China is infamous for its debt-trap policy. It enters into agreements with debtor countries and uses these agreements to exploit smaller nations, as seen in examples such as Sri Lanka, Pakistan, and several African countries. India has long been opposed to this policy, and now, with the G20 presidency, it has a platform to address it and voice its concerns for other countries as well. And indeed, India is utilizing this opportunity.
India ‘haircuts’ China debt-trap
Under the framework of G20, India is drafting a proposal for the member nations to help the debtor nations. It includes the countries that are badly hit by the economic meltdown as a result of pandemic and Russia-Ukraine war. The proposal will call for haircuts in the loans by the creditors. This is considered as a counter to China’s exploitative tactics because it is the biggest sovereign creditor of the world.
Talking about haircuts on loans, it means that, the creditor accepts less than what was due in a particular loan account. This is done to ease burden on the debtor and make it a performing asset. This also increase the possibility of repayment of the loans.
The bloc constitutes the world’s 20 largest economies, and a meeting of Finance Ministers and Central Bank chiefs is scheduled for next week, where the proposal will be put forward. China along with other members already knew about the proposals and India is optimistic about USA’s backing on this initiative.
The Chinese Ministry reiterated spokesperson Wang Wenbin’s comment who said, “China takes the debt issue of developing countries seriously and supports relevant financial institutions to put forward solutions. It is our consistent stance that multilateral financial institutions and commercial creditors, which hold the bulk of the debt of developing countries, should participate in the debt relief efforts.”
Also read: How India saw a debt-ridden Maldives and liberated it from the clutches of the evil CCP
China’s bifurcation from global south
India’s intentions are clear regarding the positive role of the G20 for the Global South. This initiative will move to isolate China from the cause, despite China’s membership in the Global South. China debt-trap politics deviate from the group’s basic issues, which are mostly economic, and India is targeting China where it hurts the most.
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