A damning revelation of how Beijing is arming aid – OpEd – Eurasia Review
By Harsh V. Pant
Despite being one of the most formidable powers in the world, China and its politics remain a mystery. Even nations that see themselves as close partners of Beijing know little about how its policies are formulated and their impact. Even Chinese behavior appears shrouded in mystery, complicating its already complex relationship with the world. This lack of transparency means that often the world has to infer patterns without real data. As a result, diametrically opposed claims are often made, depending on the perspective of the country in question.
In recent years, China’s belligerence has increased, and its apparent desire to militarize everything from trade and information to development aid and health commitments has only made matters worse. From a rising power that couldn’t do anything wrong a decade ago, China is now widely seen as the source of much of what’s wrong with global governance. Just when Beijing could have emphasized its credentials as a responsible global stakeholder as the world reeled from multiple shocks, the Chinese Communist Party appears determined to bring about a retreat from the great powers.
A report by researchers from AidData, the Washington-based Center for Global Development, the German Institute in Kiel, and the Peterson Institute for International Economics examined 100 Chinese loan contracts with 24 low- and middle-income countries, providing a new light on its priorities. to its role as a development partner. Although its “ debt trap ” model of development cooperation has been the subject of debate for some time, it is the first empirical study carried out at a time when China’s economic profile has shifted. developed in Africa, Latin America, Eastern Europe and Asia, and the world has a rise in the global debt crisis.
Noting that China is a “strong and commercially competent lender to developing countries,” the report argues that the contracts in question “use a creative design to manage credit risk and overcome obstacles to enforcement. “. Some key provisions that define these contractual obligations include extreme confidentiality, a prohibition on borrowers from disclosing loan terms, possible sanctioning of debtors for going against the interests of a “ PRC entity ” and a debt excluded from the scope of collective restructuring plans.
President Xi Jinping’s ambitious global infrastructure investment strategy, the Belt and Road Initiative (BRI), is the critical anchor for much of his lending, with China emerging as the world’s largest creditor. world, representing 65% of official bilateral debt. The opacity of its lending through the BIS has raised difficulties around the world, with China tasked with carrying out a very aggressive foreign policy under the guise of investment loans. China’s indebtedness to the developing world has grown in proportion to its debt levels and the unsustainability of the loans it has made.
China, of course, maintains that it is only providing its own model of development assistance and debt financing, which other lenders are unwilling to offer. For much of the developing world, the initial attraction to Chinese loans was a function of a sense of hopelessness in the absence of alternatives. Slowly, the true nature of Chinese loans was revealed as the debt burden increased and China used impending defaults to attempt to acquire strategic assets. The report also shows that some provisions of Chinese contracts are political in nature, even when the intention is commercial. The threat from China to sever diplomatic ties still hangs over debtors. In many ways, these contracts have therefore given China leverage in its relations with vulnerable countries.
While China has a lot to answer for, much of the blame should also be shared by the West for not offering a reasonable alternative. It’s unclear what alternative developing countries have to the highly predatory BRI, which, despite its problems, remains the only show of its kind in town. Even close to India, countries from Sri Lanka to Bangladesh have indicated a desire for alternative funding, but major world powers have yet to show commitment.
In a recent statement, Foreign Affairs Advisor to Bangladeshi Prime Minister Sheikh Hasina, Gowher Rizvi, asserted that “[Bangladesh’s] the relationship with China is very limited to investments and development projects… However, even then, we were very careful. We don’t want to create a situation where we have borrowed more than we can repay… ”The developing world is asking for help, but the main players are absent. The idea of an Asia-Africa growth corridor led by India and Japan looked very promising, but failed to take off. The Donald Trump administration in the United States launched the Blue Dot Network in 2019 to stimulate the development of private sector-led infrastructure in the Indo-Pacific, but it ruled out direct financing of projects. Last month’s Quad Executives Summit discussed the common challenge of investing in quality infrastructure, and more recently the US and UK called on democratic countries to come up with an alternative to China’s BRI. .
It all seems too little, too late. China’s predatory development cooperation framework may have many problems, but at least it exists. Its alternatives are still struggling to get off the drawing board. It is hoped that the new report on China’s secret contracts will finally lift the world out of its daze and propel it towards shaping a new paradigm of development cooperation away from China’s pernicious influence.
This comment was originally posted in Living mint.