The Communist regime in China has been infamous for pushing developing nations into its vicious debt trap by lending out money for investment projects and later using it to ensnare the sovereignty and strategic assets of the nation.

It has lent out $1.5 trillion to 150 countries, far more than that of the World Bank and International Monetary Fund (IMF). However, China is now witnessing a slump in its lending spree, reported the Center for European Policy Analysis (CEPA).

The article, authored by geostrategist Brahma Chellaney, pointed out that China later used the debt to solicit political leverage and access to the nation’s natural assets.

One of the biggest infrastructure projects that China has been pushing down the throat of its debtor States is the Belt and Road Initiative (BRI). The global infrastructure project is also known as One Road One Belt (OBOR) and has been dubbed as the ‘project of the century’ by Chinese Premier Xi Jinping.

“BRI loans continue until a borrower nation faces a debt crisis, which then arms China with considerable leverage to wrest political and economic concessions…The more desperate a borrower’s situation, the higher the interest rates China will seek to impose,” the report emphasised.

It added how China had financed a record $63.3 billion under BRI, in the second half of 2019, but had witnessed a slump in its lending capacity since then. By the first half of 2021, BRI financing had dropped by 32% to $19.3 billion.

Map of China’s Road and Belt Initiative via Asia Green Real Estate

CEPA reported that the Wuhan Coronavirus pandemic has been the primary factor that led to the steep decline in China’s loan disbursement programme. “The pandemic’s socioeconomic disruptions and adverse impacts on GDP have crimped many developing nations’ capacity to undertake new infrastructure projects,” the report said.

CEPA further contended that the predatory lending practices of the Communist country have forced the debtor States to renegotiate loan contracts or oppose unfavourable terms and conditions. To add salt to the wound, many BRI projects are being scrapped and scaled-down by partner States. It had further compelled the Chinese Communist regime to ‘recalibrate lending’ practices and contain the ‘appetite for risk-taking.’

Coupled with a lack of transparency in construction and financing, growing cases of corruption and malpractice, lack of financial viability, the image of the Belt and Road Initiative has taken a massive hit. BRI also faces a growing challenge from the Quad, a strategic security dialogue between USA, Australia, India, and Japan.

CEPA reported, “And yet the BRI’s glory days are unlikely ever to return, even if the pandemic comes under control. The dangers of China’s creditor imperialism can no longer be ignored by borrowing countries — unless their debt entrapment is beyond redemption…”

It concluded, “Even where governments remain China-friendly, many citizens are beginning to view the BRI as potentially representing the advent of a new colonial era — the 21st equivalent of the East India Company that paved the way for British imperialism in the East, initially through trade.”

BRI participant countries owe over 385 billion USD to China in hidden debt

Earlier in September this year, AidData reported that China’s Belt and Road Initiative had left a large number of countries burdened with “hidden debts” to the tune of $385 billion. AidData, an international development research lab based at the College of William & Mary in Virginia, further said that scores of countries underreported their financial liabilities linked to China for many years, resulting in mounting “hidden debts”, or confidential liabilities that the countries might be obligated to pay.

The research lab had parsed through more than 13,000 aid and debt-financed projects worth more than $843bn across 165 countries for a period of 18 years, ending 2017. It concluded that Beijing had been stealthily deploying its “debt-trap diplomacy” and using its financial supremacy to tie smaller countries in the allure of lucrative loans and then using the leverage to bend them to its will.

The analysis conducted by AidData researchers had hinted that Chinese lendings were considerably larger than previously estimated by credit rating agencies and intergovernmental organisations with surveillance capabilities. China, they conclude, had been able to pull the wool over intelligence agencies from finding out the substantial leverage it held on small countries by extending seemingly large credit lines to them.

Brad Parks, the executive director of the AidData team, was astonished to discover that the hidden debt amount granted by China is close to $385bn, as reported by Financial Times.

Chinese President Xi Jinping gives a speech at a press conference after the Belt and Road Forum in Beijing on April 27. WANG ZHAO / GETTY IMAGES

References:

opindia.com - OpIndia Staff