An Indian academic claims that China is using its much vaunted One Belt One Road initiative to engage in “creditor imperialism,” and acquire greater sway over participating countries by providing them with cheap debt.
The One Belt One Road initiative is one of the centrepiece policies of the Xi administration, seeking to foster trade and economic interaction between countries across the length and breadth of the Eurasian content via huge infrastructure undertakings.
Brahma Chellaney from the New Delhi-based Center for Policy Research, argues that the initiative is actually a form of “creditor imperialism” which seeks to “shackle” participating nations and gain access to their natural resources.
In an editorial piece published by Project Syndicate Chellaney cites the example of Sri Lanka’s Hambantota port as a worrying sign of the type of “debt bondage” that One Belt One Road could create, severely compromising the sovereignty of developing countries.
“Just as European imperial powers employed gunboat diplomacy, China is using sovereign debt to bend other states to its will,” writes Chellaney.
“As Sri Lanka’s handover of the strategic Hambantota port shows, states caught in debt bondage to the new imperial giant risk losing both natural assets and their very sovereignty.”
According to Chellaney Sri Lanka’s inability to pay onerous debts to China have forced it to cede the strategically significant port.
“Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralised by strategically import with high long-term value…Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa and the Middle East to Asia.”
While China claims the One Belt One Road initiative facilitates the provision of financial largesse to developing countries in urgent need of capital, Chellaney argues that it is instead creating exploitative debtor relationships.
“In exchange for financing and building the infrastructure that poorer countries need, China demands favourable access to their natural assets, from mineral resources to ports.
“Chinese financing can shackle its ‘partner’ countries…rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social-impact assessment.”
Chellaney says the One Belt One Road initiative has two chief goals. The first is to resolve domestic overcapacity issues, while the second is advancing China’s strategic interests abroad by “securing natural resources, promoting the international use of its currency, and gaining a relative advantage over other powers.”
According to Chellaney these goals are already having adverse consequences for the counter-parties to Chinese financing deals around the world.
“Several other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonising choices in order to stave off default,” writes Chellaney. “Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota.
“BRI is essentially an imperial project…states caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty.”