China accused of foregoing loans to Africa as part of ‘debt trap diplomacy’

A recent Chinese move to cancel 23 interest-free loans to 17 African countries and redirect billions of its reserves from the International Monetary Fund has analysts divided on whether this superficial act of generosity is a public relations exercise or another case. of “debt trap diplomacy”. “takes place in real time.

Critics have long accused Beijing of engaging in debt-trap diplomacy, a predatory lending practice that tricks poorer countries into taking out loans for expensive infrastructure projects that are doomed to fail. . When borrowers cannot repay their debt, China steps in and seizes strategic assets that reinforce its international dominance.

“Analysts argue over Beijing’s intentions, but it’s clear Chinese lenders have extended debt where there has been little or no prospect of repayment,” Gordon Chang, author of The impending collapse of Chinasay it Washington Examiner. “The port of Hambantota in Sri Lanka, which Beijing took over in 2017, is a cautionary tale, as are other large-scale projects in this now bankrupt country. China, almost single-handedly, sank the Sri Lanka.”

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Hambantota is one of the most cited cases of Chinese debt trap diplomacy. Beijing pushed Sri Lanka to borrow money from Chinese banks to pay for the project, which had little or no real prospect of commercial success. China applied onerous terms and fees that pushed Sri Lanka into default. Beijing then demanded the port as collateral, forcing the island nation’s government to hand it over to a Chinese company.

The Trump administration used the incident to warn against China’s strategic use of debt, and in 2018 former Vice President Mike Pence used the phrase “debt trap diplomacy.” as proof of the communist country’s ulterior motives. Former attorney general William Barr also used the Sri Lanka case to argue that Beijing was a bad-faith lender and claimed it was “burdening poor countries with debt, refusing to renegotiate terms, and then taking the control of the infrastructure itself”.

Some critics have also accused China of creating debt traps to force poorer countries to vote with it in the UN General Assembly on sensitive issues like Taiwan.

Chinese President Xi Jinping speaks during a pre-recorded video at the United Nations General Assembly.

Michael Nagle/Bloomberg

China has vehemently rejected claims that it is engaging in debt-trap diplomacy and instead alleges that Washington is using it as a way to discredit the country on the international stage.

“Beijing’s propaganda machine has been in overdrive of late to deny bad intentions, but we can say Chinese lenders have been either predatory or extraordinarily incompetent in lending decisions,” Chang said.

Harry Verhoeven, a senior fellow at Columbia University in New York, said Beijing’s decision in August to cancel zero-interest loans in Africa could be aimed at countering its reputation as a debt trap.

“It’s not uncommon for China to do something like [forgive interest-free loans]. … Now obviously this ties into the overall narrative of debt trap diplomacy in the sense that there is clearly a felt need on China’s part to push back,” Verhoeven told VOA.

Verhoeven added that the money involved in the 23 canceled loans would likely be small, but the politics of such gestures could be invaluable because “for many years the Chinese kind of shrugged off various aspects, various lines of criticism, concerning their engagement in various African countries.

He added that China had “belatedly realized that [debt-trap diplomacy] is a bit of a public relations nightmare.”

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Chang agrees that could be a possibility.

“Beijing never has good intentions, so we can assume that it gave debt relief because it was, in practice, coerced into doing so,” he said.

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