Debt trap Archives - Friends of Socialist China

China and Sri Lanka reaffirm longstanding friendship and refute imperialist slanders

Sri Lankan Prime Minister Dinesh Gunawardena visited China from March 25-30 at the invitation of his Chinese counterpart Li Qiang. The visit and the agreements reached were a powerful reaffirmation of the long-standing friendship between the two countries and a clear refutation of the slanders spread in the imperialist countries, in particular, regarding their bilateral cooperation under the Belt and Road Initiative (BRI) and China’s supposed ‘debt trap diplomacy’.

Gunawardena met with President Xi Jinping on March 27. Noting that the friendship between China and Sri Lanka enjoys a long history and the two peoples share a natural affinity, Xi said that consolidating and promoting China-Sri Lanka relations serves the fundamental interests and reflects the common expectations of the two peoples.

China is willing to work with Sri Lanka to carry forward the spirit of the Rubber-Rice Pact, which is characterised by “independence, self-reliance, unity and mutual support,” to consolidate political mutual trust, enhance exchanges of experience in governance, expand practical cooperation, and advance the high-quality Belt and Road cooperation.

The reference to the Rubber-Rice Pact carries great significance. The root of the two countries’ special friendship, it was concluded in December 1952, at a time when Sri Lanka (then known as Ceylon) had not long won its national independence from British colonial rule and the Chinese revolution had recently triumphed. More particularly, by this pact Sri Lanka courageously defied and broke the US-led blockade that had been imposed on New China at a time when the Chinese Volunteer Army was fighting on the Korean front. The agreement, which met the crucial needs of both countries at that time, lasted for 30 years, and led to the United States imposing sanctions, including those aimed at crippling its rubber production, and cutting off aid to Sri Lanka.

Xi added that both sides should make joint efforts to promote high-quality Belt and Road cooperation, especially that of the two flagship projects, the Colombo Port City and the Hambantota Port. China and Sri Lanka should also work together to enhance logistics, energy, and industrial cooperation, and promote exchanges and cooperation in digital economy, green economy, clean energy, culture-oriented tourism and marine economy. China, he said, is willing to advance cooperation with Sri Lanka on rural poverty reduction, to help the country with economic transformation and upgrading, and with sustainable development.

The two sides, he added, should continue to maintain the Five Principles of Peaceful Coexistence, enhance coordination on international and regional affairs, safeguard the common interests of both sides, uphold international fairness and justice, and promote the construction of a community with a shared future for humanity.

Gunawardena expressed appreciation for China’s assistance to Sri Lanka in times of difficulty, saying that projects such as the Colombo Port City and the Hambantota Port have boosted Sri Lanka’s economic and social development, as well as the overall development of the region.

The previous day Gunawardena held meetings with Premier Li Qiang and Zhao Leji, Chairman of the National People’s Congress (NPC) Standing Committee.

Li said China and Sri Lanka are strategic partners of cooperation characterised by sincere mutual assistance and enduring friendship spanning generations. The two countries have always respected each other and enjoyed equality and reciprocal cooperation since the establishment of diplomatic relations 67 years ago.

Gunawardena thanked China for providing long-term support to Sri Lanka’s efforts to safeguard national sovereignty, independence, and territorial integrity, and helping the country realise economic and social development and cope with the COVID-19 pandemic and financial crisis.

Hailing the Belt and Road Initiative and the global initiatives proposed by China, he said that Sri Lanka has always adhered to the one-China principle and will continue to firmly pursue policies to strengthen friendly cooperation with China.

Zhao said that since the establishment of diplomatic relations between the two countries in 1957, China and Sri Lanka have always enjoyed a sound and steady relationship despite changes in the international landscape.

The two sides released a joint statement on March 29. Noting that the Sri Lankan leader had also attended the Boao Forum for Asia Annual Conference 2024, held on the southern island of Hainan, during his visit, the statement said that:

“The two sides share the view that the peoples of China and Sri Lanka enjoy long-standing friendship, and have engaged in mutual learning, mutual assistance and seeking strength through unity. In the 67 years since the establishment of diplomatic ties, the two countries have strengthened traditional friendship, enhanced political mutual trust, achieved fruitful results in practical cooperation, and engaged in close coordination on regional and international issues, setting a fine example of friendly interactions and mutually beneficial cooperation between countries of different sizes. The two sides agree to carry forward the spirit of independence, self-reliance, solidarity and mutual assistance enshrined in the Agreement on Rice for Rubber, jointly tackle challenges, share opportunities and seek common development, thereby cementing and expanding the China-Sri Lanka strategic cooperative partnership based on sincere mutual assistance and ever-lasting friendship to bring greater benefits to the two countries and peoples.”

Sri Lanka expressed its appreciation to China for “the support that helped its financial difficulties, and, in particular, the pioneering step taken by the Chinese financial institutions last year to propose a bilateral debts settlement plan and the preliminary agreement reached with Sri Lanka on the settlement of China-related debts on the basis of friendly consultation.”

Sri Lanka also expressed thanks and appreciation for “the assistance on its economic and social development, and speaks highly of the important role played by Belt and Road cooperation in boosting the economic development and livelihood improvement in Sri Lanka and other Belt and Road partner countries. The two sides agree to work together to deepen high-quality Belt and Road cooperation, accelerate the formulation of a Belt and Road cooperation plan, and make all-out efforts to advance the Colombo Port City project and the integrated development project of Hambantota Port as signature projects of Belt and Road cooperation between the two countries.

“Sri Lanka welcomes the investment of more Chinese enterprises, and stands ready to provide a favourable investment and business environment for them and roll out at a faster pace preferential policies to facilitate the implementation of the Colombo Port City and Hambantota Port integrated development projects. China will continue to encourage competent Chinese enterprises to invest in Sri Lanka and assist Sri Lanka in achieving economic transformation and sustainable development.”

After detailing concrete steps in a range of areas, including trade, emergency humanitarian assistance, economic development, people’s livelihood, agriculture, education, cultural heritage, tourism, sister city and people-to-people exchanges, and medical aid, the joint statement continued:

“The two sides will jointly champion the building of an equal and orderly multipolar world, practice true multilateralism, promote greater democracy in international relations, and call on all countries to jointly safeguard the purposes and principles of the UN Charter, jointly defend the universally recognised basic norms of international relations, and jointly contribute to the reform and development of the global governance system.”

They also “hold the view that in marking the 70th anniversary of the Five Principles of Peaceful Coexistence, it is important to further carry forward these five principles, i.e. respect for sovereignty and territorial integrity, mutual non-aggression, mutual non-interference in internal affairs, equality and mutual benefit, and peaceful coexistence, and commit to building a community with a shared future for Asia and for humanity.”

The following articles were originally published by the Xinhua News Agency.

Xi meets Sri Lankan PM in Beijing

BEIJING, March 27 (Xinhua) — Chinese President Xi Jinping met with Sri Lankan Prime Minister Dinesh Gunawardena in Beijing on Wednesday.

Noting that the friendship between China and Sri Lanka enjoys a long history and the two peoples share a natural affinity, Xi said consolidating and promoting China-Sri Lanka relations serves the fundamental interests and reflects the common expectations of the two peoples.

China is willing to work with Sri Lanka to carry forward the spirit of the Rubber-Rice Pact, which is characterized by “independence, self-reliance, unity and mutual support,” to consolidate political mutual trust, enhance exchanges of experience in governance, expand practical cooperation, and advance the high-quality Belt and Road cooperation, Xi said.

He noted that China and Sri Lanka should join hands to advance their strategic cooperative partnership featuring sincere mutual assistance and ever-lasting friendship.

China firmly supports Sri Lanka in safeguarding national sovereignty, independence and national dignity, and in exploring a modernization path suited to its national conditions, Xi said, adding that China will continue to provide due assistance within its capacity for Sri Lanka’s economic and social development.

He said that both sides should make joint efforts to promote high-quality Belt and Road cooperation, especially that of the two flagship projects, the Colombo Port City and the Hambantota Port. China and Sri Lanka should also work together to enhance logistics, energy and industrial cooperation, and promote exchanges and cooperation in digital economy, green economy, clean energy, culture-oriented tourism and marine economy.

China will continue to import more high-quality specialty products from Sri Lanka, encourage Chinese enterprises to invest and do business in the country, and hopes that the business environment in Sri Lanka will be fair and transparent, Xi said.

He added that China is willing to advance cooperation with Sri Lanka on rural poverty reduction, to help the country with economic transformation and upgrading, and with sustainable development.

The two sides should continue to maintain the Five Principles of Peaceful Coexistence, enhance coordination on international and regional affairs, safeguard the common interests of both sides, uphold international fairness and justice, and promote the construction of a community with a shared future for humanity, Xi stressed.

Noting that Sri Lanka and China enjoy a traditional friendship, Gunawardena said that Sri Lanka adheres unswervingly to the one-China principle, unequivocally follows the policy of friendly cooperation with China, and gives China priority on its diplomatic agenda.

He expressed appreciation for China’s assistance to Sri Lanka in times of difficulty, saying that projects such as the Colombo Port City and the Hambantota Port have boosted Sri Lanka’s economic and social development, as well as the overall development of the region.

Sri Lanka will take part in the China-proposed Global Development Initiative, Global Security Initiative and Global Civilization Initiative, said Gunawardena, adding that the country will work with China to promote bilateral friendship, expand cooperation on trade and economy, education, tourism, poverty reduction and other fields, and improve international and multilateral communication and coordination.

A rising China and a rising Africa? This is doubly frightening to the imperialist powers

What follows below is the text of a speech given by Fiona Sim on behalf of the Black Liberation Alliance at the recent Friends of Socialist China event Africa, China and the Rise of the Global South, held at the Marx Memorial Library on 16 March 2024.

Fiona describes the blossoming relationship between Africa and China – which even extends to South Africa and China collaborating to build a research base on the moon – and contrasts it with the “playbook of neo-colonial extraction and political puppeteering” that the West has used to exploit Africa for centuries. The China-Africa partnership is inspiring fear and loathing in the West, representing as it does a challenge to the global hegemony of the US and its allies:

“A rising China and a rising Africa? This is doubly frightening to the imperialist powers. It is the precursor to the fall of western hegemony altogether.”

The West’s response has been to ramp up its propaganda war against China and to try to drive a wedge between China and Africa – most obviously by denouncing Chinese “imperialism” and slandering its investments as “debt traps”. But the reality is that “China’s loans to African countries have some of the lowest interest rates, no political strings attached, mass debt relief programmes, and the massive infrastructure projects they fund and build result in positive net growth.” Chinese loans and investment are paving a road out of poverty and underdevelopment.

Fiona concludes by calling for solidarity with China and Africa in their struggle against imperialism, for countering the lies and distortions of the Western media, and for resolutely opposing the New Cold War.

It is my great honour to be included in this panel alongside our esteemed comrade from the Communist Party of Kenya and all these powerful organisers and activists. There is nothing more powerful than being united in struggle with comrades who are not only from across the diaspora but from around the globe.

It is a reminder of the importance of internationalist, anti-imperialist solidarity that transcends borders and bureaucracy. Our struggles are connected by the chains of imperialist domination and sown from the seeds of destruction left by colonial conquest. But our joint history stretches back centuries further.

While Europe was in its so-called Dark Ages, Africa, Asia and the Islamic world were experiencing their Golden Ages. The renowned Chinese Muslim naval navigator Zheng He led peaceful expeditions along the ancient Silk Road, with voyages as far as East Africa, where the seas connecting the two continents would go on to establish trade routes and friendly relations for years to come.

Now, centuries later, with the Silk-Road-inspired Belt and Road initiative, we are seeing the rebirth of Africa-China relations and establishment of South-South cooperation at an unprecedented scale. The relationship between Africa and China could not be stronger. Kenya is China’s number one trade partner in East Africa. South Africa and China are collaborating to build a research base on the moon. After the uprisings in the Sahel, the coup governments formed were quick to affirm their relations with China, which reiterated its policy of non-intervention and non-interference in African politics. Burkina Faso’s President Traore declared that he considered China an important trade partner early on, and Niger’s interim President General Tchiani has reportedly met with the Central and North African representative for BRICS in the last few weeks.

It is no wonder that the countries of the West – where whole civilisations have been built on the foundations of plunder and pillaging of the global South – see this as a threat. The West has seen that Africa has taken great interest in the rise of China especially in the last decade and it is running scared. Scared that its playbook of neo-colonial extraction and political puppeteering is no longer going to work on its former colonies.

Let us be clear. The West only sees China as a threat to its hegemony because it cannot conceive a country that less than a century ago was one of the poorest in the world is now a global powerhouse whose economy rivals the US. Since the 1990s, China has been the only country whose GDP has grown exponentially, increasing on average by 9 percent a year. In 2023, China’s GDP increased by 5.2 percent – the highest among the major powers, with the US in second place at 1 percent.

Tanzania’s ambassador to China refutes debt trap slander

This year sees the 60th anniversary of the establishment of diplomatic relations between Tanzania and China and, according to Khamis Omar, Tanzania’s Ambassador in Beijing, the enduring bilateral friendship is growing stronger and their mutually beneficial cooperation has great potential.

According to the Ambassador: “China and Tanzania have a lot in common. In the past both had a common kind of quest to fight against colonialism and oppression and to lift people’s human rights in a real sense. Now both sides share a common vision of advancing toward prosperity and have enjoyed a substantial and supportive relationship.”

In an interview with China Daily, he further recalled that China supported Tanzania even when the former was relatively poor itself. He specifically cited the1,860-kilometre Tazara Railway, which links landlocked Zambia with the Tanzanian port of Dar es Salaam, and which opened in 1976.

“It was the first regional project that happened in our region in Africa, so it was really appreciated because at that time China itself did not have much financial muscle… It was also a symbol of Chinese contribution to the liberation, freedom and independence of Africa.”

The railway allowed Zambia to export its copper without being reliant on countries then still under colonial and white racist rule. It was, by a considerable margin, China’s biggest foreign aid project at that time.

Now, Omar notes, China is the world’s second-largest economy and represents a vast market with immense possibilities for Tanzania. The prospects for collaboration are substantial, particularly in areas such as agriculture, textiles and apparel, beverages, laser items, livestock, and the maritime economy.

Refuting the ‘debt trap’ calumny levelled against China by western powers, Omar said: “African countries need to borrow money during the process of economic development. It is important for the country that borrowed money to make sure that it spends wisely and prudently. China provides loans at preferential interest rates. What is wrong with China doing that?”

Meanwhile, the South China Morning Post has reported that China plans to spend US$1 billion to refurbish the Tazara rail line. China’s Ambassador to Zambia Du Xiaohui handed the proposal to the country’s Transport Minister, Frank Tayali, saying that China wished to work together with “Zambian and Tanzanian brothers and sisters” on the project.

Minister Tayali said that he “was particularly excited that the Chinese experts will work alongside Zambian labour.”

The following article was originally published by China Daily.

The enduring friendship between China and Tanzania is growing stronger, and collaboration between the two benefits both and has great potential, says Tanzania’s Ambassador to China, Khamis Omar.

The 60th anniversary of diplomatic relations between China and Tanzania is being celebrated this year, and the friendship between the two continues to grow increasingly robust, Omar said.

“China and Tanzania have a lot in common. In the past both had a common kind of quest to fight against colonialism and oppression and to lift people’s human rights in a real sense. Now both sides share a common vision of advancing toward prosperity and have enjoyed a substantial and supportive relationship.”

China supported Tanzania even when the former was relatively poor itself, he said. The most notable venture the two sides have been involved in is the 1,860-kilometer Tazara Railway, which links landlocked Zambia with the Tanzanian port of Dar es Salaam, and which opened in 1976.

“It was the first regional project that happened in our region in Africa, so it was really appreciated because at that time China itself did not have much financial muscle,” Omar said. “It was also a symbol of Chinese contribution to the liberation, freedom and independence of Africa.”

China has played a substantial role in bolstering Tanzania’s economy by supporting plantations and industrial facilities and by deploying technicians, which has been instrumental in initiating economic modernization. Moreover, since 1964 China has been sending medical teams to help Tanzania.

Over time China and Tanzania have expanded and strengthened their collaboration. Beyond aiding Tanzania in certain areas, both countries have worked together in many fields, promoting prosperity.

“China emphasizes mutual gains in its foreign cooperation and ensures that the other side also benefits,” Omar said.

Largest trading partner

Last year China continued to be Tanzania’s largest trading partner and biggest investor. The value of trade between January and November was $7.96 billion, a year-on-year increase of 6.8 percent, according to official figures. Chinese companies made investments worth more than $11 billion in Tanzania.

China, the world’s second-largest economy, represents a vast market with immense possibilities for Tanzania, Omar said. The prospects for collaboration are substantial, particularly in areas such as agriculture, textiles and apparel, beverages, laser items, livestock and the maritime economy.

He is keen to see provinces in China and regions in Tanzania forge stronger connections and explore collaborative opportunities, he said.

Omar first came to China in 2005, and since then he has traveled extensively throughout the country, he said. He takes pleasure in exploring its impressive progress by visiting various places, particularly to gain insights into China’s development and governance.

In Shenzhen, a model city for China’s reform and opening-up, he discovered that the keys to its prosperity lie in being open, having a youthful work force, adopting innovative practices and policies that give priority to people, engaging in sustainable development and having robust manufacturing, he said.

“Socialism with Chinese characteristics is a different kind of governance that one has to know to unpack and try to understand the Chinese context. This is not one size fits all. It’s very important to understand the context of Chinese development and Chinese civilization with different dynasties… I’m learning about it.”

The Belt and Road Initiative has brought tremendous benefits to Africa over the past decade, he said. However, some countries have said the initiative is creating “debt traps”, which is “propaganda targeted at China”, Omar said.

“African countries need to borrow money during the process of economic development. It is important for the country that borrowed money to make sure that it spends wisely and prudently. China provides loans at preferential interest rates. What is wrong with China doing that?”

This year is the China-Tanzania Culture and Tourism Year, he said. Tanzania has more than 130 tribes with different kinds of cultures, music and social life, and it is endowed with rich tourism resources that he would like to tell Chinese people about this year.

A tale of two Chinas: Rhetoric on foreign domination and domestic instability

The following original article, submitted to Friends of Socialist China by Nolan Long (a Canadian undergraduate student studying politics at the University of Saskatchewan), shines a light on the absurdly contradictory Western media coverage of China. “First, China is described as a global superpower in terms of its supposedly dominating and exploitative foreign policy; on the other hand, China is represented as an unstable, backward, underdeveloped country, bound to inevitably collapse due to the failures of socialism.”

This portrayal and the various popular narratives associated with it – that China is engaged in “debt trap diplomacy”, or that the Belt and Road Initiative is a form of colonialism, or that the Chinese economy is on the verge of collapse – are promoted as part of an ongoing propaganda war, itself a crucial component of an escalating effort to contain and encircle the People’s Republic. These various claims “exist at the heart of the West’s insecurity about its decreasing relevancy and power in the twenty-first century.”

The falsity of this anti-China hysteria is amply exposed by its contradictory nature; and yet it is unlikely to go away any time soon. As Nolan concludes: “The tale of two Chinas presents a picture of Western insecurity and modern Chinese power, a theme that will increasingly come to the fore as China continues to develop on its own and on the world stage.”

Contemporary rhetoric on the People’s Republic of China, as disseminated by Western corporate media, is made up of contradictory claims about Chinese domination and Chinese instability. It is simple enough to find intentionally missing information or context, exaggerations, and even outright lies in the muniments of most corporate media. But a deeper analysis reveals two competing narratives, both of which have become increasingly (and paradoxically) common over the last few years.

First, China is described as a global superpower in terms of its supposedly dominating and exploitative foreign policy; on the other hand, China is represented as an unstable, backward, underdeveloped country, bound to inevitably collapse due to the failures of socialism.

Notably, the first typified China is used in Western capitalist media to generate fears about China’s development efforts in the Global South, which have largely been at the expense of Western hegemony and financial interests. Despite the positive results of the Belt and Road Initiative, capitalist media portrays China as a rapacious villain running rampant across the globe.

Here, China is described as an economic powerhouse. But when discussing Chinese domestic affairs, Western journalists suddenly think China is a poor, underdeveloped state, sometimes on the brink of complete collapse. These two conceptions of China cannot coexist, and go a long way in demonstrating the irrationality and lack of scholarship among anti-communists and defenders of American hegemony.

Michael Roberts: debt trap accusation “does not hold much water”

In the following article, which was originally published on the author’s blog, the renowned Marxist economist Michael Roberts dissects the oft repeated claim that China is ensnaring countries, in this case specifically Sri Lanka, in a debt trap and then taking over the country’s assets.

This widespread charge, he notes, “does not hold much water. It leaks badly… China is not a particularly large lender to poor countries like Sri Lanka compared to Western creditors and the multi-national agencies.” Whilst China holds 10% of Sri Lanka’s debt, commercial lenders, from the imperialist countries, account for nearly 50%.

Moreover, he argues, the rise in the country’s debt burden did not result from any trap set by China, but rather from the desperate needs of the previous Sri Lankan government. After the 2008 global financial crisis, Roberts explains, interest rates fell globally, and Sri Lanka’s government looked to international sovereign bonds to further finance spending. But the country was then hit by the Covid pandemic, which ravaged the tourism sector, on which Sri Lanka was heavily reliant.

As for the port project at Hambantota, which is the most frequently cited example of China’s supposed debt trap, “China did not propose the port; the project was overwhelmingly driven by the Sri Lankan government with the aim of reducing trade costs.”

Noting a recent US district court case, Roberts explains that “it is the obscure Hamilton Bank that is opposed to any agreement [on the restructuring of Sri Lanka’s debt] and instead is demanding full repayment [of US$250 million plus interest] on its holding of Sri Lankan bonds. Hamilton is what is called a ‘vulture’ fund’, buying up the ‘distressed debt’ of poor country governments at rock bottom prices and then pushing for full repayment at par (the original bond issue price), using the blackmail of refusing to agree to any ‘restructuring’.”

He adds that in a presentation, the bank, whose directors include former British Conservative MP, government minister and personal assistant to Margaret Thatcher, Sir Tony Baldry, says that “suing a sovereign for non-debt payment can be a justified and lucrative business.”

Last week a US district court granted Sri Lanka’s request for a six-month pause on a creditor lawsuit against the country. Hamilton Reserve Bank holds a big chunk of one of Sri Lanka’s now-defaulted bonds and had been suing it for immediate repayment.

The court decided that there should be a pause in Hamilton’s demand for immediate repayment so that Sri Lanka could arrange a deal with other private sector creditors and bilateral lenders, as well as obtaining new funds from the IMF. The IMF has been unwilling to cough up money as long as it considered Sri Lanka unable to pay back its debt obligations. It is insisting that all creditors agree to a ‘restructuring’ of existing debt before agreeing to new IMF funding (which would also be accompanied by strong ‘conditionalities’ ie fiscal austerity, privatisations etc).

The IMF, World Bank and other Western creditors have claimed that what is holding up a rescheduling is China. In turn, China is refusing to agree to a deal unless all other parties are agreed on the terms, and it does not like the terms currently proposed.

In the case of Sri Lanka and many other poor peripheral countries in serious debt distress, it is regularly argued that they are in a ‘debt trap’ caused by taking loans from China to such an extent that they cannot repay them and then China insists on taking over the country’s assets to meet the bill. Indeed, US President Biden reiterated this charge only this week in a speech claiming that the West was ready to help poor countries expand their infrastructure.

CGTN interview with Senegalese President Macky Sall

In this episode of the CGTN series Leaders Talk, filmed in the South African city of Johannesburg immediately following the BRICS Summit and the China/Africa Leaders Dialogue held in its margins in August, Wang Guan interviews President Macky Sall of Senegal.

President Sall sets out a strong case for the reform of international institutions formed in the wake of World War II. The world has changed greatly since then and reform is demanded by Africa and the Global South as we are moving towards a multipolar world.

Senegal was the first country in West Africa to sign up for the Belt and Road Initiative (BRI) advanced by President Xi Jinping. President Sall extols his personal and friendly relationship with his Chinese counterpart and is full of praise for China’s relations with Africa.

China, he notes, once suffered aggression from the colonial powers, so today it shows empathy and humility in its dealings with others. Citing a recent discussion he held with French President Emmanuel Macron, he said that his message to Africa’s other partners is that we want the same from them. There is now a generation, including himself, born after the end of colonial rule, and they have a new mentality.

Turning to questions of development financing and foreign debt, Sall makes the point that China’s financing is based on requests made by Africa and priorities set by Africa. Refuting ideas of a ‘Chinese debt trap’, he notes that Africa’s debt to China is only some 12% of its total. Moreover, the interest rate is low, at a maximum of 2.5%, with a minimum repayment period of 20 years, and a grace period before payments become due that is generally longer than that offered by others.

Furthermore, citing a China-built expressway in his country as an example, because China’s projects are built quickly, they can often be generating revenue for a few years before any loan repayments fall due.

The full interview with President Macky Sall is embedded below.

Foreign diplomats in China refute Western media’s debt trap hype

Whilst the imperialist countries have ensnared countries of the Global South in ‘debt traps’ for decades, something that the late Cuban communist leader, Fidel Castro drew forceful attention to as far back as the 1980s, they have also in recent years determinedly tried to smear the People’s Republic of China by leveling the very charge of which they have themselves long been guilty. Needless to say, this is strongly refuted by the countries of the Global South themselves as it is without foundation.

The following article, which we reprint from Global Times, reports the views of some senior Beijing-based diplomats, part of a more than hundred person group who recently visited the China Communications Construction Group, a leading Chinese company engaged in Belt and Road Initiative (BRI) projects.

According to the diplomats, these projects have improved local livelihoods, created jobs and promoted local economic development.

South African Ambassador Siyabonga C. Cwele noted that infrastructure projects in his country have to go through public tendering and a transparent procurement process with stringent requirements. In his view, Chinese companies tend to be better because they come with financing, skills and innovation and tend to complete projects on time. “What causes debt problems is that projects are not completed on time,” he notes.

Sri Lanka’s Deputy Chief of Mission, K.K. Yoganaadan, remarks: “If you take Sri Lanka’s total debts, only 10 percent is owed to China and 90 percent of our debts are owed to other bilateral partners and multilateral agencies.” Noting that China is already helping and supporting Sri Lanka to resolve its debt problem, he added: “We are very confident and hopeful that these BRI projects will help us improve Sri Lanka’s foreign exchange income and attract more foreign investors.”

Foreign diplomats refuted the “debt trap” hyped by some Western media on Chinese overseas projects, asserting those infrastructure projects have improved local livelihoods, created jobs and promoted local economic development.

Western media hyping the “debt trap” of Chinese projects is “fake news,” Moin ul Haque, Ambassador of Pakistan to China, told the Global Times on Monday. “We don’t subscribe to such a characterization of China-Pakistan cooperation, which is based on our mutual support and respect and win-win,” said Haque.

The interview was conducted during a group visit to China Communications Construction Group (CCCC), one of the major Chinese companies that participates in the China-proposed Belt and Road Initiative (BRI). The group visit gathered 111 diplomats from embassies and international organizations in China.

Haque noted that BRI and China-Pakistan Economic Corridor projects have greatly contributed to changing the economic landscape in Pakistan in infrastructure development and industrialization.

Asked about his opinion on Western reports saying China’s projects brought “debt traps” to host countries, Siyabonga C. Cwele, South African Ambassador to China, told the Global Times that “we don’t see it that way. We see it as a win-win situation with China, and with mutual respect.”

Fred M’membe: It’s the US, not China, that threatens African sovereignty

In this powerful interview on BreakThrough News, Fred M’membe (leader of the Socialist Party of Zambia) explodes the myth of Chinese colonialism in Zambia. He states: “China has never threatened our independence. We’ve never been subjected to any form of mistreatment or exploitation by China, but we can’t say the same about the US.”

M’membe recalls that China was a key supporter of post-liberation Zambia, providing both economic aid and military equipment to defend against the attacks of the apartheid regime in South Africa. He says that Zambia turned to the US for support but was turned away; China was a true friend, even making enormous sacrifices to build the Tazara Railway, which was essential for the country’s development.

He compares the US’s strategy of domination with China’s strategy of solidarity and friendship: “The US supported the apartheid regimes in South Africa and Rhodesia. The US has been involved in reactionary coups and assassinations all over Africa, including the assassination of Patrice Lumumba, the overthrow of Kwame Nkrumah, the assassination of Muammar Gaddafi. China has never participated in any coup, has never killed an African.”

Referencing the accusations of a “Chinese debt trap”, M’membe points out that China only holds 10 percent of Zambia’s debt. And what have Chinese loans been used for? Hydropower stations, airports, roads, water systems, hospitals, schools, government buildings. “The debt problem we have is the debt we owe to Western institutions, that’s 70 percent. The China debt trap narrative is a lie.”

Key facts the US deliberately ignores about African debt

This important article, first published in Xinhua on 7 February 2023, takes up the question of Africa’s debt crisis, which has been a hot topic particularly in the light of US treasury secretary Janet Yellen’s recent visit to Zambia, in which she attempted to pin blame for the crisis onto China. This connects to an ongoing slander campaign about “Chinese debt traps” – a campaign which seeks both to divert attention away from the West’s horrifying record of trapping the developing world in debt, and to weaken the bonds of solidarity between China and the countries of the Global South.

The article cites a report published last year by Debt Justice, a British NGO, showing that only 12 percent of the external debt of African countries is owed to Chinese lenders, with much of the rest being owed to Western private lenders and multilateral institutions. Furthermore, the interest rates on Chinese loans is on average around half that of the interest charged by Western private lenders. Tim Jones, head of policy at Debt Justice, is quoted: “Western leaders blame China for debt crises in Africa, but this is a distraction. The truth is their own banks, asset managers and oil traders are far more responsible, but the G7 (the Group of Seven) are letting them off the hook.” Indeed, China has been an ardent supporter of the G20 Debt Service Suspension Initiative, reaching agreements with 19 African countries on debt relief and suspending the most debt service payments of any G20 member.

China’s loans to Africa are typically directed towards key infrastructure projects, with the aim of helping African countries to break out of the cycle of underdevelopment in which they have been locked as a result of centuries of colonialism and neocolonialism. Sustainable modernisation will bring tremendous benefit to the peoples of the continent, and will create conditions such that it will no longer be necessary to take out predatory loans.

Like many senior U.S. officials who have visited Africa, U.S. Treasury Secretary Janet Yellen did not fail to target China and raise concerns about China’s role in the debt problem during a recent visit to the continent.

While hyping up the bizarre “Chinese debt trap,” the U.S. officials deliberately ignored some key facts about African debt.

Who holds most African debt?

According to the World Bank’s International Debt Statistics, multilateral financial institutions and commercial creditors hold nearly three-quarters of Africa’s total external debt.

A report published last July by the British NGO Debt Justice showed that 12 percent of the external debt of African countries is owed to Chinese lenders, compared to 35 percent to Western private lenders. The average interest rate of these private loans is 5 percent, compared with 2.7 percent for loans from Chinese public and private lenders.

“Western leaders blame China for debt crises in Africa, but this is a distraction. The truth is their own banks, asset managers and oil traders are far more responsible, but the G7 (the Group of Seven) are letting them off the hook,” said Tim Jones, head of policy at Debt Justice.

Why Chinese “debt trap diplomacy” is a lie

This useful and comprehensive article by Amanda Yee, originally published in Liberation News, discusses the accusation that China is engaged in “debt trap diplomacy”; that it imposes predatory loans on countries of the Global South with a view to taking control of their resources.

Amanda details the most-cited putative examples of this phenomenon – the Hambantota Port in Sri Lanka and the Entebbe International Airport in Uganda – and in both cases demonstrates incontrovertibly that the accusations of “debt trap diplomacy” are false. There is not a single case of China pressuring countries to take unsustainable loans; nor does China use national assets as collateral. The author points out that, in fact, China’s loan conditions are typically far less onerous than those of the West, and that the infrastructure projects it invests in “are determined by the recipient country, not China, based on their own economic and political interests.”

It’s the IMF and World Bank loans, not China’s, that are “granted on conditions of privatizing public sectors, gutting social welfare programs, and trade liberalization to enrich Western capitalist interests.” Thus a debt trap does exist; it was invented by, and continues to be used by, the imperialist powers. Accusations of China employing “debt trap diplomacy” are sheer projection and New Cold War propaganda.

U.S. politicians and corporate media often promote the narrative that China lures developing countries into predatory, high interest loans to build infrastructure projects as part of its Belt and Road Initiative. As the story goes, China anticipates that the borrowing country will default on that loan, so that it can then seize that asset in order to extend its military or geostrategic influence—evidence of China’s so-called colonizing of the Global South.

The concept of Chinese “debt trap diplomacy” finds its origins in a 2017 academic article published by a think tank in Northern India describing China’s financing of Sri Lanka’s Hambantota Port. The concept was then picked up by two Harvard graduate students in 2018, when they published a paper accusing China of “debtbook diplomacy” and “leveraging accumulated debt to achieve its strategic aims.” This paper was then widely cited by media publications, the idea of Chinese “debt traps” seeped into Washington and intelligence circles, and a short time later, by November 2018, a Google search of the phrase “debt trap diplomacy” generated nearly two million results.

By now the “debt trap diplomacy” accusation has become a bipartisan one: both the Trump and Biden administrations have peddled it, and it’s been further advanced by organizations such as the U.S. International Development Finance Corporation, and corporate media outlets like The New York Times, The Washington Post, and The Hill.

In one egregious instance, BBC News even edited an interview with Deborah Bräutigam—a scholar known for her work challenging the validity of the Chinese “debt trap diplomacy” myth—to only include her explanation of the myth itself, omitting all evidence she cited against it, leading listeners to believe that Bräutigam was, in fact, claiming the concept was true.

Problems with the “debt trap diplomacy” myth

Generally, there are three problems with this “debt trap diplomacy” myth.

The first problem is that this myth assumes China unilaterally dictates Belt and Road Initiative projects to lure other countries into taking on these predatory loans. In reality, Chinese development financing is largely recipient-driven, through bilateral interactions and deals. Infrastructure projects are determined by the recipient country, not China, based on their own economic and political interests.