Debt-trap diplomacy

Debt-trap diplomacy is a type of diplomacy based on debt carried out in the bilateral relations between countries. It involves one creditor country intentionally extending excessive credit to another debtor country with the alleged intention of extracting economic or political concessions from the debtor country when it becomes unable to honour its debt obligations. The conditions of the loans are often not made public and the loaned money is typically used to pay contractors from the creditor country.

The term was first used by Indian academic Brahma Chellaney to describe a number of loans given by People's Republic of China to countries in South and South East Asia.[1]

China

The term has been used by critics of the People's Republic of China to describe the country's loan practices with some developing countries.[1][2][3][4] Critics of Chinese lending practices allege that many loans associated with China’s Belt and Road Initiative to build infrastructure projects using Chinese contractors in strategically located developing countries are a type of debt-trap diplomacy.[1][2] Critics in both the western[5][6], Indian[7] and African[8] media have also criticised the secretive conditions of the loans as well as their high interest rates.

Wang Se in the Chinese stated-owned daily Global Times argues that debt-trap diplomacy does not exist and accused Western governments of hypocrisy by ignoring Japanese-owned Sri Lankan debt.[9] Carnegie-Tsinghua scholar Matt Ferchen argues that the concept of debt-trap diplomacy symbolizes a backlash against assertive Chinese international economic policies that assumes China of practicing neomercantilist trade policies.[10] Rwandan President Paul Kagame has stated that "talk of "debt traps" were attempts to discourage African-Chinese interactions."[4]

Sri Lanka example

Loans given by the People Republic of China to construct the Hambantota Port in Sri Lanka is given as an example of debt trap diplomacy by critics following Sri Lanka's falure to pay debt obligations and a subsequent 99 year leas given to China in place of payment.

One of the most cited examples of alleged debt-trap diplomacy by China is a loan given to the Sri Lankan government by the Exim Bank of China to build the Magampura Mahinda Rajapaksa Port[11] and Mattala Rajapaksa International Airport. The state-owned Chinese firms China Harbour Engineering Company and Sinohydro Corporation were hired to build the Magampura Port at a cost of US $361 million which was 85% funded by Exim Bank of China at an annual interest rate of 6.3%.[12] Due to Sri Lanka's inability to service the debt on the port, it was leased to the Chinese state-owned China Merchants Port Holdings Company Limited on a 99-year lease in 2017.[2] This caused concern in the United States, Japan,[3] and India that the port might be used as a Chinese naval base[13] to contain China's geopolitical rivals.

Other Chinese examples

Chinese loans to Africa[14]
Year Billions of US$
2005
2
2006
5
2007
6
2008
4
2009
6
2010
7
2011
10
2012
13
2013
18
2014
15
2015
13
2016
30

Other examples given of alleged debt-trap diplomacy by China are:

References

  1. 1 2 3 Chellaney, Brahma (2017-01-23). "China's Debt-Trap Diplomacy". Project Syndicate. Retrieved 2018-09-15.
  2. 1 2 3 Diplomat, Sam Parker and Gabrielle Chefitz, The (30 May 2018). "China's Debtbook Diplomacy: How China is Turning Bad Loans into Strategic Investments". The Diplomat. Retrieved 2018-09-15.
  3. 1 2 3 Pomfret, John (27 August 2018). "China's debt traps around the world are a trademark of its imperialist ambitions". Washington Post. Retrieved 2018-09-15.
  4. 1 2 "China's Xi offers $60bn in financial support to Africa". www.aljazeera.com. 3 September 2018. Retrieved 2018-09-15.
  5. ↑ "How China tried to shut down Australian media coverage of its debt-trap diplomacy in the Pacific". Business Insider. Retrieved 2018-10-09.
  6. ↑ "Panel: Chinese Investments to Boost Trade Come as U.S. Commercial Shipping in Decline - USNI News". USNI News. 2018-10-02. Retrieved 2018-10-09.
  7. ↑ "Chinese Diplomacy, BRI and 'Debt-Trap' in Africa". www.newdelhitimes.com. New Delhi Times. 8 October 2018. Retrieved 2018-10-09.
  8. ↑ "Bususiness Ghana - News Politics". www.businessghana.com. Retrieved 2018-10-09.
  9. ↑ Wang, Se (15 July 2018). "Western media misread Sri Lanka's debt issue - Global Times". www.globaltimes.cn. Retrieved 2018-09-15.
  10. 1 2 Ferchen, Matt. "China, Venezuela, and the Illusion of Debt-Trap Diplomacy". Carnegie-Tsinghua Center. Retrieved 2018-09-15.
  11. ↑ "ISS Today: Lessons from Sri Lanka on China's 'debt-trap diplomacy'". Daily Maverick. Retrieved 2018-09-15.
  12. ↑ Kotelawala, Himal (8 August 2017). "Roar Media". roar.media. Retrieved 2018-09-15.
  13. ↑ Marlow, Iain (17 April 2018). "China's $1 Billion White Elephant". www.bloomberg.com. Retrieved 2018-09-15.
  14. ↑ Donnelly, Lynley. "Africa's debt to China is complicated". The M&G Online. Retrieved 2018-10-09.
  15. ↑ Wu, Annie (2018-09-12). "South African Lawmakers Latest to Call Out China for 'Debt-Trap Diplomacy'". www.theepochtimes.com. Retrieved 2018-09-15.
  16. ↑ "DA demands details of R370bn Chinese loan, warns of debt trap". Fin24. Retrieved 2018-09-16.
  17. 1 2 3 Donnelly, Lynley. "Africa's debt to China is complicated". The M&G Online. Retrieved 2018-10-09.
  18. 1 2 3 4 5 6 7 8 Fernholz, Tim (7 March 2018). "China Debt Trap: These eight countries are in danger of debt overloads from China's Belt and Road plans — Quartz". qz.com. Retrieved 2018-09-15.
  19. ↑ Barkin, Noah. "Chinese 'highway to nowhere' haunts Montenegro". U.S. Retrieved 2018-09-15.
  20. ↑ "Is Pakistan falling into China's debt trap?". www.cadtm.org. Retrieved 2018-09-15.
  21. 1 2 Cook, Erin (7 September 2018). "South Pacific waking to China's 'debt-trap' diplomacy". Times of Asia. Retrieved 2018-10-09.
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