm producing in China for sale in China (“in China for China” is a thing) would not register in China’s trade data. After all, goods made in China and sold in China never cross a border, and thus should not show up in the customs data.

But in the new balance of payments data, China basically reports a trade deficit with itself because of foreign firms producing in China.

[...]

If a foreign firm contracts with a Chinese firm to manufacture that foreign firm’s goods in China, and then receives delivery of those goods in China, China counts this as an export.

[...]

But the strange turn happens if the foreign firm turns around and sells the good that a contract manufacturer produced for it inside China. Such goods are now being counted as an import in the balance of payments data.

Thus, China exports goods to foreign firms operating in China, and then imports those goods back from the same firm even though the goods never leave China. If the goods are sold at a higher price than the contract manufacturer receives, it ends up being reported as a trade deficit in the balance of payments.

[...]

So Chinese production for the Chinese market by foreign firms is somehow generating a trade deficit in the balance of payments data. This, of course, makes no real economic sense.

[...]

Bottom line: there is no good reason to think that this adjustment in captures anything important about how China’s economy interacts with the global economy. All this “fake” trade deficit does is reduce China’s reported current account surplus—as the goods surplus in the balance of payments is now about $300 billion (over 1.5 percentage points of China’s GDP) smaller than what it should be in the balance of payments data [while the author estimates] the current account surplus to be close to $700 billion even after the drop tied the resumption of tourism in 2023.

[...]

What matters for now is that a large number of analysts are using China's current account data to assess China's impact on the world without realizing that the fall in China's surplus since 2021 is basically an artifact of difficult to justify changes in China's balance of payments methodology. The real story is found in the old fashioned goods data.

cross-posted from: https://feddit.org/post/1752069

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While housing rescue policies may help provide stimulus to property markets, the economic fundamentals currently unfolding in China are unfavourable to their implementation, writes Yixiao Zhou from The Australian National University.

[...]

China has one of the world’s highest housing price-to-income ratios at 29.59. China also has a low lending interest rate at around 4 per cent. Considering this, the room for expanding the mortgage scale is limited, constraining the ability of easing lending rules to stimulate housing demand.

Another short-term demand factor is the transfer of rural homestead land. In June 2024, Nantong, a city in Jiangsu province, introduced new policies that allow individuals who voluntarily relinquish their rural homesteads and buy homes in urban areas to receive financial subsidies. Nantong is not alone in this initiative. Encouraging the voluntary and compensated relocation from rural homesteads has become a key focus of real estate policies. But this does not seem to have affected the decreasing trend of housing prices either.

[...]

If downward adjustment in property prices leads to real estate loan default, this will pose major risks to financial stability. Japan’s experience with a massive real estate bubble burst in the early 1990s provides a crucial lesson for policymakers in China. The sharp downturn in the real estate sector led to a prolonged period of economic stagnation known as ‘Japan’s lost decade’.

[...]

Ultimately the structural problems holding back demand for properties could be solved by reforms in land allocation, financial market regulation and urbanisation policies. These reforms could help reposition China’s property sector on a healthy and sustainable growth path.

Local government debt is estimated at up to $11 trillion, including what's owed by local government financing entities that are “off balance sheet,” or not included in official estimates. More than 300 reforms the party has outlined include promises to better monitor and manage local debt, one of the biggest risks in China’s financial system.

That will be easier said than done, and experts question how thoroughly the party will follow through on its pledges to improve the tax regime and better balance control of government revenues.

“They are not grappling with existing local debt problems, nor the constraints on fiscal capacity,” said Logan Wright of the Rhodium Group, an independent research firm. “Changing central and local revenue sharing and expenditure responsibilities is notable but they have promised this before.”

The scramble to collect long overdue taxes shows the urgency of the problems.

Chinese food and beverage conglomerate VV Food & Beverage reported in June it was hit with an 85 million yuan ($12 million) bill for taxes dating back as far as 30 years ago. Zangge Mining, based in western China, said it got two bills totaling 668 million RMB ($92 million) for taxes dating to 20 years earlier.

Local governments have long been squeezed for cash since the central government controls most tax revenue, allotting a limited amount to local governments that pay about 80% of expenditures such as salaries, social services and investments in infrastructure like roads and schools.

Pressures have been building as the economy slowed and costs piled up from “zero-COVID” policies during the pandemic.

US stocks plunged on Monday morning as Friday’s dismal July jobs report continued stoking fears that the US economy is on shaky legs.

The Dow plunged 1,072 points, or 2.7%. The S&P 500 fell 4.1% and the Nasdaq Composite sank by a whopping 6.3%.

The Cboe Volatility Index, or VIX, which measures bets on expected stock market volatility, surged to 55. The last time the fear gauge hit that level outside of the pandemic was the Great Financial Crisis, in 2008.

Video about job prospects after big tech layoffs

Tldr: healthcare, education, transportation, manufacturing is outpacing IT in hiring

As Pakistan works on enacting economic reforms under a multibillion-dollar IMF bailout, Islamabad must first figure out what to do with its mountain of debt owed to China

After cash-strapped Pakistan secured a new $7 billion (€6.5 billion) bailout package from the International Monetary Fund (IMF) in July, Islamabad has started talks with Beijing on reprofiling billions in Chinese debt as it seeks to enact economic reforms.

On the table are proposals to delay at least $16 billion in energy sector debt to China, along with extending the term of a $4 billion cash loan facility due to depleting foreign exchange reserves.

Last week, Pakistani Finance Minister Muhammad Aurangzeb was in Beijing to present proposals on extending the maturity of debt for nine power plants built by Chinese companies under the multibillion-dollar Pakistan China Economic Corridor (CPEC).

On Friday, Prime Minister Shehbaz Sharif told a federal cabinet meeting that he had written a letter to the Chinese government requesting debt reprofiling, Pakistan's Dawn newspaper reported.

Reprofiling debt differs from restructuring debt in that the amount is not cut, rather, the due date for repayment is extended.

Islamabad is under immense pressure to renegotiate the expensive agreements with power producers, primarily Chinese companies, to bring down electricity prices.

Since CPEC was signed in 2015 and became one of largest components of China's Belt and Road Initiative (BRI), Beijing has poured billions of dollars into developing infrastructure in Pakistan.

The value of CPEC projects comes in a $65 billion, with the primary goal of building a shipping connection for Chinese goods from Gwadar port on the Arabian Sea over the mountain border into China's Xinjiang region.

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U.S. Sen. Elizabeth Warren on Friday demanded that the chairman of the Federal Reserve immediately "cancel his summer vacation" and slash interest rates following the release of government data showing weaker-than-expected job growth and an increase in the unemployment rate last month.

Warren (D-Mass.), an outspoken critic of the Fed's aggressive interest rate increases, argued in a social media post that Fed Chair Jerome Powell "made a serious mistake not cutting interest rates" at the Federal Open Market Committee's (FOMC) meeting earlier this week. The central bank's policy-setting group opted to hold rates at 5.25% to 5.5% for the 12th consecutive month.

cross-posted from: https://feddit.org/post/1386306

Over the past 20 years, China has become the largest lender in the Pacific. Now Tonga, Vanuatu and Samoa are spending some of the biggest sums in the world to repay debts to China, as a proportion of their GDP, according to Lowy Institute analysis.

Pacific countries have some of the highest costs in the world in terms of climate adaptation needs, but these are things that have to be deprioritised to deal with the debt. "It's a trade-off and it's not one that's good," Tonga's finance minister says.

Experts say China's EXIM Bank does not forgive foreign debts. "It will ease borrowing terms by extending repayment moratoria or pushing out final loan repayment dates. However, it rarely reduces interest rates," Bradley Parks, executive director of AidData, said.

• Tonga's annual debt repayments to China are nearly 4 per cent of its GDP — the third-highest level in the world. It's a rate that Lowy research associate Riley Duke calls "astronomically high".

• AidData analysis has found 85 per cent of China's loan-financed infrastructure projects in Tonga show signs of debt distress.

• Fiji, Papua New Guinea and Cook Islands also have moderate levels of public debt exposure to China, according to the AidData research lab at William & Mary, a Virginia-based public university in the United States.

• Vanuatu has struggled less with its debts to China and has met its loan repayments, but a series of economic shocks have set the nation back, including three tropical cyclones in 2023 and the collapse of its national carrier in May.

• Loan repayments to China commonly drain resources from public services such as health and education, and other pressing needs in the region. In Tonga's case, the government was spending more on servicing its debt than on health.

Cross posted from: https://beehaw.org/post/15214106

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• Kenya’s foreign exchange reserves have experienced a significant drop of USD 487 million (about KES 63.9 billion) over the past week, following substantial repayments of external debt.

• The decrease in reserves follows the government’s repayment of USD 533 million (about KES 70 billion) in external loans, which includes USD 433 million (KES 56.8 billion) used to service a loan from China.

• The reduction has decreased the import cover from 4.1 months to 3.9 months. Import cover refers to the number of months the available foreign exchange reserves can finance imports.

• Previous reports indicated that Kenya had spent KES 152.69 billion (approximately USD 1.15 billion) repaying China in the last fiscal year This included USD 705.05 million (KES 100.47 billion) in principal repayment and USD 366.46 million (KES 52.22 billion) in interest.

• Additionally, Kenya paid USD 286.04 million (KES 40.76 billion) more than initially planned for the fiscal year.

• The secretive nature of Beijing’s loan terms with developing countries like Kenya often means borrowers must prioritise repayments to China, placing a considerable burden on the Kenyan public.

cross-posted from: https://feddit.org/post/1212562

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In Laos, the tiny Asian country, China became the largest foreign investor with some $5 billion spread across 745 projects, overtaking Thailand. The China-led strategy was meant to protect countries like Laos from economic shocks — instead, it led to them. Today Laos is struggling to repay the billions it borrowed from China to fund the hydroelectric dams, trains and highways, which have drained the country of foreign reserves. As repayments drag, external debt is rising, a vulnerability exacerbated by the pandemic and rising global fuel and food prices.

The escalating public debt in Laos has sparked global discussions regarding the sustainability within the region. This concern primarily stems from China’s increasing role as a significant financier of Southeast Asian infrastructure projects, raising fears that China might be using debt to gain geopolitical leverage by ensnaring impoverished nations in unmanageable loan agreements.

When President Xi Jinping of China proposed the Belt and Road Initiative (BRI) in a pair of speeches in 2013, the initiative became popular in the developing world, where almost all countries face infrastructure deficiencies. Beijing has loaned almost $1 trillion to developing nations in the past two decades. But China was specifically providing debt and burdening borrowing countries with high-interest rates they could not repay.

[...]

BRI has also been criticised as an effort to export China’s authoritarian model, as a number of major loan recipients have poor records of democracy and civil liberties like in Cambodia and Laos in Asia.

What then results is called ‘Debt-trap diplomacy (DTD),’ now associated as a Chinese policy tool connected to BRI. The approach to Debt-trap diplomacy begins by China intentionally lending excessively money to low-income indebted states that cannot later repay Chinese debt. Loan taking nations see a rise in public debt. However, it is difficult to say how much Chinese financing is going to infrastructure in Southeast Asia because the Chinese effort lacks transparency. China’s loans are largely coming from the two policy banks: China Development Bank and China EXIM Bank. They borrow on domestic and international capital markets and lend with a spread, so they expect to be financially self-sufficient.

In an interview with the Wall Street Journal, the long-time associate of The Black Swan author Nassim Nicholas Taleb said a severe crash is on the way and stocks could lose more than half their value, while acknowledging that his latest warning should come as no surprise.

“I think we’re on the way to something really, really bad—but of course I’d say that,” Spitznagel said.

Since Fortune is mostly citing WSJ, here's an archive of that WSJ story. From that source:

Governments have been so active tamping down any conflagration in the economy that the dry brush of debt and other hidden risks have built into the ingredients for a severe blaze.

How should mere mortals without access to tail risk hedges respond to his prediction? Probably by doing nothing, says Spitznagel.

“Cassandras make terrible investors.”

Cross posted from: https://beehaw.org/post/15094770

Archived version

Developing countries owe China an estimated $1.1 trillion, and more than 80% of China’s loans are to countries experiencing financial distress, according to AidData, a research lab at William & Mary. Despite this, China rarely agrees to loan forgiveness or principle reduction, preferring to negotiate longer repayment plans on a case-by-case basis.

• Despite promises of two-way trade, African exporters have little access to Chinese markets for their goods. Most of China’s imports from the continent are oil, gas and minerals.

• The result is a more one-sided relationship than China says it wants.. One that is dominated by imports of Africa’s raw materials and that some analysts argue contains echoes of colonial-era Europe’s economic relations with the continent.

• With the annual Forum on China-Africa Cooperation (FOCAC) set to take place in September, China is expected to announce new projects in Africa. But its lending practices are coming under scrutiny. Several countries that have taken on debt have found themselves forced to make drastic cuts to domestic programs or raise taxes in order to repay the loans.

• Kenya, for example, spends about 60% of its revenue on debt payments, with about one-third of that money going to pay the interest on loans.

cross-posted from: https://feddit.org/post/865985

The fatalistic tag “garbage time” began popping up on social media platforms over the past month. It was given a more recent boost when state media and commentators lined up to denounce the phrase and any suggestion that decline would follow downturn for China.

“This is a catchphrase insinuating that there’s no help and no hope, denying and downplaying everything in China,” [state-owned media outlet] Beijing Daily said in a commentary last week.

It follows another buzzword China’s censors have targeted as a threat to stability since it broke into the mainstream three years ago: “lying flat,” a call to a slacker life of limited ambition and quiet protest.

[...]

There are other signs China’s collective confidence has suffered, according to survey data collected by Stanford University professor Scott Rozelle and others published in summary last week by the U.S. think tank Center for Strategic and International Studies.

Rozelle found Chinese respondents to a survey were more pessimistic than they had been two decades ago, more likely to blame structural factors for determining whether a person is rich or poor and far less likely to believe hard work pays off.

In 2004, 62% agreed “in our country, effort is always rewarded." That dropped to 28% in the 2023 survey.

cross-posted from: https://feddit.org/post/860815

The Chinese banking sector is facing a severe crisis. In just one week, 40 banks disappeared, and the collapse of Jiangxi Bank has further deepened the sector's problems.

Cryptocurrency market analyst Sigma G also examined the situation in China's banking sector. He points out that the leading cause of the problems is the deep recession in China's real estate sector. Over-indebted developers and local governments fail to repay loans, leading to financial instability. Property prices have plummeted, and construction projects have been halted, further burdening the economic system.

The author also highlights the issue of hidden bad debts. Banks have used asset management companies (AMCs) to offload toxic loans, creating an illusion of stability. However, a new banking regulator, the National Financial Regulatory Administration (NAFR), has begun cracking down on these practices by imposing fines and increasing oversight.

Many Chinese cities and even entire regions are drowning in debt. The liabilities were so high that local government representatives sent envoys to Beijing in the spring. They are negotiating terms for repaying billions in loans. Unpaid debts are increasingly weighing on regional economies, threatening national economic growth.

cross-posted from: https://feddit.org/post/859855

Archived version

In 2025, Russia’s Central Bank plans to fully roll out the digital ruble — a new form of currency that, according to officials, can be used on par with cash and electronic payments, and holds the exact same value as the traditional ruble.

The Russian authorities insist that this new tool is safer than cash and that the fees for using it will be lower than for other electronic payment methods. Every digital ruble has its own unique code, which theoretically makes it possible for the Central Bank to restrict its use — and, according to experts from the digital rights group Roskomsvoboda, to monitor citizens’ transactions.

• The issuer of this new form of currency is the Central Bank itself, a key difference to conventional bank transfers. Responsibility for its use and management will fall on the state, not on commercial banks. When customers deposit funds into their digital ruble accounts, they will effectively be lending their money to the authorities.

• At the same time, commercial banks will be responsible for all account operations, as well as for ensuring security. Clients will be able to manage their digital rubles through commercial bank apps.

• Each digital ruble will always be worth exactly one ruble. However, it’s possible that the authorities will restrict how digital rubles can be spent; the Central Bank may encode certain rubles, for example, so that they can’t be used for gambling or buying alcohol.

• Unique codes on each digital ruble will allow the government to directly monitor citizens’ spending when they use the new form of currency.

• The digital ruble could become a major tool in the Central Bank’s management of Russia’s finances, allowing not only the monitoring of transactions (the government already surveils non-cash payments) but also “instantaneous and direct control over monetary policy.”

• According to the lawyer, the government could use it to instantly implement currency redenomination or impose broad restrictions on money use. “During the COVID restrictions, for example, it would have been possible to use digital rubles to ban payments for [travel] tickets and hotels,” the lawyer said.

I personally would not be interested in buying a new car. They depreciate in value too quickly and do the same exact job as a used car.

Used cars also have been run so lemons that come from the factory have been filtered out or fixed.

Legal experts say the acquittal of 28 defendants facing Panama Papers-related money laundering charges raises questions about the progress of anti-corruption efforts in Panama and beyond, as the country’s new president welcomed the outcome of the trial and called the original journalistic investigation a “hoax.”

In a statement released on Friday, Panama’s judicial branch said the judge Baloisa Marquínez did not find enough evidence to reach a guilty judgment and dismissed a host of electronic evidence presented by prosecutors for not meeting chain-of-custody protocols and authentication standards.

Carlos Barsallo, a Panamanian attorney and former president of Transparency International’s Panama chapter, said the decision reflected a blunder by prosecutors since many of those documents were obtained by authorities during an inspection of the offices of Mossack Fonseca, the Panamanian law firm at the center of the Panama Papers leak. Digital documents, like emails, should have made it easy to maintain the chain of custody, Barsallo said.

“From a global perspective, it shows the difficulty of these cases and the necessity for the prosecution to have more resources — not just economic, but also human resources and technical know-how,” Barsallo said.

Archived version

• Communist-run Laos has come to the fore after it opened a high-speed rail line with China in 2021 that cost the landlocked country about $6 billion. While the development is seen by many as the start of a ramp up in infrastructure that directly connects China with Southeast Asia, it has raised concerns of a build-up in debt for Laos and other smaller countries.

• China is by far Laos’ biggest creditor, accounting for about half of the $10.5 billion in external government debt. The tiny nation had $13.8 billion in total public and publicly-guaranteed debt at the end of last year, amounting to 108% of its gross domestic product.

• Laos’ external debt payments in 2023 reached $950 million, almost double the amount compared to 2022,, making the country defer $670 million in principal and interest payments. The World Bank has said in the past that such moves have provided temporary relief in recent years.

• Laos' development is seen by many as a further chapter of China's 'debt-trap diplomacy' as Beijing offers developing countries financial loans under often opaque condition, leaving them grappling with repayments while it supports China’s efforts to expand its economic and political influence in foreign countries.

• For example, Sri Lanka fell into default for the first time in its history back in 2022 after its foreign reserves dwindled. Last month the South Asian nation said it reached final restructuring agreements worth $10 billion, including with an Official Creditor Committee of bilateral lenders and China’s Exim Bank. Sri Lanka's port, however, is now owned by China.

• China dismissed the “debt-trap diplomacy” allegations.

Malaysia and Thailand are the latest nations in Southeast Asia to express interest in joining the expanded BRICS group of emerging economies.

Archived version

• Nepal has shied away from signing a plan to implement China’s ambitious Belt & Road Initiative (BRI) in the Himalayan nation. Resisting immense pressure from Beijing, Nepal’s Prime Minister Pushpa Kamal Dahal refused to greenlight the signing that would have paved the way for the implementation of nine mega and more than a dozen major BRI projects in Nepal.

• That’s because soon after Nepal signed the BRI framework agreement in May 2017, India launched a massive but silent campaign to educate and explain Nepal’s political leadership, economists, bureaucrats, diplomats, academia, media and civil society leaders the pitfalls of China’s BRI to them, making Nepal’s top politicians and others fully aware of China’s sinister plan to ensnare nations into a debt trap through the BRI.

• PM Deuba eventually told China that Nepal would only agree to a small component of the cost of BRI projects in the form of loans. However, the interest on such loans should not be more than what multilateral lending agencies like the World Bank and Asian Development Bank (ADB) charge for their loans (one per cent per annum).

• This was not acceptable to China which charges more than two per cent on the loans it gives to other countries to finance BRI projects. Also, China insists on the contracts for these projects being awarded only to Chinese companies and refuses to do away with or water down penalty clauses (in case of failure to repay the loans on time).

What also worked against China was Nepal’s experience with the Pokhara International Airport which cost US $ 305 million. China’s Exim Bank provided a loan of about US $ 215 million at 2 per cent interest. Chinese firms were awarded contracts for construction and technical works.

Allegations of shoddy construction, inflated costs and mismanagement by the Chinese have fuelled public anger against China in Nepal. The airport has turned into a huge liability (read this) since no commercial and scheduled flights are operating from there.