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Who’s Afraid of the Belt and Road? (Wall Street Journal)
June 10, 2019
From the article:
"Western diplomats see China’s Belt and Road infrastructure initiative as a 'debt trap' that ensnares developing nations in predatory loan terms for dubious projects. But these instances are better understood as mistakes by Beijing. Such trickery would undermine China’s economy as well as its quest for global influence.
Preoccupation with 'debt-trap diplomacy' is understandable. Pakistan, the Maldives and Tajikistan have little in common beyond swelling budget deficits thanks to Chinese loans. Islamabad projects it will owe Beijing $40 billion over the next two decades. The Maldives has taken on $3 billion in debt from China—more than half the island chain’s gross domestic product. According to the Center for Global Development, Chinese credit accounted for 80% of the increase in Tajikistan’s external debt from 2007-16.
Occasionally, poor countries forfeit hard assets to pay up. When Sri Lanka couldn’t repay a Chinese loan for building Hambantota port, a Chinese firm took out a 99-year lease on the strategic Indian Ocean harbor. Yet Hambantota is an outlier. Such outcomes aren’t in China’s financial interest, and new evidence demonstrates Beijing has a strong preference for debt renegotiation when partner countries get into the red..."