Experts say its part of China’s “One Belt One Road” [1]development strategy includes Overland and Maritime Silk Road of sea-based network of shipping lanes and ports for its own interests forwarded through credit, or lending, based investments. Examples of China using “Creditor Imperialism” [2]include, among others, Sri Lanka and Venezuela.
When its 26-year Civil War ended in 2009, Sri Lanka wanted to jumpstart its economy and took USD 14.87 Billion as credit between 2005 till 2017. It went ahead with ‘debt-driven infrastructure financing’ largely to facilitate construction of power plant, airport, extension of Colombo port, a Colombo Port City and new port of Hambantota. Resultantly it fell into the trap of increasing Chinese (and its companies) influence, from a seemingly no strings attached infrastructure financing. Its debt-to-gross domestic product now stands at around 75 percent. Some 95 percent of government revenue is devoured just to service the debt.
The Chinese brought in their own companies, own labour and own geo-strategic impact on regional politics, including India.
Subsequently, power plant, suffered numerous outages, the airport became “world’s emptiest’, and the port a commercial failure. Sri Lanka had to formally hand over Hambantota port, a strategic asset straddling Indian ocean shipping lines, to Chinese interests on a 99-year lease. While the lease price was over USD 1 Billion, but this came mostly in the form of a reduction in the enormous debt burden of around USD 8 billion [3]to Beijing that is crippling the island nation’s economy. With Chinese building a USD 3 Billion oil refinery there too, country may become “a battlefield for the regional power struggles between China and India in particular or by outside influencers interfering in internal matters and sovereignty. [4]
Venezuela is another classic example. China invested more than USD 60 Billion in loans, backed by oil supply deals [5]and other contracts and investments. While inflation in Venezuela is increasing by over 2000 % and it is on verge of collapse Chinese are still hopeful it will pay back loans through oil. [6]
Finally in both the cases, loans were not obtained transparently and with terms and conditions known to public.
[1] edition.cnn.com/2018/02/03/asia/china-sri-lanka-string-of-pearls-intl/index.html
[2] Does Debt Pay? China and the Politics of Investment in Sri Lanka, By Darren J. Lim and Rohan Mukherjee, thediplomat.com/2018/01/does-debt-pay-china-and-the-politics-of-investment-in-sri-lanka/
[3] nytimes.com/2017/12/12/world/asia/sri-lanka-china-port.html
[4] China’s lucrative embrace of Sri Lanka stirs unease, Russell Blinch For The Straits Times In Colombo, www.straitstimes.com/asia/south-asia/chinas-lucrative-embrace-of-sri-lanka-stirs-unease-0
[5] foreignpolicy.com/2017/06/06/venezuelas-road-to-disaster-is-littered-with-chinese-cash/
[6] http://www.scmp.com/news/china/diplomacy-defence/article/2115031/why-venezuelas-2349pc-inflation-painful-lesson-china
