Why is China spending an astounding $8 trillion to build roads, bridges, dams, power plants, industrial parks and ports across virtually the whole world? Its ‘Silk Road Economic Belt’ includes infrastructure corridors across 60 countries, extending from China to Western Russia, across Central Asia. Its ‘Maritime Silk Road’ extends across the South China Sea and Indian Ocean, through Gwadar in Balochistan, to the shores of North Africa.
The answer is relatively simple. Over the past four decades, China has built infrastructure, including dams, roads and power plants within its own borders, at a pace, unparalleled in world history. This process is now completed and China has been left with unemployed workers and idle machinery. What better way to utilise these than express readiness to build infrastructure across the world, in an ostensibly altruistic manner. After getting started in its effort and convincing the world of its ‘altruism’, China is finding that its true objectives are getting exposed, faster than it bargained for.
Every Chinese project has two faces. The first is the huge publicity given to the project itself and references to Chinese ‘aid’. This is where rhetoric and reality about Chinese ‘generosity’ diverge. There is a relatively small amount of financing on ‘soft’ terms, with even a small grant element thrown in. But the bulk of the financing is on near-commercial terms, with strict schedules for interest payment. There have also been references to Chinese payoffs to influential members of ruling elites abroad.
Recipient countries soon find they are unable to meet repayment obligations and are forced to hand over ownership of the project, as equity of the Chinese donors. Sri Lanka handed over control of the Hambantota Port to China, after its inability to repay $1 billion of Chinese ‘aid’, because hardly any cargo ship visited the port. It is facing the same problem in a nearby airport, built with such aid. India is trying to help Sri Lanka resolve the problem. But the debt-ridden country seems to still hanker for Chinese aid.
Bangladesh seems to have been circumspect in responding to offers of Chinese aid. Myanmar soon found that it would get into a debt trap, if it were not circumspect. It has rejected a Chinese offer to build a 6,000 MW hydro-electric project at a cost of $6 billion and drastically reduced the costs of a ‘Special Economic Zone’ near the Kyaukpyu Port, built by China. Its Bay of Bengal ASEAN neighbour, Malaysia, has rejected Chinese offers of assistance for infrastructure development, amounting to $21 billion. We may soon learn to what extent former Maldivian President Abdulla Yameen has mortgaged some of his islands to China, in appreciation of assistance.
The biggest surprise has been the decision of the Imran Khan Government to cut down the size of the much-touted $62 billion ‘China-Pakistan Economic Corridor (CPEC)’. This became inevitable, after Khan’s financial aides found that the debt burden of the project would be unbearable. Moreover, the IMF and the Americans warned that they could bail out Pakistan only after carefully assessing its debt burden to China. Pakistan is learning that there are no ‘free lunches’ in international affairs, even from an ‘all-weather friend’.
G Parthasarathy
Former diplomat
dadpartha@gmail.com