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.
Brahma Chellaney is a Professor of Strategic Studies at the New Delhi-based Center for Policy Research and a Fellow at the Robert Bosch Academy in Berlin. He is the author of nine books, including Asian Juggernaut, Water: Asia’s New Battleground, and Water, Peace, and War: Confronting the Global Water Crisis.
Copyright: Project Syndicate, 2017.
www.project-syndicate.org
Many countries with wealth of their own too would not be able to build infrastructure so quick due to their internal politics n bidded pricing.
Even private companies are engaging the mainland Chinese to build based on equalvalent quality. Most lowest local contractors might not even go 40% further.
These don’t apply to construction only bit manufactured goods.
India can keep up their critical remarks, nevertheless you see more Indian traders representing Chinese product both on the low and high end market. The only problem is with India market is mass quantity often then quality
The local indian products in general especially machineries for farmers n manufacturing loses out to Chinese imports on quality n price.
Some important parts of these critical parts in a Chinese machines that need resilients performance came from Germany where 90 % is Chinese made have impacted their selling power.
The Indians in majority will always be dissatified with the Chinese as China were once the Sick man of Asia. They were once thought tobe a lower caste than Indians as indian culturally love casting their own and naturally and conveniently apllies to their Communisy neighbor.
The author seems to be like cry baby as India cannot even dream of doing what China is doing. Stop crying and show your gut to challenge China in this aspect too. But I know that India will never have such gut. Never.
the real ally or friends of China is US, Russia, Japan,UK and other Imperialist countries, because they are in the same league as Imperialist powers, DPRK (NK) and China, DPRK (NK) and Russia is only friends in political boundary bcoz China and Russia as borders of DPRK doesn’t want US to established foothold in entire Korean peninsula
Philippines be careful what you wish for, China is ready to chop you by parts until they get what they want China will play like a friend but a enemy behind.
The British did so much worst when after doping the Chinese people by flooding it with Opium grown cheap and in abundance in a colonized India, the Brits attacked the weakened China with its superior naval power grabbing the strategic commercial/industrial island of Hongkong in the guise of a 100 year lease. In the first place, wala pang utang ang China nito sa GB ha. Huwag po tayong maging bulag sa mga ginawang pananakop at pangaapi ng mga world major colonizers, exploiters, drug pushers, murderers and leaders in war crimes and atrocities but who are very subtle manipulators in covering up the truth and twist history.
Now the Philippines will be its 4th victim through duterte’s greed of money and power!
So it’s OK for UK, USA, France, Portugal, Netherlands and other western countries to steal and pillage the natural resources of countries like Burma, Macau, Hong Kong, Indonesia, Malaya, Borneo, Latin America etc in the name of colonial free trade???
Indian reporters caught stealing silveware in London hotel during West Bengal Chief Minister Mamata Banerjee’s visit. With such dishonesty among Indian journalists on a personal level don’t expect true and faithful reporting in Indian media.
Read this " how India is going to punish Maldvis for sign a FTA with China " at https://www.dailyo.in/politics/india-maldives-relations-mohammed-nasheed-yameen-abdul-gayoom-sushma-swaraj/story/1/21633.html . See the Indian bully in action. So much for being a neighbor of India.
The author’s opinion is grounded on thin air, the less said the better. The facts are as follows: In terms of donor-wise debt calcification, in the bilateral category, Japan ranks as the country to which Sri Lanka is indebted most – SL Rs. 486.8 billion; next comes India (SL Rs. 142.3 billion); and, China comes third (SL. Rs. 131.6 billion.) Japan and multilateral agencies (ADB, IDA and others) alone account for more than half of Sri Lanka’s total external debt. China’s share comes to less than 5 percent of the total external threat. Indian pundits like this author don’t even seem to be aware that Sri Lanka’s internal debt by far outstrips the country’s total foreign debt.
Such dishonest opinion serves to do more harm to India by condemning India to a “lose-lose” situation. All of India’s neighbors have anyway signed up on the BRI, disregarding our scary warnings about debt trap and so on. India has denied itself a potential platform to create jobs in big numbers.
Chinese imperialism. Have been saying this for ages. Glad the chickens appear to be coming home with a wider understanding. The people of China have always been victims of world leadership ambitions, no matter how far back we go in history. The Great Wall was not built to keep NATO out but their own internecine enmities. If today China’s claims of poverty reducation are verifiable it is because they are the "honest trifles, to betray ’s (making a case for her own people)/ In deepest consequence."
ASIA TIMES SEEMS TO BE ESTABLISHED TO SPREAD PROPAGANDA IN FAVOR OF USA AND INDIA …LIKE FOX NEWS OPERATED BY SOME HANDFUL EVILS….
Then how about other foreign countries? How do they do their LOAN business? Isnt it all loan business is a Trap? Your just making issues to give negative impact to a country, huh what a shame… Dont forget USA, how they put debts on other country wahaha.
It’s people like you that enjoy bathing in blood. You are nothing but hypocrites. Your jealousy and hatred will be your downfall. But that’s not your fault, it’s your vile upbringing.
Ahmed Hardy arseholes like you and your kind are reason for delays in development phase of India.
Inorder to prosper India needs to get rid of jihadi muslim appeasement.