Communist China’s debt trap: An empire of lies and deceit

China Xi Jinping

China‘s latest investment of an estimated $1.4 billion in Sri Lanka’s Colombo Port City project is the largest single foreign investment in the island nation’s history.

Dubbed as a public-private partnership (PPP) between the Government of Sri Lanka (or its representative agencies) and the CHEC Port City Colombo (CPCC) Private Limited, the project has been much publicised for the employment opportunities and huge revenues, which it would generate for the Sri Lankans.

What is seldom spoken about is the fact that of the 269 hectares of reclaimed land, 43 per cent will be controlled by the CPCC through a 99-year lease agreement. This is reminiscent of the not too long-ago takeover of the Hambantota port on a 99-year lease by China Merchant Port Holdings (CMPH). The port is now operated ‘jointly’ by the Sri Lanka Ports Authority and CMPH, with the latter holding 80 per cent stake in the port and exercising near total control over its operations.

Even more interesting, however, is the Colombo Port City Economic Commission Bill passed by the Sri Lankan parliament in May this year. This law provides special overarching powers of taxation and new projects and investments to the ‘Commission’, which itself could possibly be composed of foreign nationals.

Recently, there were reports of Chinese personnel in military uniforms being employed in infrastructure work in Hambantota. Sri Lanka is just one example of how China uses its economic power to ensnare unsuspecting, and sometimes complicit governments, in an intricate web of debt and dependencies.

The larger effort of China’s debt-trap diplomacy is visible in Africa. It is reported that one-in-five infrastructure projects in Africa are funded by China and one-in-three are built by Chinese companies. Often these projects are taken up without appropriate studies on their socio-economic and environmental impact and even their commercial viability. One of the countries which is already reeling under its consequences is Angola, which is repaying multibillion-dollar debt to China with crude oil, creating major problems for its economy.

Another glaring example of this unviability is Kenya’s ‘railroad to nowhere’, as captioned in a recent report. The Kenyan government, realising the enormity of the debt that was required to be serviced on account of the Standard Gauge Railway (SGR) project from Mombasa to Nairobi and further inland, attempted to renegotiate the terms of loan payments. The result was a ‘freeze’ on fresh instalments by China’s Exim Bank for other infrastructure projects in Kenya. Worse, the threat of takeover of Mombasa’s hugely profitable port is now looming large — a la Hambantota — given Nairobi’s apparent inability to service the debt.

Similar stories emerge from Central Asia, where China has made economic inroads to hedge against its own political and security vulnerabilities. As of today, all Central Asian countries are economically dependent on China for both exports and imports of goods, especially medical equipment and pharmaceuticals where Beijing is a world leader; and the debt is growing.

Although, the Central Asian countries initially tried to balance their trade with Beijing by exporting gas — Chinese imports from Central Asia grew 1,000 per cent in the last ten years — these measures have proven to be insufficient.

On the contrary, Beijing has seized several concessions from these nations, notably the ceding of 1,158 square km of territory in the Pamir mountains by Tajikistan and the increasing presence of China’s Private Military Companies (PMCs) to provide security to infrastructure projects in Central Asia.

To gauge the extent of China’s increasing stranglehold across the globe, one only needs to look beyond Asia and Africa. In Europe, Montenegro is struggling to repay a multi-billion-dollar loan to China for a highway constructed by China Road and Bridge Corporation from ‘nowhere to nowhere’. Only the first 25-mile section of the proposed 270-mile road has been completed and the host country cannot afford to pay for the rest of project.

This, incidentally, is only a glimpse of what Chinese capital could do in the larger context of the Balkans, which is part of President Xi Jinping’s Belt and Road Initiative (BRI). In the Pacific, six countries are currently debtors to China of which three small countries — Tonga, Samoa, and Vanuatu — are particularly heavily indebted.

In the Caribbean and South America, 19 governments have subscribed to the BRI. The Shanghai-based China Cosco Shipping is building a new US$3-billion port at Chancay in Peru, while there are ambitious proposals for a transcontinental railway linking South America’s Atlantic and Pacific coasts from Brazil to Chile. It is perhaps a matter of time that China will unleash its debt diplomacy in this region.

All these, of course, are rooted deeply in the culture of the Chinese Communist Party (CCP) to hide the truth and portray an unrealistic picture of hope. Millions of poor and suffering Chinese have been fed such lies since the Revolution. The CCP has attempted to gloss over its failures in preserving human rights while depicting a semblance of prosperity.

In the aftermath of COVID-19, the CCP’s censorship around the Wuhan anniversary sought to purge voices that questioned the official narrative. Activists were detained and outspoken relatives of people who died from the virus were harassed. Foreign media persons have been routinely prevented from reporting facts, as evident most recently in reporting the floods in Zhengzhou this July.

Therefore, it is hardly surprising that China tries to elaborately gift wrap its ulterior motives in seemingly benign outreach to unsuspecting partners. In 2018, the Center for Global Development named Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan as “highly vulnerable to debt distress” due to China’s Belt and Road Initiative. This should serve as a warning to these nations and to those which run the risk of eventual bankruptcy in this dangerous game of geopolitics.

(N. C. Bipindra is Chairman, Law and Society Alliance, which recently published a Research Report ‘Mapping Chinese Footprints and Influence Operations in India’. He can be reached at [email protected] The views expressed are personal)

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