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Sovereign Subprime Lending Is Officially In The House

During a business trip to Ghana last year, I got into a casual conversation at one point with a local mining executive about the West-vs.-China dynamic when it comes to thinking about the intersection of business, politics and development aid in Africa. And this executive said to me something that I will never forget: “The West tells Africa what it needs. The Chinese give Africa what it wants.”

So now we have the news that China is offering a $1 billion line of credit to Moldova, doubling the amount Moscow promised and dwarfing by a factor of more than 40 the funding available from the U.S. Millennium Challenge Account.

Reports so far have not detailed what, if any, political price comes attached with this largesse, but its relative scale – Moldova’s GDP is a mere $8 billion and its budget $1.5 billion – as well as its terms -3% annual over 15 years with 5 years grace on interest payments, none of those annoying human rights strings attached – suggest that something beyond the short term horizon our narrow pointy little heads are accustomed to watching awaits. According to the Wall Street Journal:

China’s interest in Moldova, a small and distant country with few natural resources, has baffled some diplomats in the capital, Chisinau. But they note that China has long had close relationship with Mr. Voronin’s government, one of the last in Europe to call itself communist.

China Overseas Engineering Group didn’t return calls for comment, and the Chinese Embassy in Chisinau couldn’t be reached.

Um, sure…but China has pulled exactly this move in several non-communist countries across the world, not all of which are replete with natural resources…though if natural resources are not the point, there’s usually something else, maybe to do with Taiwan, maybe to do with a UNHCR action, maybe something else off the grid entirely. After all, one can never have too many friends. I’m not a conspiracy theorist by any stretch of the imagination, but I just can’t stop thinking about a certain Monty Python sketch……