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
People’s just hate the Chinese because the Chinese had learned from the people’s who had humiliate them, the Japanese, the US,the European.How good a Chinese do ,they will still use other means to discriminate because they can’t lose their superiority.Lose face
New World Order..
Western Imperialist mouthpiece expressing how sour their grapes are .. after plundering the world for hundred of years, they are no longer the master that once was , pity isn’t it..
Real facts is Third World Politicians are corrupted like Sri Lanka politicians they take debt for unnecessary project to obtain illegal commission In Sri L
anka no tenders for Chinese built project no transparency finally Sri Lanka was unable to pay debt and China is getting its advantages to maximize profits
The Hambantota type of lease does not give China sovereignty or administrative rights over any territory in Sri Lanka or in any other country while the British leasing of New territory and Hong Kong did. Thus, it’s not colonialism and it’s not the same thing.
Aptly in support
Yep, this idiot really did compare defaulted loans in a democratic country to the opium wars and the forced colonization of China by foreign powers. Time to trade in your post-secondary degrees, they aren’t worth the paper they are printed on.
The problem is developing economies aspire for fast growth without knowing the consequences it might bring to the economy in the long run. They need to learn to be patient.
Any way India doesnt have that kind of money … still modi is saving and try to build toilets to manage indian shit
Kenya has fallen into the same trap
Lol, propaganda much Asia Online?
Years ago an old shipmate of mine, I was a teenager, told me the Chinese would eventually rule the world by stealth. He said they would use their wealth and intellect to influence other nations that their way was forward thinking. Me oh my what an intelligent man my mate was, wish he was still here to see his prophecy coming to fruition.
What is meant by NK?
The loans from the West werent altruistic in nature – is there one country that does not seek to gain strategic influence with its offers of help ? Why this anguish ? The countries’ seeking help, if they were able to get it from others at lucrative rates would not be easily wooed by China – so one perhaps just to grin and bear it – it is on the march, it has money to burn, expertise to share and manpower to convert that expertise to reality.
All those valued readers who suggest the different opions here…
With my review over comments by many of you here is merely selfish n egoestic in nature. Dont think simply for one nation. But be minded if chiana become a dominant world power it will bring many destructions n negative impacts to world as a large. And china will place its policies of ‘LIKE N LIKE NOT’ on any nation around the word.
Becareful about its present deal. They r mentally currupted n selfish. They dont mind puting billions of livies in risk for their own interest.
Athula Mallikarachi you sri lankans are full of hate for hindus and india.
You aholes carry indian gene yet never shy to insult india coz of one stupid war.
You guys are haters…bloody egoistic and arrogant stubborn beings.look what…now u sell yo port to china…haa???…
And you still tok hate abt india.if only u guys were clever and smart yo save and run yo own country your ports wont had been taken over by chinese.
A tym will come when u guys will have to sell much more and many of that will be in shanghai nights…just keep hatung you morons.
Syed Abbas I think you live in the cave in this age and time.
India is a super power and all powerful western countries including USA and Russia are with India.
We Hindus are to ethical and follow the rules of engagement.
We are just waiting for pakistan and any other rogue nation to breach the last line and we will wipe them off the face of earth.
And correct your information data…muslims only ruled parts of India and inspite of so much treachery and brutality and beastility your likes never were able to overcome Hindus.
So it should be a lesson for you and all those jihadi swines.
Hope the Philippines will not be like Sri Lanka
Duterte should be more cautious in accepting loans from china. He may fall into a debt trap like so many countries mention and bring the filipino people enslave to chinese greed.
The use of "debt" is ill conceived. Credit cards are not for free. you default & pay 20% interest. Credit cards are issued to those with a good credits history. Why do banks collate your loans with immoveable properties then?
yes there is another way out. lease the land for military activities and camps like in Japan, South Korea, Taiwan, Australia, Phillipines, Singapore etc. and get ready to be dumped with military hardwares and drugs aside, which are not edible wares. Keep using them can cost your country heavily or into slavery.