How could China afford $1 trillion for its BRI project?
There’s been a lot of talks about the Chinese funding in the African & Asian continents and their controversial One Road One Belt project which is also known as Belt and Road initiative. It is estimated that the project will cost around $1 trillion which is half of India’s total GDP value. How could a country afford such a large amount just for building infrastructures?
To find an answer to this question, we need to dig deeper into this so-called “debt-trap diplomacy.”
How did the British East India Company conquer India?
When the British arrived in India in the early 1600s, the significant portion of it was under one rule — The Mughal Empire and then came the Marathas, Nizams, etc., At first, the Britishers didn’t have the idea of conquering this land, and they only intended to trade with the rich Rajas of India. However, once they sensed the weakness among the Kings, they devised a plan which would eventually lead them to rule the subcontinent for over 200 years. The idea was to fund the Kings who were on a constant war with their neighbors with high-interest rates. Once the wars were over, and the economy of the kingdom trembled the Brits took over the job of collecting taxes on behalf of the king and soon they took over their kingdom itself. Sounds familiar?
People’s Republic of China: The new East India Company
There is a famous saying that “History repeats!”. The best example of that statement will be China. China is planning to become the world’s only superpower by the end of 2050, and it is working hard to achieve its goal.
On the one hand, it is ramping up its military prowess to compete with the current superpower the USA. And on the other side, it is building infrastructures such as railroads, roadways, sea routes, and markets around the world so that it can take its product to every nook and corner of this world and create an impact in the world economy. In 2013, Xi Jinping announced the One Belt One Road Initiative proclaiming that they’re rebuilding the ancient silk route which was one of the busiest business routes in the medieval time. However, the world suspects his intention behind it. In the name of constructing trade routes in Asian and African continents, China has trapped a lot of countries in an irreversible debt trap. Countries like Pakistan, Montenegro, and Djibouti are the best examples of that.
The Chinese first lure the economically weaker countries by offering the honey of cheap loans which apparently they cannot repay with their scale of economy. And finally, if those countries can’t repay the loan they took, then the Chinese as a good samaritan will settle for an alternative of acquiring some of their infrastructures they helped building with their money for a lease. The best example would be China’s take over of the Djibouti base and Hambantota port in Sri Lanka.
The most controversial part of these types of deals is the opaqueness of the contracts that are signed. Nobody outside the higher authority of the recipient government knows how much money has been borrowed and the interest rates of those loans — a typical Chinese way. This shocking truth came to light when the new government of the Maldives decided to repay its loan to the Chinese. The primary demand from the Chinese side in those contracts will be that the recipient country should allow the contracts only to a handful of companies that will be either owned by the Chinese government itself or its subsidies. And, whenever a deal is signed, the Chinese will first deposit the loan amount in a bank, and yes that will be a Chinese bank too. So literally the money never leaves China!.
With the help of those contracts, the Chinese government knocks many fruits with a single stone. It creates jobs for many unskilled Chinese labors and also it will have strategic access to a foreign country. It provides business to its financial institutions and also gets the interest of the recipient country for the money it had never spent. It is a win-win situation, but the only problem here is that it is the Chinese who are on both sides who are getting benefited.
Now the world woke up from the sleep, and all the fog that was surrounding the Chinese activities is getting cleared. Recently Malaysia, which got its new President last year canceled a multi-million dollar project with China citing the overvaluation of the project. Countries like Thailand, Montenegro, are reviewing their infrastructure projects with the Chinese and as the year goes by, the chorus against the Chinese debt-trap policy is growing louder.
