China’s “debt-trap diplomacy”
May 21, 2018 -- China is funding dual-use infrastructure projects from the Pacific to the Horn of Africa, fuelling “debt traps” that will give Beijing leverage to gain strategic and military power.
It is all part of Beijing’s “Belt and Road” initiative -- also known as “One Belt, One Road” (OBOR) -- a US$8 trillion plan to create a new Silk Road with sea and land links across Asia and Africa to Europe. OBOR will encompass some 64 nations and an estimated 7,000 infrastructure projects. And this real estate will need to be defended.
Projects costing around $900 billion are currently underway or in the planning stage, paid for with billion-dollar loans from Beijing. Loans that cannot be serviced leave governments in the debt trap. China is leveraging economic debt for strategic advantage, tilting the balance of power from the U.S and its allies towards Asia, according to a report by Harvard Kennedy School scholars for the U.S. State Department.
Co-authors, Sam Parker and Gabrielle Chefitz, point out that Beijing has used infrastructure incentives in the contested South China Sea to help break opposition to Beijing’s territorial ambitions. Now, Sri Lanka, Djibouti, Pakistan and Vanuatu are deemed to be vulnerable.
In 2017, struggling to pay its $8bn debt to Chinese state-controlled companies, Sri Lanka leased its strategic port of Hambantota to China for 99 years, raising fears it could become a military base.
In Djibouti, where the U.S., France and China already have military bases, Beijing’s state-owned enterprises have taken over Doraleh Container Terminal in exchange for debt.
Pakistan, where China is constructing major port facilities at Gwadar, is adding $62bn of Chinese loans on top of external debt standing at $82bn
Vanuatu, just 2,000 kilometres (1,240 miles) off Australia’s coast, has taken at least $270 million in Chinese loans in the past decade. Fairfax Media reported in April that China had held discussions with Vanuatu about building a People’s Liberation Army naval base -- a charge vehemently denied by Beijing.
In an interview with the Australian Financial Review, Parker said, “China is giving hundreds of billions to countries that can not afford to repay it, and it’s going to want something in return for that money. ”