When we talk of China, the first thing that comes to our mind is its “Debt Trap Diplomacy”. China is known for using this to lure developing nations into borrowing more than they can afford to finance its infrastructure projects and then seizing strategic assets as loan collateral. There is a long list of countries who have taken expensive loans from China on such accounts and are not able to pay it back. They are targeting countries with rich natural resources or having a strategic military location. Asia, South America or Africa, wherever they see a developing country struggling for finances – Chinese lenders move there to disburse expensive loans.
Let us take the example of the African continent first. In the last 10 years alone, China has disbursed more than 200 Billion USD loan to various African Countries. This figure was less than 10 Bn USD in 2010 and 30 Bn USD in 2016 which multiplied to 650% in the last four years.
Similarly, in South America, some Latin American countries with a crippling economy like Argentina, Ecuador and Venezuela have taken huge loans. Venezuela has almost become a Chinese colony and today it is one of the bones of contention with the United States.
In case of Asia, our own continent, this debt trap diplomacy becomes clear when we see the situation in Tajikistan (which Ceded more than 1000 sq km of Land to China for a petty loan), Sri Lanka (Ceding of Hambantota Port and Mattala Air Base), Malaysia (Large scale corruption was observed when 90% of the cost for oil pipelines was paid in advance while work is stuck up at 12%).
The case of Laos matches exactly with that of Pakistan. When total forex reserves of Laos dropped below 1 Bn USD and its credit rating was downgraded to “CAA-2”, China offered expensive loans to the south Asian country. At a time when the National Debt of Laos became 40% of its GDP and Laos struggled to pay back, it took over the National Power Grid of Laos which is currently managed by China Southern Power Grid Company Limited headquartered in Guangzhou.
In case of Pakistan, the condition is going to be worst. Here the total national debt has become more than 110% of its Gross Domestic Product (GDP) out of which more than 40% is taken from China itself. As per an estimate, Pakistan is expected to pay back more than 100 Billion USD to various Chinese financial institutions by the end of 2024 on account of CPEC projects only. It has already ceded two of the major islands to China and is in the process to hand over the entire Gwadar Township, Gwadar Port and few other locations including Jiwani Naval base to China. It is also learnt that China will take over all the nine Special Economic Zones (SEZs), Majority of Infrastructure hubs and key industrial towns in the due course of time as collateral to its loan. Interestingly, this debt has doubled since Imran Khan Niazi took over as Prime Minister of Pakistan.
Professor Jia Yu, Director of International Development Corporation at Peking University openly mentioned at the 2018 CPEC Summit that “CPEC is not a gift”. This clearly means that Pakistan has to pay back either by money or by ceding its strategic assets. The possibility of the first option (Payback by money) looks bleak in case of Pakistan as it is struggling to cope up with the crashing economy, so the only option left is to cede its assets to China. A process that has started already.
This can be a serious threat to humanity since Pakistan boasts of being a nuclear country. Further, this is one of the few countries in the world where the government is primarily run by non-state actors, and terror sponsorship has become a government policy.
About the Author: Major Amit Bansal is a Defence Strategist with keen interests in International Relations and Internal Security. He is also an author, blogger and poet.
(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of India.com. The writer is solely responsible for any claims arising out of the contents of this article).