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China’s BRI promised prosperity, gave debt trap

Several countries—Sri Lanka, Zambia, Djibouti, Laos, Maldives, Republic of Congo, Tonga, Pakistan and Kyrgyzstan, among others—where China has invested through its much-hyped Belt and Road Initiative (BRI) have run into serious financial threat and debt trap, contrary to the expectation that the infrastructure exercise would help in their economic growth.

The BRI project—involving the development of infrastructure for ports, roads, railways, airports and power plants which has run into hundreds of billions of dollars—was kicked off in 2013 just after Chinese President Xi Jinping took control. Seven years down the line, the mega infrastructure project, touching 70-odd countries, has also had limited impact on employment generation.

After Sri Lanka leased its prestigious Hambantota Port Holdings Co to China for 99 years, concerns over an imminent debt trap have emerged among many countries.

The list is long. Maldives owes about $1.4 billion to China. It is a huge sum for a country which has a GDP of $5.7 billion. The China Africa Research Initiative at Johns Hopkins University in a study said that Zambia’s total loans from China amounted to almost $6.4 billion at end-2017. “If this figure is correct, Zambia may have a total debt of $14.7 billion (including state guaranteed loans), of which Chinese loans account for some 44%,” the CHR Michelsen Institute said in a report.

Pakistan’s growth in 2018 was about 5.83 per cent. It was down to less than 1 per cent in 2019—a decline of over 4.8 per cent from 2018. Besides, joblessness in the South Asian country remains a cause for concern, despite the China Pakistan Economic Corridor (CPEC) —part of the BRI project.

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“China has been aggressively lending and there is little transparency in terms of details. This creates more problems and challenges for the countries which are involved in the BRI,” EY’s chief economic adviser D.K. Srivastava said, adding that most of the lending is undertaken through the government enterprises.

“China says that BRI will help people living in these countries, especially poor countries, to improve their living standards and they will become part of global trade. However, if we try to analyze deeply, we find that all these plans are China-centric,” Swadeshi Jagran Manch’s national co-convener Ashwani Mahajan said.

Mahajan added that most of the contracts for BRI projects have gone to Chinese companies. “These companies are generally under the ownership of Chinese government. Further, China is destined to gain from improved connectivity due to BRI projects, because its trade with US is going down due to trade war and it wants to compensate the same from other countries,” he added..