It is a known fact that China with its Debt Trap diplomacy is on the offensive to portray itself as a global power, especially after facing flak for its lapse in regards to the Covid-19 pandemic. So, from the Himalayas to the South China Sea, the Chinese Communist Party has been busy in negating the negative coverage of their country and its policies. This has been witnessed more so in their infrastructure projects of the Belt and Road Initiative (BRI).
Due to the pandemic, caused by the CCP, Chinese Premier Xi Jinping has taken the call to relax or provide debt-relief to the nations which have taken loans from them. This may sound rosy for the BRI partner-nations but the devil is in the detail.
<h3>Caught in its own net</h3>
In 2019, China’s outstanding debt claim to 77 countries, 44 of whom are in Africa, stood well over $5 trillion. This stands at 6 per cent of the global GDP.
Furthermore, the country’s debt to GDP ratio has risen to 317 per cent from 300 per cent from the previous year.
According to the Institute of International Finance (IIF), China’s debt-to-GDP ratio saw a record quarterly increase in the first quarter of 2020, jumping to over 317 per cent—“an eye-watering 17 percentage points higher than 2019.”
The dream to link inner-China with the global economy via the ancient Silk Route, now branded as the BRI project, is getting burdened under a pile of debts. The hinterland of China has always struggled to make the best of the global economy, whereas coastal areas are profitable with access to finances and trading routes.
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Beijing should be worried. With calls in changing the supply chain to India and Africa, China has to deal with a variety of problems—coronavirus, lapse in debt repayment and economic deterioration.
For several years, Beijing had been bankrolling a number of BRI projects across south Asia, the Indian Ocean region and parts of Africa. This was to set up strategic assets across continents.
But Xi’s ambitious initiative has also come under criticism for exposing smaller nations to high risk and trapping them into Chinese debt; strategic affairs expert Brahma Chellaney calls it the 'Chinese Debt Trap.'
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For instance, Sri Lanka’s failure to repay their $1.1-billion loan to China has led them to lease the Hambantota Port for 99 years, giving the Chinese a strategic foothold in the Indian Ocean.
Similarly, the Maldives has to pay $10 million in the middle of the coronavirus pandemic to China as they owe between $1.3 billion to $3.2 billion in debt.
Then there is the island nation of Tonga. A small Polynesian tropical island with a GDP of $450 million (2018 estimate), its owes China $125 million in debt. Unable to repay the loan due to years of internal strife, the South Pacific nation had no choice but to join the Belt and Road Initiative in exchange for a five-year debt deferment.
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Pakistan, a nation riddled with internal strife, economic decline, and sectarian violence, has requested a grace period of 10 years to repay their loan debt. It goes without saying that, thanks to the China Pakistan Economic Corridor, the Islamic republic is one step away from becoming the new colony of China—just as India became of East India Company.
The purpose of China’s debt-trap diplomacy is two-fold. First, to enhance China’s economic clout by making partner nations indebted, thus allowing the CCP to call the shots.
Second, by giving massive loans to nations such as the Maldives and Tonga, it allows Beijing to build up its maritime power and continue investment in their navy to match and position themselves against the US.
However, much of Beijing’s strategy is coming a cropper. As nations refuse or are unable to repay their loans, China’s economy will take a battering.
India has been cautious in taking up the sweet, honeypot loans from China. Prime Minister Narendra Modi, during a virtual inauguration of the Supreme Court of Mauritius in Port Louis, warned nations took a subtle swipe about the Chinese debt trap.
He said, “History has taught us that in the name of development partnerships, nations were forced into dependence partnerships. It gave rise to colonial and imperial rule. It gave rise to global power blocks. And Humanity suffered.”
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He underlined various projects undertaken by India, from building the Parliament of Afghanistan to investments in Guyana and Niger, all in the name of improving humanity. For New Delhi, the only motivation is in sharing the development lessons to support the prosperity of other nations.
China, however, had imperial ambitions. It conceived BRI and lent to economically weak and small nations to fulfill its ambitions and entrap its partner nations into the debt trap. But the dragon has been caught in its own snare..