Debt - Trap Diplomacy of China

Author - Garima Rana


I. Introduction:

It is a potential threat for India China has been a lot on news lately as Chinese officials are eager to make China a superpower. China is in midst of a rapid push to gain economic and political ascendancy across the Asia Pacific region and the world and it’s lashing out billions of dollars across the globe in concessional loans to developing countries for infrastructural projects and leveraged that to get what it wants. But what happens when countries cannot repay the loan taken from China? Poor nations are lured by china for cheap loans for transformative infrastructure projects, then when predictably these countries are unable to keep up with their payments China can ask for concessions or other advantages in exchange for debt relief. This is known as debt trap diplomacy. India has not entered into any loan agreement with China like other neighbouring countries. The China’s string of pearl in the Indian Ocean gives China strategic advantage if an event of war arises between the countries they can attack from multiple sides from countries like Singapore, Myanmar, Bangladesh, Sri Lanka, Maldives, and Pakistan.


II. Significance

A lot of this is tied to a trillion dollar plan to build infrastructure around the world and then use it to create wealth mostly for Chinese companies; move goods, mostly from China; and gain influence for the Chinese Communist Party. The centrepiece of Chinese investment is President Xi Jinping's foreign policy, one belt one road initiative. Its a trillion dollar project aimed at connecting countries across continents with china at centre. It aims to promote free and orderly flow of economic factors, deep integration of markets and highly efficient allocation of resources. According to the official figures 152 countries and international organisations have accepted cooperation with China taking part in the initiative over the past six years.


III. Salient features

Running a country is difficult especially for an undeveloped nation. Not every country is capable to generating money to repair and build things. In a situation like this, a country lends money from other countries like China. India borrowed money from Japan for bullet trains. India being growing economy would need money for development. Similarly there are other countries across the world which needs money to grow their economy and develop the nation. Let’s take Sri Lanka for example; it borrowed money from China to construct the Hambantota Port. But being unable to payback it was forced to hand over the control of the port over to china after finding itself in billions of dollars in debt to pay to China. It has now control of a key port on the doorstep of regional rival India and a strategic foothold along a key commercial and military waterway. Montenegro, a small country in Europe which has no highway. The Chinese government offered to help the country build a highway. Montenegro called it as “the construction of the century and a pathway to the modern world”. A lot of countries from Africa borrow money from China for infrastructure and economic growth. Kenya took extensive loans for building a standard gauge railway between Mombasa and Nairobi, highways and for developing its largest and most lucrative port. Djibouti took loans to develop a strategic port. A lot of projects in Indonesia were funded by China like Suramadu Bridge, Sumatra coal railway, Jakarta-Bandung high-speed rail, Central Kalimantan Puruk Cahu-Bangkuang coal railway, and several other contracts of infrastructure development.





IV. Developments under it

China proposed the one belt one road initiative to promote connectivity and cooperation. It aims to take a larger role in global affairs focus on this China centered network of trade.  It covers many African and Asian countries, such as Indonesia, Kenya, Israel and many more. Most of these countries are developing nations. China’s initiative of one belt one road can help these countries improve their transportation, energy production and trade. Pakistan’s largest hydropower project Nehru Tim Jielu Mu Hydropower Station, which generates 5.15 billion kilowatt-hours energy is an example of One Belt One Road investment. This project brought light to Pakistan and also assisted in the nation’s economic development. Kazakhstan is a very cold country and has there is barely any vegetation. The one belt one road connects the Chinese region to Kazakhstan. This provides with the basic needs of Kazakhstan’s people. Brunei is a country in Southeast Asia, which has plentiful oil and gas but lacks material for producing pipelines. One belt one road comes in form of trade routes. This initiative shortens the distance between countries and promotes the global economy, and will probably see ongoing progress and generate benefits for all countries.


V. Critical analysis

China characterises the project as a win-win for both its global trade ambitions and for infrastructure starved developing economies. In reality many vulnerable countries are finding themselves overwhelmed by Chinese debts. The centre for global development highlights eight countries who find themselves at risk of being unable to repay their loans. For now many countries are enjoying the investment injection; new highways, airports and promises of economic development. But it may be a matter of time until they too are overwhelmed by debts.


VI. Conclusion

While Chinese money may be putting some countries at risk and China could be wielding its loans as a strategic tool, it’s not the only country projecting its power around the world. Enthusiastically taking Chinese money, the countries who took loan looked at the short-term deals for shoring over the financial crisis, without realising its medium- and long-term implication on the country. Many countries being unable to pay back the loan are stuck in this vicious cycle and have to lend more money from the same or another country in order to pay back the loan. After a country finds itself unable to pay back the loans, its stuck in the debt trap and according to the facts around 10 countries are trapped in China’s debt- trap diplomacy


#diplomacy #debt #china #policy

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