Debt trap Archives - Friends of Socialist China

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.