Is the China Belt and Road Initiative a debt trap?
From an accounting aspect, debt is not a problem. The larger a company is, the more debt the company has. All it accounts for is the balance sheet. A company can raise more debt if it has more assets. A healthy financial position is the balance of assets and debt. When China builds the infrastructure for a country, the infrastructure is a profitable asset. When the country gets the infrastructure, the asset, and the debt, it is balanced and has a larger economy for improving the living standard of its people. When the country has the infrastructure, the asset, it has the credibility to have more debt. The blue chip companies all have debt and assets, we call it the book. Don’t take one’s mortgage to compare the debt of, say, GM’s. GM can have more debt than a household. Yet a household can still be riskier than GM, such as in the 2007 subprime crisis. A company is proud to have the capability of raising more debt. It means the company has more credibility. When China builds infrastructure for a county, it improves the credibility of the country as the country developed its economy, so the country can afford to have more debt.