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
Let us assume that the good Professor will be advising Modi not to partner with China.
Good. Stay away. Your loss.
Eat your heart out Brahma Chellaney.
In last 2000 years India because of its Caste system inhumane inequality was able to be enslaved by so many foreigners.
Aryans, Greeks, Arabs, Afghans, Turks, Uzbeks, Portugues/Dutch/French and then English.
Now after 700 years of Muslims and 200 of English try to beat Caste System out of India has failed as Modi is taking back India exactly where it was.
It looks like China is next. Indians, you learnt wonderful Persian, then English. Start learning Chinese and prosper.
In 15 years past China pulled 700 million souls out of poverty. In the same period next door India impoverished the same number while making its rich even richer, and the West decimated its middle class.
One can only assume that you are the 1% of Indians who benefitted from Modi, and do no like Chinese way of making honorable living.
Jealousy will lead you no where.
” .. The West won the world not by the superiority of its ideas or values or religion, but rather by its superiority in applying organized violence. Westerners often forget this fact, non-Westerners never do ” .
Samual Huntington, The Clash of Civilizations and the Remaking of World Order, p. 51. ..
China’s acquisitions are far cry from Calicut, Opium Wars, or Commander Perry’s gunboat diplomacy. Does China hold a gun at Colombo or Athens?
The West is simply jealous that China is gaining ground by honorable, legal, moral ways while they looted the world shamelessly through immoral means. The cries in the West about "Human Rights" rings hollow, a futile ploy now that it is going broke and fears retribution.
Go China Go.
Give them a Credit card you do have to pay back the debt can extend to the great grand children or even further
Of course, Sri Lanka is an island nation. Indian cannot blockade Sri Lanka like it did to Nepal to bend its policy to Indian’s own liking. Is blockade 21st century financial imperialism or 20th century gunboat policy? I can’t decide.
Please shut up yr PC, Shitty…
Time for poor countries to think and take decisions wisely
Hmm
Marxist colonialism 🙂
Any doubt the Chinese with their Manderin tradition will be heavy handed toward nationalist opposition?
How soon will the Chinese have to face an armed opposition-with 20th Century AKs and RPGs augmented with ISIS inspired weaponry.
Those who forget the lessions of history….
He is basically saying that if it is the west that is doing it, it is fine while if its China or Asian, it is bad. WTF, the World Bank has been doing that for more than half a century. Besides, if the promise of a vibrant world economy and progress and prosperity for these small countries then evrybody will be happy except the west maybe. China actually needs these countries to be progressive to become a viable market for its products. It is increduluous tbat they want these countries to fail. Another western black propaganda for idiots.
Brahma Chellaney quotes Rex Tillerson that “China is aiming to define its own rules and norms…”. The rest of the world knows that the only really bad guy on planet earth for a long time has been the USA, so changing the rules as defined by the USA is a good thing! He also said that the US has, in Djibouti, the only permanent American military facility in Africa. He is disingenuous: https://www.thenation.com/article/the-us-militarys-best-kept-secret/ . Brahma needs to get around a bit so he can actually see that most Africans, and most of the rest of the world welcome the Chinese alternative to the disastrous policies of the World Bank/IMF.
Whilst I’m not justifying China’s business tactics, this isn’t a new thing.
The US has been doing exactly the same thing since WWII. Before the US, the British did it. At least China does not force its cultural values on the victim.
Would Sri Lanka be in debt if India had not spent decades destabilizing the country?
So what? That’s what a powerful totalitarian imperialist state does. The real queston is, what is INDIA going to do to combat this? Your whining complaints that the crocodile is a meat eater are tiresome.
Pure baloney from an Indiot.
There are 3 main points here
A) China’s debt to GDP is close to 250% which means their financialization is 30 trillion dollars which helps them to get Industrial profit of 1.5 trillion a year & they have large savings also ….so china will export capital in large scale to asia in coming decades…this will be good as interest rates will then be low for Asia.
B) For srilanka of its 30billion dollar trade china is only 20%,rest of srilanka trade goes to India & US/EU.China can use srilanka’s free trade agreement to send chinese merchandize also….this may lead to trade problem as Indians will accuse srilanka of dumping.
C) If project cost of port is say 10Billion dollar capex…..design,maintainance,building,port operation will all be done by china what local populace will benefit in skills is unknown…so china will gain as 60% of project cost will be from chinese companies as they have manpower,technology & also are financiers.
India should request for china’s economic whitepaper how it approaches the next 5 years what is strategic investing & commercial investing.
very touched that India has become so concerned about the budget deficits of its neighbours…even Pakistan.
Maybe India should come to the rescue instead of just complaining. What has India done for its smaller neighbours other then imposing on them their "big brother" mentality. Where are you hiding all these years?
Brahma Chellaney article are full of baloney and with anti-China rhetoric. Atimes should filter our such writers otherwise Atimes will become another CNN,Foxnews
Use the same old arguments over and over again. The professor conveniently did not mention that no one, India included, Sri Lanka approach want to develop the port. Only when China agreed to build the port that the strategic significance of it becomes apparently. What is the professor trying to argue? Too bad for India and western powers. Who has money win.
21st century financial imperialism, glad that India has stayed away from it till now!