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<\/figure>\n\n\n\nAnnounced in 2013, China\u2019s grandiose \u2018One Belt, One Road\u2019 initiative was officially launched with great fanfare by Xi Jinping shortly after taking over as president. But as Beijing implements it step by step, luring more partners to get the show on that road, the risk and reward equation is coming under closer scrutiny. The potential debt trap embedded in the Chinese loans is viewed by critics as a serious threat to those countries. If unable to repay the debts taken on to develop their transport infrastructure, New Silk Road champions may lose some of their economic or even political sovereignty to China.<\/p>\n\n\n\n
Many criticisms of Beijing\u2019s lending expansion have been coming from the West. In March, the Center for Global Development, a US-based think tank, published a report claiming that China was \u201cposing a severe risk to the finances of a number of countries as a result of its aid activities and excessive lending\u201d. Those countries included Mongolia, Laos, Kyrgyzstan, Tajikistan, the Maldives, Djibouti, and Montenegro.<\/p>\n\n\n\n
\u201cWhen advanced countries give out loans or other forms of aid, they generally impose a cap. This prevents them from lending excessive amounts,\u201d notes Shin Kawashima, professor of International Relations at the Graduate School of Arts and Sciences, University of Tokyo. \u201cChina, however, is not a member of the Organisation for Economic Cooperation and Development. Nor is it a member of the Development Assistance Committee, the division of the OECD that regulates aid policy. This can present problems for borrowers. If a country borrows to the point that its fiscal health is at risk, that is a serious problem. How will it repay the loans? It is not unreasonable to expect that it might have to use controlling interests in ports, mines, or other infrastructure as collateral to facilitate the repayments.\u201d<\/p>\n\n\n\n
The emerging world, however, is also in no shortage of China\u2019s persistent opponents on those issues. A member of the BRICS and yet Beijing\u2019s key regional competitor, India has traditionally avoided Chinese economic initiatives. \u201cStates caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty,\u201d says Brahma Chellaney, professor at the New Delhi-based Centre for Policy Research. \u201cThe new imperial giant\u2019s velvet glove cloaks an iron fist \u2013 one with the strength to squeeze the vitality out of smaller countries.\u201d<\/p>\n\n\n\n
Those accusations are not unfounded, with Sri Lanka being the most cited example. In 2010, China invested $1.5 billion to build a port in one of the fishing villages of southern Sri Lanka\u2019s Hambantota District. More projects and loans followed, and by 2017, Colombo had realized that those debts were just unaffordable. \u201cIn an attempt to tackle that issue, the Sri Lankans initially offered a Chinese company to buy an 85 percent stake in the Hambantota port, but in late 2017, it was announced that the port would be handed over to China on a 99-year lease,\u201d says Nandan Unnikrishnan, vice president at Observer Research Foundation, an influential India-based center for political studies.<\/p>\n\n\n\n
Similar developments have been unfolding in Pakistan. Its government will likely face problems servicing a nearly $90 billion loan provided to finance the construction of the China-Pakistan Economic Corridor and the Diamer-Bhasha dam. \u201cThe fears are that the Gwadar port will become a strategic price payable to Beijing just as Hambantota,\u201d says Unnikrishnan. \u201cImportantly, China has already announced plans to build a naval base at Gwadar \u2013 in addition to the one in Djibouti.\u201d<\/p>\n\n\n\n
Ishaan Tharoor, a well-known Indian political reporter, agrees. In August, a coalition government was formed in Pakistan with Imran Khan as the prime minister. According to Tharoor, one of his tasks will be to steer the country out of a deep political and economic crisis, and that will likely require financial aid. Over the past three decades, Pakistan has been receiving it from the IMF. But its tough conditions could prompt Khan to seek help elsewhere, argues the reporter in his Washington Post article, pointing to China as a potential alternative. The consequences, however, would also be quite predictable. \u201cPakistan could instead turn to China for fresh loans, but that could make Islamabad even more beholden to Beijing than it already is,\u201d writes Tharoor. \u201cIn that regard, Pakistan is becoming the latest testing ground of a key plank in China\u2019s global strategy.\u201d We could see Sri Lanka redux, he adds, recalling \u201caccusations that China is engaging in a 21st-century style of \u2018creditor imperialism\u2019\u201d.<\/p>\n\n\n\n
Husain Haqqani, a former Pakistani ambassador to Washington, goes even further, saying that the Chinese-Pakistan Economic Corridor \u2013 the formal name for a complex $62 billion infrastructure-development plan actually should be called \u2018Colonizing Pakistan to Enrich China\u2019<\/p>\n\n\n\n
Meanwhile, both Chinese and Pakistani officials insist that accusations of Beijing\u2019s new colonialism are overblown. The two countries have been longtime allies \u2013 a status largely underpinned by their mutual antipathy to India. In recent years, Beijing has strengthened its role in many sectors of the Pakistani economy, from nuclear energy to creating special economic zones. \u201cPakistan does need China\u2019s help, as it faces a slew of economic challenges, including a backward industrial supply chain, weak foreign trade, and a huge portion of its population still living in poverty and without proper education,\u201d states an editorial in the Global Times, a Chinese daily, urging China to \u201cignore the noise and step up its investment in Pakistan\u201d.<\/p>\n\n\n\n
Interestingly, the aggregate Chinese investments in the New Silk Road projects are extremely difficult to estimate. According to the Asian Development Bank, nearly $26 trillion need to be invested in the regional infrastructure in 2017-2030 to maintain the current growth rates and address climate change. It means Beijing\u2019s $1 trillion commitment cannot by itself be treated as a claim to global leadership. Besides, experts argue that it is far from being consistently supported with adequate financial investments.<\/p>\n\n\n\n
\u201cThe real concern among the majority of beneficiary countries, namely middle-sized emerging markets, is what I call the \u2018Chinese chimera\u2019\u2026 [rather] than a \u2018debt trap\u2019,\u201d says Richard Javad Heydarian, a political scientist and assistant professor at De La Salle University in Manila, referring to \u201cthe yawning gap between China\u2019s rhetorical promises of large-scale investments and the reality of its minimal substandard investments. \u2026 It manages to extract major geopolitical concessions from host nations by overawing them with large-scale offers of technology and capital. Moreover, the limited Chinese investments that come in tend to represent \u2018corrosive capital\u2019, which could crowd out domestic producers, enrich and strengthen corrupt officials, and undermine good governance and environmental sustainability in host nations with weak rule of law.\u201d<\/p>\n\n\n\n
The Philippines under President Rodrigo Duterte, who welcomed China as a major partner in the country\u2019s large-scale development program by attracting $7.3 billion in infrastructure investments, is a perfect illustration of that threat realizing.<\/p>\n\n\n\n
Robust credit ratings, economic growth, and GDP have been keeping the Philippines out of the Chinese \u2018debt trap\u2019, which tends to capture poorer and smaller nations. However, Duterte\u2019s effort to attract capital from Beijing has already inflicted unreasonable geopolitical costs on his country. In 2017, he used his ASEAN chairmanship to actively defend the partner nation from any criticism related to its extensive reclamation activities in the South China Sea. To Beijing\u2019s delight, Duterte also downgraded the Philippines\u2019 security cooperation with the US, promising to shut down the American military bases by the end of his term in 2022.<\/p>\n\n\n\n
But the country has had only crumbs from the Chinese table. In spite of claims about the bilateral relations entering a new \u2018golden age\u2019, actual data show that China so far has failed to make any major investment in the Philippine economy. The bulk of last year\u2019s investments came from the country\u2019s traditional trading partners \u2013 the US, Japan, and the Netherlands \u2013 and, to a lesser extent, Singapore and Hong Kong.<\/p>\n\n\n\n
\u201cMoreover, there are concerns that the Chinese investments, similar to those in Africa, Latin America, and Central Asia, will only reinforce undemocratic trends in the Philippines… which in effect could strengthen autocratic tendencies in the Philippine leadership,\u201d says Heydarian. \u201cWhat\u2019s of particular concern is that Chinese investments, or even the promise of them, tend to pick up in particularly inauspicious times for fledgling democracies, specifically when they are being gradually captured by either corrupt or\/and authoritarian leaders \u2013 whether it\u2019s in Sri Lanka (under Mahendra Rajapaksa) or Malaysia (under Najib Razak).\u201d<\/p>\n\n\n\n
Another reason behind the negativity surrounding the \u2018One Belt, One Road\u2019 initiative is the possibility of China using the newly built infrastructure to bolster its military potential, however abstract that possibility may be.<\/p>\n\n\n\n
\u201cThe infrastructure being built by China, including roads, railways and ports, will not only contribute to economic development in the region, it will also help to improve connectivity throughout Eurasia,\u201d says Kawashima. \u201cAt the same time, though, that infrastructure will benefit China\u2019s military, enabling Beijing to secure an effective means for communication and the movement of troops in a contingency.\u201d<\/p>\n\n\n\n
Clearly, Beijing has not been using that infrastructure to enhance its defense in a direct manner, while its base in Djibouti and other facilities serve to fight piracy near Somalia and support peacekeeping operations in South Sudan and other regions. However, the Djibouti base is indeed capable of playing a role that goes beyond peacekeeping and piracy control. The port, railway, and communication infrastructure are also suitable for a military use on top of a trade and economic one.<\/p>\n\n\n\n
\u201cIn cases that involve enhancing this capability, doubts will be expressed by those countries if China does not maintain a certain degree of transparency and accountability and explain its intentions,\u201d adds Kawashima. \u201cAnd if Beijing makes loans that are beyond the ability of the recipient country to repay, China\u2019s acquisition of controlling interests in the ports will give its neighbors to understand that it is leveraging this capability and its economic power to acquire those controlling interests.\u201d<\/p>\n\n\n\n
Yet, all these controversies hardly obscure the obvious benefits that the \u2018One Belt, One Road\u2019 initiative holds in store for the entire Eurasia instead of just China and its allies. \u201cCountries in need of financing to establish new ports or related transport infrastructure or to upgrade existing facilities would welcome news of a willing new sponsor or financier,\u201d says Lucio Blanco Pitlo III, a member of the Philippine Association for China Studies (PACS). \u201cChina\u2019s longstanding policy of no-strings attached would be popular with states that have limited access to capital and technology. … Increased regional connectivity would boost trade and commerce, allowing participating countries greater access to the huge China market while attracting much-needed investments … But for China to entice more countries to join, it has to address some important points.\u201d<\/p>\n\n\n\n
Other experts also approve the considered and measured approach. \u201cScenarios unfolding in the Maldives and some African and even European countries seem to underscore the success of China\u2019s geoeconomic initiative,\u201d says Unnikrishnan. \u201cWhile disproving the myth that the New Silk Road is a purely economic project that also highlights China\u2019s readiness to challenge the Western leadership within the existing world order.<\/p>\n\n\n\n
The question is whether it will actually stabilize other economies or simply replace one hegemon with another, whether China is indeed guided by global interests or has limited its focus to its own national priorities. Time will soon tell.\u201d <\/p>\n\n\n\n
<\/figure>\n\n\n\nIn 2013, Xi Jinping proposed an idea of building a modern version of the historical Silk Road, including roads, railways, natural gas pipelines, and a power grid, to connect China with a number of regions in Asia, Europe, and East Africa. However, the initiative goes beyond infrastructure, envisaging the creation of the world\u2019s largest platform for economic cooperation, which is intended to provide for policy coordination, joint financing and trading efforts, and the establishment of social and cultural ties.<\/p>\n\n\n\n
In 2015, the State Council approved a plan encompassing two key initiatives \u2013 the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The former includes the New Eurasian Continental Bridge (from western China to western Russia) and five economic corridors: the China-Mongolia-Russia corridor (from northern China to eastern Russia), the China-Central Asia-Western Asia corridor (from western China to Turkey), the China-Indochina corridor (from southern China to Singapore), the Bangladesh-China-India-Myanmar corridor (from southern China to Myanmar), and the China-Pakistan corridor (from southwest China to Pakistan). The 21st Century Maritime Silk Road, on the other hand, is supposed to connect local waterways in eastern and southern China with Africa via the Indian Ocean and the Mediterranean via the Strait of Hormuz.<\/p>\n\n\n\n
Over 60 countries with an aggregate GDP of $21 trillion have expressed interest in participating. Together, they account for 65% of the global population, about a third of global GDP, and nearly a fourth ofglobally produced goods and services.<\/p>\n\n\n\n
A number of institutions were established to finance the initiative. One of them \u2013 the Asian Infrastructure Development Bank (AIIB) \u2013 is set to receive contributions that will push its capital up to $100 billion, with a third or half to be provided by China. The others include the Silk Road Fund ($40 billion) and the New Development Bank ($100 billion).<\/p>\n","protected":false},"excerpt":{"rendered":"
Having launched its \u2018One Belt, One Road\u2019 initiative, China is forcing its way through with an iron hand. Its generous infrastructure loans have been leading some of the countries willing to follow that road into a debt trap. The chance to escape is slim.<\/p>\n","protected":false},"author":2,"featured_media":1225,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[17],"tags":[887],"country":[71],"authors":[],"class_list":["post-1224","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy","tag-887","country-china"],"acf":[],"yoast_head":"\n