An Academic Alleges Debt Trap To ‘Bend Other Countries To Its Will’ Being Used By China

Partner countries of China’s inter-continental Belt and Road Network would be deprived of their valuable natural resources and there is threat that they would be “shackled” by the project, if one of the critics of the project is to be believed.

Covering the regions of Europe, Middle east and Asia, the Belt and Road Network of China has at least 68 countries of the regions within its fold and Beijing is financing and implementing huge infrastructure projects in those countries.

Credit from Chinese state-owned banks and sovereign loans from the Chinese President Xi Jinping’s administration are the formats of funding that such participating countries are getting. Many of such countries are in need of such investment because they are emerging economies.

But termed as the ‘dept-trap diplomacy’, the strategy of the Chinese government to dole out loans that are unrealistic for these developing countries have bene criticized as they bring in unprecedented and unrealistic financial obligations on the emerging countries. Warnings of creation of an unsustainable debt burden by the Belt and Road project of China were earlier issued by the administration of the Indian Prime Minister Narendra Modi in a statement earlier this year.

“Just as European imperial powers employed gunboat diplomacy, China is using sovereign debt to bend other states to its will,” according to Brahma Chellaney, professor of strategic studies at the New Delhi-based Center for Policy Research, who described Beijing’s policies as “creditor imperialism.”

Sri Lanka was pointed out as an example by Chellaney – who had previously been an adviser to India’s National Security Council, of the threat of falling into the debt trap in an editorial on Project Syndicate. Its Hambantota port has been recently handed over to the Chinese by the South Asian state because it was not able to pay back the debts it had taken from to China. The deal was worth $1.1 billion and the port was handed over to state owned China Merchants Port Holdings. This is believed to be a case of an erosion of sovereignty.

“As Hambantota shows, China is now establishing its own Hong Kong-style neocolonial arrangements,” Chellaney said. “Like the opium the British exported to China, the easy loans China offers are addictive. And, because China chooses its projects according to their long-term strategic value, they may yield short-term returns that are insufficient for countries to repay their debts,” he explained.

Consequently, China – the second largest economy of the world, has considerable political sway over government and has the power to “force borrowers to swap debt for equity, thereby expanding China’s global footprint by trapping a growing number of countries in debt servitude.”

And Sri Lanka is not the only case at hand.

The establishment of the first overseas military base for China happened in 2016 when one of its military bases was leased out to China by heavily indebted Djibouti which is also part of Belt and Road project, for $20 million per year.

“China has also used its leverage over Turkmenistan to secure natural gas by pipeline largely on
Chinese terms,” Chellaney said, adding that “Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota.”

(Adapted from CNBC)

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Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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