International Chinese Debt-Trap Diplomacy: Xi Jinping's Belt and Road Initiative Turns 10 Years Old

[Arkain2K]

Beijing may be late to the colonial investment game, but they're executing this tried & proven strategy beautifully in Third-World countries that are a bit behind on the subject of World History.

Welcome to the wonderful Belt and Road Initiative and its unserviceable loans for billion-dollar White Elephant projects, otherwise known to China's once-willing debtees as the insidious long game of Debt-Trap Diplomacy.

If you are late to the party, do yourself a favor and read the information provided below to catch up to everyone else before posting, instead of jumping in face-first to embarrass yourself.

Thread Index:

• China vows Belt and Road ramp up despite debt-trap criticism (Oct 10, 2023)
• Sri Lanka debt default has begun (April 14, 2022)
• Sri Lanka warns it will default on its foreign debt amid crisis (April 12, 2022)
• India tries to pry Sri Lanka loose from China’s embrace (April 1, 2022)
• Kenya's government is refusing to release details on secretive Chinese loan (Jan 20, 2022)
• Laos opens railway to China as debt to Beijing rises (Dec 3, 2021)
• $385bn of China's Belt and Road lending kept undisclosed (9/29/21)
• Montenegro narrowly avoids Chinese debt trap, for now (8/9/21)
• Montenegro Close to Solving Chinese Debt Trap issue - by borrowing from Europe to pay China (6/18/21)
• Montenegro learns true cost of China-backed $1B road to nowhere
• Montenegro's motorway to nowhere (6/15/21)
• Chinese debt trap: Former Maldives president Mohamed Nasheed says China’s banks not giving ‘breathing space’ even in the pandemic (Dec 11, 2020)
• The Maldives: "Even if we sell our grandmother's jewelry, we won’t be able to repay China" (Nov 19, 2020)
• Why do so many Asian nations want to be in China's debt? (Oct 22, 2020)
• Sri Lanka wants its ‘debt trap’ Hambantota port back. But will China listen? (Dec 7, 2019)
• China's vast investment in Africa hits a snag in Congo (April 28, 2019)
• Analysis: How the Philippines fell for China’s infamous debt trap (March 27, 2019)
• Is Pakistan About to Be Caught in China’s Debt-Trap? (August 08, 2018)
• Philippine lawmakers caution gov’t on China debt trap (August 24, 2018)
• Samoa rejects Tonga's China Pacific debt forgiveness call (Aug 20, 2018)
• Malaysia is pushing back against a $20 billion Chinese debt trap (August 13, 2018)
• Tonga urges Pacific nations to press China to forgive debts as Beijing defends its approach (August 15, 2018)
• Tonga to start paying back controversial Chinese loans described by some as 'debt-trap diplomacy' (Jul 19, 2018)
• China's "debt trap" in Sri Lanka is even worse than we thought (July 2, 2018)
• Myanmar will ask China to downsize project (July 4, 2018)
• The Myanmar fishing port that may become a $10 billion Chinese debt bomb (May 11, 2018)
• Kenya must avoid China debt trap or fall into Sri Lanka pit. (May 9, 2018)
• Sri Lanka's currency suffers as debt trap deepens (April 29, 2018)
• Philippines gets China loan for Chico River Pump Irrigation Project at 10x Japanese interest rates (April 12, 2018)
• Pacific nations drowning in Chinese debt (January 29, 2018)
• China wants to conquer the world, and several poor countries have fallen into its debt-traps (MARCH 25, 2018)
• Sri Lanka the latest victim of China’s debt-trap diplomacy (Dec 24, 2017)

 

[Arkain2K]

Sri Lanka the latest victim of China’s debt-trap diplomacy
Beijing has been given a 99-year lease on Hambantota port as part of a debt-reduction deal
By Brahma Chellaney | December 24, 2017

Hambantota port in Sri Lanka has been taken over by China for 99 year
​

This month, Sri Lanka, unable to pay the onerous debt to China it has accumulated, formally handed over its strategically located Hambantota port to the Asian giant. It was a major acquisition for China’s Belt and Road Initiative (BRI) – which President Xi Jinping calls the “project of the century” – and proof of just how effective China’s debt-trap diplomacy can be.

Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value (even if they lack short-term commercial viability). Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa, and the Middle East to Asia. In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports.

Moreover, as Sri Lanka’s experience starkly illustrates, Chinese financing can shackle its “partner” countries. Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, and often little or no environmental- or social-impact assessments. As US Secretary of State Rex Tillerson said recently, with the BRI, China is aiming to define “its own rules and norms.”

To strengthen its position further, China has encouraged its companies to bid for outright purchase of strategic ports, where possible. The Mediterranean port of Piraeus, which a Chinese firm acquired for $436 million from cash-strapped Greece last year, will serve as the BRI’s “dragon head” in Europe.

By wielding its financial clout in this manner, China seeks to kill two birds with one stone. First, it wants to address overcapacity at home by boosting exports. And, second, it hopes to advance its strategic interests, including expanding its diplomatic influence, securing natural resources, promoting the international use of its currency, and gaining a relative advantage over other powers.

China’s predatory approach – and its gloating over securing Hambantota – is ironic, to say the least. In its relationships with smaller countries like Sri Lanka, China is replicating the practices used against it in the European-colonial period, which began with the 1839-1860 Opium Wars and ended with the 1949 communist takeover – a period that China bitterly refers to as its “century of humiliation.”

China portrayed the 1997 restoration of its sovereignty over Hong Kong, following more than a century of British administration, as righting a historic injustice. Yet, as Hambantota shows, China is now establishing its own Hong Kong-style neocolonial arrangements. Apparently Xi’s promise of the “great rejuvenation of the Chinese nation” is inextricable from the erosion of smaller states’ sovereignty.

Just as European imperial powers employed gunboat diplomacy to open new markets and colonial outposts, China uses sovereign debt to bend other states to its will, without having to fire a single shot. 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. This gives China added leverage, which it can use, say, to force borrowers to swap debt for equity, thereby expanding China’s global footprint by trapping a growing number of countries in debt servitude.

Even the terms of the 99-year Hambantota port lease echo those used to force China to lease its own ports to Western colonial powers. Britain leased the New Territories from China for 99 years in 1898, causing Hong Kong’s landmass to expand by 90%. Yet the 99-year term was fixed merely to help China’s ethnic-Manchu Qing Dynasty save face; the reality was that all acquisitions were believed to be permanent.

Now, China is applying the imperial 99-year lease concept in distant lands. China’s lease agreement over Hambantota, concluded this summer, including a promise that China would shave $1.1 billion off Sri Lanka’s debt. In 2015, a Chinese firm took out a 99-year lease on Australia’s deep-water port of Darwin – home to more than 1,000 US Marines – for $388 million (A$506m).

Similarly, after lending billions of dollars to heavily indebted Djibouti, China established its first overseas military base this year in that tiny but strategic state, just a few miles from a US naval base – the only permanent American military facility in Africa. Trapped in a debt crisis, Djibouti had no choice but to lease land to China for $20 million per year. China has also used its leverage over Turkmenistan to secure natural gas via a pipeline largely on Chinese terms.

Several other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonizing choices in order to stave off default. Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota.

These experiences should serve as a warning that the BRI is essentially an imperial project that aims to bring to fruition the mythical Middle Kingdom. States caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty. The new imperial giant’s velvet glove cloaks an iron fist – one with the strength to squeeze the vitality out of smaller countries.

http://www.atimes.com/article/sri-lanka-latest-victim-chinas-debt-trap-diplomacy/

 

[Rod1]

Question, what is the debt denominated in and who enforces it?

 

[KnightTemplar]

The way things are heading, there might not be much of a world left for China to conquer

 

[redwire]

It sounds like China read Confessions of an Economic Hitman. Those wacky Chinese and their knock-off imperialism.

 

[Rholk]

The way things are heading, there might not be much of a world left for China to conquer

If your definition of "the world" are a few Syrian bases perhaps not no

 

[KnightTemplar]

If your definition of "the world" are a few Syrian bases perhaps not no

If it's localised to Syria, fantastic. The problem is you have two of the most powerful nations on earth flexing their considerable muscle over that worthless shit-hole.

Logically, no one wants WWIII. But no one wanted WWI or WWII either...

 

[Arkain2K]

The way things are heading, there might not be much of a world left for China to conquer

On the contrary. Poor countries and their resouces in Asia/Pacific, Africa, and South America are ripe for the taking.

Beijing couldn't care less about the warring Middle East shithole, since that's the traditional Washington/Russian playground.

I wonder how much of Venezuela gonna ends up as Chinese oversea territories/assets in the next few years when the debt is called in.

 

[D3thr0n3d K1ng]

All your zhitholes belong to us.

 

[Trotsky]

I mean, the West already benefited bigly from economic colonialism before supposedly (hint, hint) outlawing it. It's only fair that world powers in other areas of the world get to reap the same benefits from their predatory loans and odious debts.

On the contrary. Poor countries in Asia/Pacific, Africa, and South America are ripe for the taking.

Did you support TPP? Just curious.

 

[D3thr0n3d K1ng]

I mean, the West already benefited bigly from economic colonialism before supposedly (hint, hint) outlawing it. It's only fair that world powers in other areas of the world get to reap the same benefits from their predatory loans and odious debts.

Once China gets too big will Murka employ a scrap metal embargo or similar like they did with the Japanese Empire which leads to another world war?

 

[Rod1]

I wonder how much of Venezuela gonna ends up as Chinese oversea territories/assets in the next few years when the debt is called in.

Again, which court is going to enforce the debt?

 

[KnightTemplar]

All your zhitholes berong to us.

Fixed

 

[Joe_Armstrong]

They run many companies in Africa as well.

 

[Black Helicopters]

China is gonna own a lot of ports stretching from East Asia to East Africa.

Hard to feel sorry because like Arkain said, this has all been done before and is very obvious to see.

 

[Arkain2K]

Question, what is the debt denominated in and who enforces it?

The infrastructure construction loans are made in Chinese demonination Yuan, which then is used to pay for the construction projects done by Chinese state-own companies, with labor provided by Chinese workers.

Then several years later when it's time to pay and there's still no money in the state coffers, the debt-to-equity swap is quietly negotiated and carried out by those China-dependant ruling government themselves, since they knows what's best for them.

This has been happening in broad day light for quite a while now, while Western media is too busy talking about Russia.

Again, which court is going to enforce the debt?

Court? What makes you think that ANY of the crony governments that China loaned their money to (such as Sri Lanka, Cambodia, Tajikistan, or Venezuela) would actually take their "true friend and ally" to the courts to dispute the debt, rather than just quietly signing on the dotted lines for the assets transfer and continue living like kings, like they have been doing since the "investments" started flowing in?

Case in point:
---

China wants to conquer the world, and several poor countries have fallen into its debt-traps
Gavin Fernando | MARCH 25, 2018​

China is out to conquer the world, and many have already fallen victim to its game.

The rising superpower has been asserting itself on the global stage for well over a decade, with its Belt and Road Initiative, part of its aim to become a central player.

But recent data from the Centre for Global Development (CGD), an international think tank, suggests its program has already left eight countries swimming in debt: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan.

After borrowing money from China for infrastructure projects, these countries are now pushing their debt-to-GDP ratios higher and higher, with China holding a rising share in them.

POORER COUNTRIES FALLING AT CHINA’S FEET

China’s game, best summed up by Quartz, goes like this: they offer the honey of cheap infrastructure loans, then attack with the sting of default when these poorer economies aren’t able to pay their interest down.

At the heart of this sits the Belt and Road Initiative, a trillion-dollar project that seeks to connect countries across continents on trade, with China at its centre.

The ambitious plan involves creating a 6000km sea route connecting China to South East Asia, Oceania and North Africa (the “Road”), as well as through building railway and road infrastructure to connect China with Central and West Asia, the Middle East and Europe (the “Belt”).

According to Dr Malcolm Davis, senior analyst in defence strategy and capability at the Australian Strategic Policy Institute, China is mainly targeting poorer countries and employing a “debt-trap strategy”.

Dr Davis told news.com.au the trillion-dollar project basically forces other countries to align themselves with it.

“It services their need in terms of accessing resources, sustaining contacts and national development, and maintaining that ‘China Dream’. It’s really vital for the Communist Party to maintain prosperity if they want to maintain power.”

He used Sri Lanka as a key example.

Last year, the island nation was forced to hand over a port to companies owned by the Chinese government last year after falling into more than $1 billion in debt.

The deal was signed between two state firms — the Sri Lanka Ports Authority (SLPA) and China Merchants Port Holdings — allowing the state-owned Chinese company to lease the port for 99 years.

Last year Sri Lanka formally signed its strategic Hambantota Port over to China for 99 years.​

Tajikistan faced a similar story in 2011.

According to the CGD report, China reportedly agreed to write off an unknown amount of debt owed by Tajikistan in exchange for some 1158sq km of disputed territory.

At the time, Tajik authorities said they only agreed to provide 5.5 per cent of the land that Beijing originally sought.

Kyrgyzstan’s debt from infrastructure projects is set to raise from 62 per cent of the country’s GDP to 78 per cent, while China’s share of this debt will jump from 37 per cent to 71 per cent.

Likewise, Cambodia and Afghanistan could soon owe more than half their external debt to China, according to the Wall Street Journal, although the levels aren’t as concerning as for the other eight countries.

The report notes that in some instances, the debt is forgiven. But China responds on a case-by-case basis, and it’s difficult to know when they will and will not choose to make territory grabs.

http://www.news.com.au/finance/econ...t/news-story/a8c743bd7021187e73817d59ca48cb6b

 

[Rod1]

Court? What makes you think that ANY of the crony governments that China loaned their money to (such as Sri Lanka, Cambodia, Tajikistan, or Venezuela) would actually take their "true friend and ally" to the courts to dispute the debt, rather than just quietly signing on the dotted lines for the assets transfer and continue living like kings, like they have been doing since the "investments" started flowing in?

So what happens when the government is overthrown and the debt declared odious? who is going to collect? the Chinese navy? And if the debt is in Yuan nothing stops said countries to stop using it in the first place.

You see in order to carry out a gunboat diplomacy you actually need gunboats in the first place.

There were some uproars among the Sri Lankans people when the deal was made, but after all said and done, the strategic Hambantota Port is now owned by the Chinese for the next 99 years, no court sessions required.

Sure and if the next government declares such treaty void what are the Chinese going to do? invade?

The Chinese needs to stop copying America and thinking they have to go through ALL stages of turning into an imperial power.

 

[S-dot]

I might a Chinese government official on vacation in Italy. We spent a fair bit of time together and one thing he told me, after hitting the grappa and limoncello one night he told me that the Chinese were going to keep letting the states rack up debt and eventually at some point in the future would forgive the debt. There was a bit of a language barrier but when I asked him why they’d do that he basically said to show the Americans that they can, that all that debt meant nothing. I pressed him a bit on it because it sounded ridiculous but he stuck to it and said maybe they’d use it to negotiate something down the road but they never expect to get paid back. I never really believe him although I don’t have a clue how this international debt system works, but this sounds like what they’ve been doing in a number of other places from this article.

 

[Seaside]

I think the US has something up it sleave and will start war or contain china somehow. i dont underestimate the americans my money on them to win.

 

[Arkain2K]

China is gonna own a lot of ports stretching from East Asia to East Africa.

Hard to feel sorry because like Arkain said, this has all been done before and is very obvious to see.

They run many companies in Africa as well.

The Africans have already seen things like this happened over and over and over again in the 19th and 20th century, so they will have no excuse for not knowing when the mineral mines listed as collateral changes ownerships.

It's all "equal footing" between the "friends" until it's time to pay up those nonserviceable loans, and then Beijing gonna be the new proud owner of those Cobalt mines that all car companies gonna be fighting over soon.

Namibia president says China not colonizing Africa
March 31, 2018

BEIJING (Reuters) - Namibia President Hage Geingob said China is not colonizing Africa and that growing cooperation between the world’s No. 2 economy and Africa benefits both sides, China’s official Xinhua News Agency reported on Saturday.

The report said Geingob, currently on a state visit to China, said “comments smearing bilateral cooperation” between China and Namibia are “doomed to fail.”

“We are mature, we can choose our friends, we can choose what we want for, and what’s good for us,” Geingob said.

Africa has been a region of focus for Beijing’s quest for greater global influence, with billions of dollars being pumped into infrastructure projects in the continent. Some critics have questioned China’s motives, however, accusing it of seeking to secure key raw materials such as oil and minerals.

In March, then-U.S. Secretary of State Rex Tillerson warned African countries should be careful not to forfeit their sovereignty when they accept loans from China. He said at that time that if an African government “gets into trouble” after accepting a Chinese loan they could lose control of its infrastructure or resources through default.

China has repeatedly rejected accusations that it is only interested in Africa for its mineral resources and said its no-strings-attached aid programs are widely welcomed.

Geingob also told Xinhua that China-Africa cooperation is on equal footing and that China’s investment in his country is not just “digging out resources.”

“No country in the world has added so much value to our products as China has. China has done a lot of technology transfer and job creation,” the Namibian president told Xinhua.

https://www.reuters.com/article/us-...nizing-africa-china-state-media-idUSKBN1H80TY