GOOD MORNING FROM LONDON
China’s critics always claim that the Belt and Road Initiative is a trick to lure vulnerable developing countries into excessive borrowing, leading them into debt repayment that they cannot meet. And, eventually, the narrative goes, China grabs the assets offered as security for the unpaid loans.
According to Deborah Brautigam, Professor of International Political Economy at Johns Hopkins University and Founding Director of the China Africa Research Initiative (CARI), the “debt-trap” narrative is a myth.
CARI has scrutinised thousands of Chinese loan documents, mostly for projects in Africa, and reports that it has not found any evidence that China seizes the assets of other countries if they fail to pay loans.
The revelation comes at a time when dozens of African countries are either in or at a high risk of debt distress. Most of the countries – including Angola, Ethiopia, Kenya and Zambia, which are among the top borrowers from China – have sought debt relief. Beijing has since provided some debt relief to more than 20 countries and, for some countries, has cancelled interest-free loans that were maturing in 2020, according to the Chinese Ministry of Commerce.
Critics of China’s BRI ever eager to discredit China have always focused on the Sri Lankan port of Hambantota when the South Asian country fell behind in servicing its debts. CARI researchers insist that, instead of the port being seized by China, Sri Lanka privatised 70 per cent of the Chinese-financed port to China Merchants who raised US$1.2 billion.
In a recent study on debt repayment, Brautigam, Meg Rithmire, an Associate Professor at Harvard Business School, and Won Kidane, an Associate Professor of Law at the Seattle University of Law, found no evidence of Chinese “asset seizures” in Africa or globally. 142 countries have signed up for BRI projects.
The disproved allegation of ‘debt diplomacy’ and ‘asset seizure’ will continue to be made because it is part of the US policy to demonise China.