Malcolm Rivera
Cheque book diplomacy, or checkbook diplomacy, is a foreign policy in which countries exchange economic aid and investments to gain diplomatic favour. It is a tool used by nations to gain influence and project power over their target regions. This form of diplomacy is based on debt and is carried out in the bilateral relations between countries. It involves a creditor country intentionally extending excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country is unable to honour its debt obligations. Cheque book diplomacy has been associated with China's lending practices, which have been criticised for imposing unsustainable burdens on vulnerable countries.
| Characteristics | Values |
|---|---|
| Type of diplomacy | Based on debt |
| Creditor country | Extends excessive credit to debtor country |
| Debtor country | Receives economic or political concessions from creditor country |
| Loans | Conditions are not made public |
| Loaned money | Used to pay contractors from the creditor country |
| Creditor country | Receives assets including infrastructure |
| Country with most debt | China |
| Region most marked by cheque book diplomacy | Pacific |
| Country with intensification of cheque book diplomacy | China |
| Country engaging in cheque book diplomacy | India |
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What You'll Learn
- Cheque book diplomacy is a foreign policy tool used to gain diplomatic favour
- It involves countries exchanging economic aid and investment
- It is a type of diplomacy based on debt
- China is a major player in cheque book diplomacy
- Other countries engaging in cheque book diplomacy include Germany, Japan, India, and Taiwan
Cheque book diplomacy is a foreign policy tool used to gain diplomatic favour
Cheque book diplomacy is a foreign policy tool used by states to gain diplomatic favour or influence through the provision of economic aid, investment, and development funding. It is a form of bilateral debt-based diplomacy where a creditor country extends excessive credit to a debtor country with the intention of extracting concessions when the latter is unable to meet its debt obligations. The loaned money is often used to pay contractors from the creditor country, and the conditions of the loans are typically not made public.
Cheque book diplomacy is a tool used by countries to gain influence and project power over target regions. It is a more subtle approach than force or coercion, instead relying on relationship-building and reciprocal advantages. The term was first used to describe German and Japanese international involvement during and after the Gulf War, due to constitutional restrictions that prevented these countries from committing troops to the coalition.
In recent times, cheque book diplomacy has been notably employed by China, which has extended financial lending to countries across the globe, particularly in the Pacific region. China's lending has been criticised as imposing unsustainable debt burdens on vulnerable countries, with loan conditions requiring secret negotiations and non-competitive pricing that benefits Chinese state-owned companies. The high-interest loans are often collateralised by strategically important natural assets, and countries unable to repay the loans are forced to surrender lands, ports, and airports, providing China with military and strategic gains.
Other examples of cheque book diplomacy include the recognition of the breakaway South Caucasus states of Abkhazia and South Ossetia by Pacific island nations. Nauru, Tuvalu, and Vanuatu recognised these states in exchange for aid from Russia, although the latter two have since withdrawn their recognition.
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It involves countries exchanging economic aid and investment
Chequebook diplomacy is a foreign policy tool used by countries to exchange economic aid and investment to achieve diplomatic favour. It involves one country offering financial aid or investment to another in exchange for political influence or concessions. This can include seeking to strengthen diplomatic recognition, gain support in international organisations, or extract economic or political concessions.
For example, in the Pacific region, China and Taiwan have engaged in a lengthy process of "buying" diplomatic recognition from Pacific nations since the 1970s. This has continued in recent years, with China providing substantial support to Pacific nations during the COVID-19 pandemic. Similarly, in 2017, Estonia provided Fiji with over US$225,000 to support its Presidency of the UNFCCC, which was also diplomatically important for Estonia as it was canvassing for support for its bid for a Security Council seat.
Chequebook diplomacy can also involve providing loans or credit to another country with the intention of extracting concessions when the debtor country becomes unable to honour its debt obligations. For example, China has been accused of imposing unsustainable debt burdens on vulnerable countries, which has led to concerns about a potential military advantage for China as countries are forced to hand over lands, ports, and airports in order to repay their loans.
While countries engaging in chequebook diplomacy may deny that they are currying favour, it is a powerful tool for projecting power and influence over target regions. It is a form of engagement that has been a key component of diplomacy in the Pacific, with up to 12 votes available in the region, support from Pacific nations is critical for any initiative to succeed in the UN General Assembly or other international organisations.
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It is a type of diplomacy based on debt
Chequebook diplomacy is a type of diplomacy based on debt. It is a foreign policy tool used by countries to exchange economic aid and investment to achieve diplomatic favour. This form of diplomacy involves a creditor country intentionally extending excessive credit to a debtor country, often in the form of loans with conditions that are not made public. The loaned money is typically used to pay contractors from the creditor country, and the debtor country may struggle to honour its debt obligations. This can lead to the debtor country having to make concessions, such as providing access to strategically important natural assets.
Chequebook diplomacy has been associated with China's lending practices, which have been criticised for imposing unsustainable burdens on vulnerable countries. For example, Sri Lanka signed over a 99-year lease for the Hambantota Port to China after being unable to repay a loan, and countries such as Argentina, Namibia, Laos, Burundi, Chad, Mozambique, and Zambia have also faced challenges in repaying loans from China. China's role as a major infrastructure developer and its rapid economic growth have contributed to its position as a key player in chequebook diplomacy.
Other countries, such as India, have also been accused of engaging in chequebook diplomacy to gain political influence. India has increased its foreign assistance, particularly to neighbouring countries and African nations, which has raised concerns about competing interests with China. The use of external assistance as a tool for diplomatic gain requires careful planning due to the potential risks associated with leadership and policy changes in recipient countries.
Chequebook diplomacy has been a key component of diplomacy in the Pacific region, where countries compete for diplomatic recognition and influence. The support of the Pacific nations is critical for initiatives to succeed in the UN General Assembly and other international organisations. China and Taiwan have engaged in a lengthy process of "buying" diplomatic recognition in the region, and other donors, such as Slovenia, Estonia, and Kuwait, have also provided aid to Pacific nations.
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China is a major player in cheque book diplomacy
Cheque book diplomacy is a foreign policy that uses economic aid and investment between countries to achieve diplomatic favour. China is a major player in cheque book diplomacy, using its economic clout to gain diplomatic recognition and influence. China has been accused of exploiting developing countries in a neo-colonialist manner through high-rate loans and requiring secret negotiations that lead to non-competitive pricing on projects.
For example, in 2017, Sri Lanka was unable to repay a loan from China that was used to build a new port in the city of Hambantota. As a result, Sri Lanka signed over to China a 99-year lease for its use, potentially as a strategic base for China's navy. Similarly, China has provided substantial investment to Pakistan, whose economy is cash-starved, in the form of the China-Pakistan Economic Corridor (CPEC), with an investment of up to $60 billion.
China has also been accused of buttressing repressive regimes and seeking to coerce countries invested in to align with key strategic and military issues. For instance, in exchange for Chinese aid, Mongolia agreed to no longer host the Dalai Lama, whom Beijing views as wanting to separate Tibet from China. Additionally, China has been accused of imposing unsustainable debt burdens on vulnerable countries, with a study by the International Monetary Fund (IMF) finding that from 2013 to 2016, China's contribution to the public debt of heavily indebted poor countries nearly doubled from 6.2% to 11.6%.
Through cheque book diplomacy, China has been able to sustain captive sources for raw materials and ready markets for its end products, as well as guarantee invaluable political and diplomatic influence.
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Other countries engaging in cheque book diplomacy include Germany, Japan, India, and Taiwan
Cheque book diplomacy is a foreign policy that uses economic aid and investment between countries to achieve diplomatic favour. Other countries that have engaged in cheque book diplomacy include:
Germany
Germany has been involved in cheque book diplomacy during and after the Gulf War. Unable to commit troops to the coalition due to restrictions in its constitution, Germany contributed financially to the war effort. In 2017, Germany also hosted the Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC) in Bonn, which was financially demanding.
Japan
Similarly, Japan was also unable to commit troops to the Gulf War due to restrictions in its constitution. Instead, it provided financial support.
India
India has been encouraged to provide concessional loans, development grants, lines of credit, and technological help to neighbouring countries so that they do not fall into debt traps. India's interests are affected by the policies and politics of developed and developing countries that engage in cheque book diplomacy.
Taiwan
Taiwan has been engaged in a lengthy process of "buying" diplomatic recognition from Pacific nations since the 1970s. This has resulted in an unprecedented growth in the magnitude of Sino-Taiwan aid competition in the region. Taiwan has been persistent in its pursuit of diplomatic recognition through aid diplomacy, matching the surge in Chinese foreign aid to the Pacific.
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Frequently asked questions
Cheque book diplomacy is a foreign policy in which countries exchange economic aid and investments to gain diplomatic favour.
Here are some examples of cheque book diplomacy:
- In 2017, Sri Lanka signed over a 99-year lease for the Hambantota Port to China as they were unable to repay a loan used to build it.
- In 2017, Estonia provided over $225,000 to Fiji to host the Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC). This was also important to Estonia as they were looking to gain support for their bid for a Security Council seat in 2020-2021.
- In 2017, Slovenia provided close to $44,000 in one-off aid to three nations in a Compact of Free Association with the United States – Palau, Micronesia and the Marshall Islands.
China is most commonly associated with cheque book diplomacy. However, other countries such as Taiwan, India, Japan and Germany have also been known to engage in cheque book diplomacy.
