The Foreign Minister of the Chinese regime, Wang Yi, has just announced that he will write off 23 debts to 17 African countries. Of course, the Chinese authorities proudly announced the news, but the story indicates that there is reason to suspect China has undisclosed interests in making the decision.
“China will waive the 23 interest-free loans for 17 African countries that had matured by the end of 2021,” Wang said at the China-Africa Cooperation Forum, according to a statement.
The Chinese regime has repeatedly demonstrated its interest in penetrating African countries. Despite being mostly very poor and with minimal development in military matters, many are major raw materials suppliers. Others are strategically positioned with access to the sea, facilitating geostrategic connections with mainland China.
It is highly suspicious that China would make this decision out of simple generosity or indulgence.
In this sense, critics argue that China is involved in what was called “debt trap diplomacy,” a vicious circle through which the country issues huge, often unpayable, loans to eventually secure, through various mechanisms, international assets strategic to its interests.
‘Debt diplomacy’ is on the rise
During the last few years, the Chinese regime found itself with an exponential growth of monetary liquidity, which motivated it to present itself as a “generous” lender and “financial partner” of massive projects and infrastructure works.
The most impoverished countries, generally also those with the highest rates of political corruption, were the primary “beneficiaries” of the Chinese regime’s lending system.
Thus it was that China, during the last decade, injected huge amounts of cash into emerging countries. Mainly in Africa, Southeast Asia, and South America, where it built large ports, roads, bridges, railways, and other significant works, many of which have been criticized as meaningless for the countries that supposedly benefited.
Now, the global pandemic caused by the Chinese Communist Party (CCP) virus, rising energy costs, and international food shortages caused by the war in Ukraine has shown how vulnerable these poorer nations are and how unable they are to meet their debt commitments.
One of the paradigmatic cases of this perverse lending system is the recent economic collapse of Sri Lanka and the foreclosure of its multi-billion dollar Hambantota port, handed over to China in 2017. A clear example of “debt trap diplomacy.”
The ratio of Gross Domestic Product (GDP) to external debt assumed with the Chinese regime in such countries has steadily increased since 2010. After that, however, the inflow of dollars shriveled due to a sharp increase in their current account deficit and a sudden drop in exports. That is reflected in their impossibility of importing even essential commodities such as fuel, let alone paying off debts.
In this context, despite the impossibility of these countries to pay, the Chinese regime continued injecting foreign currency into the economies in an irresponsible manner. It takes the form of huge loans with highly misleading clauses, forcing the countries to commit themselves to granting concessions and benefits of various kinds in the event of defaulting on their maturities.
The Belt and Road
This lending scheme is also closely linked to China’s transcontinental Belt and Road Initiative (BRI), in which most African countries have become involved.
In 2013, CCP leader Xi Jinping announced the launch of the BRI as a project that would bring prosperity to all nations through billion-dollar investments in infrastructure, building railroads, ports, cities, power plants, dams, roads, and so on. In addition, the initiative promised to increase trade between China and Europe, passing through Africa and South America, increasing the production of all participating countries.
The lack of transparency of the initiative has been a point of criticism from researchers, governments, and journalists alike when evaluating the BRI as a whole.
Critics also question the ambiguity that defines which projects are part of the BRI, as currently, many countries in South America, Central America, and Africa have announced Chinese infrastructure investments as part of the BRI. However, in practical terms, they have nothing to do with connecting Asia with Europe and appear to be part of China’s global expansion worldwide.
Ten years into the ambitious project, the results were nowhere near what the participating countries had hoped.
More than 90% of the projects were carried out by Chinese state-owned companies, which meant that the regime sent Chinese workers who took their salaries back to China.
At the same time, it became evident that many of the works were unnecessary in the countries where they were carried out or were disproportionate to local needs. Consequently, the projects in many cases were not profitable or impossible to maintain over time.
So what is the advantage to the Chinese regime?
In many cases, the debts and interest were paid, even though the debtor countries were left in ruins.
In other cases where the debts were not paid, China is empowered to apply the clauses associated with the contracts. Through them, they obtain other advantages, perhaps more important, such as access to specific natural resources or the exploitation of the executed works such as seaports and airports.
Growing frustration in BRI countries
As the Chinese communist regime’s strategy and how African countries fell into the trap became clear, political and social movements are emerging to oppose the BRI and indebtedness to China.
AidData, a U.S. research lab, mentioned as part of a paper on the subject, “A growing number of policymakers in low-and middle-income countries are mothballing high profile BRI projects because of overpricing, corruption and debt sustainability concerns.”
In addition, in countries such as Angola, Ghana, Gambia, Kenya, and the Democratic Republic of Congo, there have been significant social protests against Chinese-funded projects.
The movements are mainly motivated by the effects of neo-colonization, the impact on natural resources, culture, human rights, and independence of the countries affected by the projects, assuming that China’s incursion into Africa is not only economic but also ideological.
With these factors in mind, it is not surprising that the regime has decided to write off the huge debts. On the one hand, it will be able to activate the leonine clauses involved in the contracts, which are usually not public and are part of deals made with corrupt politicians in impoverished countries.
On the other hand, and no less important, it eases tensions with the political and social sectors confronted with the Chinese regime’s subjugation of the African continent.