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China’s debt imperialism

Chinese and Kenyan officials in 2019. Patrick Meinhardt/AFP/Getty

The discovery of a secret Chinese loan to finance a Kenyan railway highlights the reach of Beijing’s “debt traps”, says Brahma Chellaney in Project Syndicate. China has become “the world’s largest single creditor”: its outstanding foreign loans now exceed 6% of global GDP, and, through its $838bn Belt and Road Initiative, it has overtaken the World Bank as the largest funder of infrastructure projects. It has also embarked on “massive” bailout lending, with a “staggering” $21.9bn handed out to Pakistan alone. Unlike the IMF, China attaches few stringent conditions to its loans – which simply makes countries borrow even more and sink “ever deeper into debt”.

Beijing ruthlessly exploits this indebtedness. Assets it has seized when countries can’t pay up include: a majority share of Laos’s electricity grid; a 99-year lease on the “most strategically important” port in the Indian Ocean, Hambantota in Sri Lanka; and mining rights for gold, silver and other mineral ores in Tajikistan. Debt entrapment enabled China to build its first overseas naval base in Djibouti, giving it a stronghold at the entrance to the Red Sea. More military bases, set up through similar means, are also on the way. Beijing’s ability to “dim the lights in Laos” or control a country’s ports gives it a powerful weapon to wield in global affairs. Though many of its financial deals are still shrouded in secrecy, “it is already clear that China’s creditor imperialism carries far-reaching risks”.