How China Keeps Vulnerable Countries In Debt With “Debt Traps” | World | News
China has been criticized for its practice of “trapping the debt” of developing countries – a practice where they give money to the poorest countries, which are then indebted to China, which means that she can lobby for their support in international affairs. In November 2021, MI6 chief Richard Moore warned in his first TV interview that China “is trying to use its influence through its economic policies to try to hook people up.”
What is a debt trap?
Critics of China claim the superpower is lending money to other countries that need to develop infrastructure, fund armed forces and pay off other debts, which end up having to give up control of assets keys if they cannot repay their debts.
China has long denied being a “debt trap” country.
China’s loans to low- and middle-income countries have tripled over the past 10 years, reaching $ 170 billion (£ 125 billion) by the end of 2020.
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However, the figure is likely to be significantly higher, and China does not publish statements of its foreign loans.
Many of its contracts also contain nondisclosure agreements that prevent borrowers from revealing details.
Research by AidData, an international development agency in the United States, found that half of China’s loans to developing countries go unreported in official debt statistics.
Some of these loans go off government balance sheets because they are intended for state-owned companies and banks, joint ventures or private institutions, rather than going directly from one government to another.
Djibouti, Laos, Zambia and Kyrgyzstan all currently have debts to China equivalent to at least 20% of their annual GDP.
Much of the debt to China is linked to large infrastructure projects such as roads, railways and ports, as well as the mining and energy industry, as part of the initiative. ” the Belt and Road “of President Xi Jinping.
One of the most striking examples of a country trapped in debt is Sri Lanka, which embarked on the Hambantota Port Project with Chinese backing in the mid-2000s.
The billion-dollar project using Chinese loans and contractors was mired in trouble and left the island nation struggling with huge and spiraling debt.
China eventually agreed to take a 70 percent stake in the port on a 99-year lease – with warning of further Chinese investment in the country.