The recent news flashes are spotting bright light on China’s Belt and Road initiative (BRI) and how it has become a debt trap for the low and middle-income countries.
With an annual development finance committee of $85billion, the dragon is out-spending twice when compared to the significant superpower, including the US. Moreover, the government is accused of using debt instead of aid to situate its strong dominance over the global finance market.
The latest, astounding, and astonishing revelations by AidData have flashed the focus on how China’s BRI project is plunging smaller nations into debt. The report pointed out to over 42 countries whose debt rate to China surpasses over 10% of their country’s annual GDP.
What is actually Happening?
While the initiation of the Belt and Road Initiative, China build five connectivities:
- Policy co-ordination
- Trade promotion
- Physical connectivity
- Renminbi internationalization
- People-to-people contacts
A considerable number of countries involved in the treaty participated in the BRI meeting. However, only 42 countries participated in the 2021 BRI meeting. In the investment and connectivity project, eleven countries were engulfed in debt, including Tazakistan, Sri Lanka, and others.
The debt trap remained anonymous initially as most of the investments were proposed mostly by state-owned Chinese enterprises and banks. Also, over 90% of the contracts were supervised by state-owned enterprises. Therefore, most of the projects were invested and built by Chinese banks and companies, leaving hardly any role for the other countries.
The following has lead to immense corruption and dumping of Chinese manufacturing elements into the participating countries.
The Exim Bank of China itself attested that the BRI project has been facing a debt-related problem. Furthermore, the bank stated that the BRI investment had created 35% of the global debt.
The critical problem for most of the resident countries now is that even if they don’t require these project, having participated in the project, have pushed them deeper into the debt with high-interest rates.
The Current State of the BRI Project
Though the debt problems associated with the BRI project have always been in the limelight, the recent figures published by AidData are pretty stark, dictating the predatory practices of the Chinese government.
Leveraging the void in the global connectivity that the other significant superpowers are not willing to fill. China’s initiative to fill in this gap was praised globally. But as the project was seen from the geopolitical lens, via the BRI project, China succeeded in controlling the economy of these countries. And, now this lack of sustainability is coming to light, be it the financial viability, economic viability, and the environmental viability of the project.
Today the corruption, labor & environmental violations in the BRI project have landed many of the smaller countries which are part of the BRI project into a spectrum of economic in-efficiency. When looked closely at the strangled hold of China in these countries, there needs to be a reconsideration from Latin Amerian to Africa as to what is actually happening in the long-term economic prospect.
Moreover, as the Chinese government is trying to remap their own BRI project-related ambition, the complication for the most vulnerable countries is on a spike.
The transaction of the BRI project was conducted in a very opaque manner leading to today’s strangling debt trap. Today, a little over 35% of the project is stuck at the implementation stage. Furthermore, the labor disputes in many countries are further elongating the deadline.
The BRI Project & the Debt Trap
Formerly knowns as the ‘One Belt, One Road’ project, the Belt and Road Initiative (BRI) was announced in 2013 by the Chinese government. The colossal endeavor is argued to be essential to China’s foreign policy future. However, there is growing skepticism within China. Considering the size of the project and the inclusion of a vast number of countries all over the world, more will be added in the future.
Despite its high stakes, this project has drawn both visionary praise and harsh criticism. Pundits, ministers, and heads of state praise the initiative for its positive impacts; however, criticism about its inexact nature and corruption have converged into one precise term: the ‘Debt Trap.’ Recent years have seen a surge of articles related to China’s foreign policy and the effects on the receiving countries that mention this concept.
The Future of China and BRI
It is unclear whether China will become an outlier with limited success or an innovator in international relations through its attraction strategy. A similar set of general observations and suggestions are useful for understanding the BRI, which encompasses virtually every facet of China’s foreign policy. Despite the many advantages of the BRI, the government is already aware of the obstacles that lie ahead.
Major emerging powers must build a positive image and reputation alongside legitimacy to counter skepticism and hegemonic fears. A country can only achieve long-term credibility and attractiveness if its words and conduct complement each other. However, the mixed signals and incoherent messages used through the BRI have resulted in counterproductive results so far.
In order to build a trusting reputation, it takes a long time, but it takes much less time to tarnish it, so a review of how China wants to present itself is more important now than ever. The spotlight is shining on China now; how long it will last remains to be seen.