Beijing’s debt-trap diplomacy has come to bite it back, as Xi Jinping’s ambitious plans to connect China with 100 other countries through railroad, shipping and energy projects- the Belt and Road Initiative (BRI) is now mired in a debt crisis. Ironically, the Chinese virus is the main cause behind the downfall of the ambitious initiative.
Rolled out in 2013, the BRI was envisaged as a trillion-dollar infrastructure project to bolster Chinese trade in other countries. Soon, the partner countries noticed that the BRI was a misnomer for Chinese colonialism.
China has funded several projects worth billions of dollars across Africa, Latin America, South-East Asia, Central Asia and Europe. The loans were always given at exorbitant and unsustainable rates.
The CCP regime also ensured that only Chinese companies were awarded the projects and local companies were held disqualified due to ‘quality constraints.’
The projects were often economically unviable for the host countries. The BRI is aimed to connect China with other markets, and not supposed to cater to local infrastructure needs. This is why China’s interests are often at loggerheads with those of its BRI partners.
Therefore, the Hambantota Port project in Sri Lanka turned out to be a colossal failure. The Mahinda Rajapaksa regime was forced to hand over the port to China on a 99-year lease, when it failed to repay for the profit-less venture.
The Hambantota fiasco has become the defining feature of the BRI. China lends heavily on exorbitant rates. But when the host country fails to repay in terms of money, Beijing forces it to repay in terms of sovereignty.
Other countries are also troubled with Beijing’s debt-trap diplomacy. Take the case of Laos, for example, where China is funding a high-speed rail project that costs half the country’s GDP.
The BRI started hitting roadblocks even before the Coronavirus Pandemic. Two African countries- Sierra Leone and Tanzania scrapped the BRI last year.
In 2018, Malaysia had postponed a major rail project under the BRI. It was revived after a negotiation but was ultimately scrapped.
Bigger projects have been cancelled this year. In February, Egypt postponed indefinitely what was touted as the second-largest coal-run power plant. The project was to be based at Hamrawein.
A month later, Bangladesh gave another jolt by cancelling a coal power plant at Gazaria.
But the BRI is really crumbling under the weight of the debt trap that China had so egregiously laid. The Pandemic has crippled economies around the world, and the BRI countries are no exception.
BRI countries are compelling China to delay repayment of debts. And Beijing might have to cave in for a variety of reasons.
China has already lost all its goodwill this year. It created a Pandemic, covered it up and caused hundreds of thousands of deaths around the world. Later, Beijing came out looking like a giant bully by becoming increasingly bellicose in the South China Sea, East China Sea and the Himalayas.
China needs to earn some goodwill with its BRI partners, otherwise, Xi Jinping’s most ambitious initiative might well due to a brutal death.
Islamabad wants to delay repayment of loans by ten years. African countries too are asking for debt-forgiveness. China isn’t really in a position to say no at this critical juncture.
Therefore, Beijing has paused debt repayment for 77 countries. 40 out of them are located in the African Continent. In 2019, Beijing’s debt claims stood at well over 5 trillion US dollars, a major portion of which is going to get compromised.
But today it is itself trapped in the debt trap that China had created for others. Its reputation is an all-time now and the BRI has run into deep trouble with several layers of unsustainable debt around it.
