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As we explained in Foreign Affairs on April 27, China is trying quietly to exempt its massive Belt and Road Initiative (BRI) infrastructure loans to poor countries from its agreement to participate in the G20 moratorium on debt-collection through the end of the year. While the World Bank is disbursing emergency aid to its poorest borrowers, China—a major World Bank borrower, with $16 billion in outstanding loans—continues, effectively, to use cheap World Bank financing to fund its own higher-interest loans to other World Bank borrowers.  As the graphic above shows, Pakistan, South Africa, and Ethiopia owe China considerably more than they owe the World Bank.  Although China’s BRI loans are shrouded in secrecy, we estimate outstanding BRI debt in 67 countries we were able to track through 2017 at at least $135 billion.  Given that more countries have signed on since then, total outstanding BRI debt is probably nearer to the $196 billion owed to the World Bank. Given the scale of BRI debt and the horrific impact of the COVID-19 pandemic in poor nations, China has a moral obligation to join the G20 moratorium in full—including its BRI loans.

  

The “law of one price” holds that identical goods should trade for the same price in an efficient market. But how well does it actually hold internationally? The Economist magazine’s Big Mac Index uses the price of McDonald’s Big Macs around the world, expressed in a common currency (U.S. dollars), to measure the extent to which various currencies are over- or under-valued. The Big Mac is a global product, identical across borders, which makes it an interesting one for this purpose. var divElement = document.getElementById('viz1581102560244'); var vizElement = divElement.getElementsByTagName('object')[0]; vizElement.style.width='600px';vizElement.style.height='497px'; var scriptElement = document.createElement('script'); scriptElement.src = 'https://public.tableau.com/javascripts/api/viz_v1.js'; vizElement.parentNode.insertBefore(scriptElement, vizElement); But the law of one price assumes there are no restrictions on, or costs involved in, the movement of goods, and Big Macs travel badly. So in 2013 we created our own Mini Mac Index, which compares the price of iPad minis across countries. Minis are a global product that, unlike Big Macs, can move quickly and cheaply around the world. As explained in the video here, this helps equalize prices. As shown in the graphic at the top, the Mini Mac Index suggests that the law of one price holds far better than does the Big Mac Index. The Big Mac shows the dollar overvalued against most currencies, by an average of 35.2 percent (a whopper). By contrast, the Mini Mac shows the dollar slightly undervalued—1.8 percent on average (small fries). The Mini Mac therefore offers no support for the Trump administration’s controversial new regulation allowing companies to pursue tariffs against foreign competitors benefiting from “currency manipulation.” We have long believed most such charges to be trumped up, a fig leaf behind which to pressure countries to change policies having little or no relation to currency.  The best example is Treasury’s targeting of Germany, Italy, and Ireland—eurozone countries with no monetary policy.