Malcolm Rivera
China's Belt and Road Initiative (BRI) has been accused of engaging in debt-trap diplomacy (DTD) by intentionally extending excessive credit to low-income countries, which, when unable to meet their repayment obligations, are pressured into forfeiting strategic assets or providing geopolitical concessions. While some analysts and scholars have criticized BRI for supporting authoritarian regimes and engaging in predatory lending practices, others argue that evidence for DTD is limited and that China's lending practices are not the primary driver of debt distress in borrowing nations.
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What You'll Learn
China's lending policies in Africa
Debt-trap diplomacy (DTD) is a relatively new policy tool associated with China. The term was first coined by Indian academic Brahma Chellaney in 2017, who defined it as a Chinese foreign policy tool in the 21st century. DTD is said to occur when a creditor country, in this case, China, extends excessive credit to a debtor country, with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations.
China has been accused of pursuing this policy in Africa, particularly in Zambia, Djibouti, and the Congo. However, there is limited evidence to support these claims. While China is a significant lender to African countries, other institutions, such as the World Bank and commercial loans, account for a larger share of loans. Additionally, analysts have disputed the idea that China's lending practices are part of a grand geostrategic plan, arguing that there is no single person in charge of the lending process.
Furthermore, some analysts have suggested that China has indicated a willingness to become more of a donor country to Africa, rather than just harvesting African mineral resources. Beijing has pledged to increase its support for Africa, and there have been calls for China to increase its grants and not just loan money to the continent.
It is worth noting that the debate around DTD is complex, and some scholars question the existence of such a strategy. They argue that China's lending practices are not the main cause of debt troubles faced by borrowing nations, and that Chinese banks have never seized assets from any nation. For example, in the case of the Maldives, while the country faces a heavy Chinese debt burden, the conditions do not align with debt-trap diplomacy assumptions. Similarly, in Sri Lanka, another country heavily associated with DTD claims, there is evidence that the Hambantota Port project was driven by Sri Lankan actors for their own domestic purposes, rather than by China.
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China's Belt and Road Initiative
BRI is often associated with debt-trap diplomacy (DTD), a term coined by Indian academic Brahma Chellaney in 2017. DTD is seen as a new Chinese policy tool connected to BRI, where China lends money excessively to low-income indebted states that cannot later repay Chinese debt. The debtor country then relinquishes strategic assets to China to decrease its debt burden.
There is debate surrounding the existence and extent of DTD. Some scholars argue that China's lending practices are not behind the debt troubles faced by borrowing nations, and that there is no evidence of predatory lending practices. They highlight that China has written off many loans and provided debt relief. Others argue that China's lending to risky borrowers is not a plot, and that the term "debt-trap diplomacy" is used more easily in American political discourse than accepting that domestic politics drive excesses in China.
Some critics of BRI argue that it is a geopolitical strategy that lures poor countries into unsustainable loans for infrastructure projects, allowing China to seize assets and extend its strategic or military reach. However, evidence for these views is limited, and it is argued that economic factors are the primary driver of current BRI projects. The two most widely cited 'victims' of China's 'debt-trap diplomacy', Sri Lanka and Malaysia, initiated the most controversial BRI projects themselves, pursuing their domestic agendas. Their debt problems arose mainly from the misconduct of local elites and Western-dominated financial markets.
In conclusion, while China's Belt and Road Initiative has sparked concerns about debt-trap diplomacy, the evidence suggests a more complex reality. The initiative's impact is shaped by recipient countries' political and economic interests, resulting in poorly managed projects with negative consequences. China now faces the challenge of balancing debt repayment with maintaining goodwill through the initiative.
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China's financial influence
The term "debt-trap diplomacy" was first coined by Indian academic Brahma Chellaney in 2017 to describe China's lending practices, particularly in Africa. The accusation is that China lends excessive amounts of money to developing countries to build infrastructure, creating a dependency and obtaining leverage when these countries struggle to repay their debts. This leverage is then used to extract economic or political concessions, such as control over strategic assets.
However, the existence of Chinese debt-trap diplomacy has been disputed by many academics, professionals, and think tanks. Some argue that China's lending practices are not the main cause of debt troubles faced by borrowing nations, and that there is no evidence that China has ever seized assets from indebted countries. For example, a 2018 report by the Center for Global Development found that between 2001 and 2017, China restructured or waived loan payments for 51 debtor nations without seizing state assets. Additionally, China has provided debt relief to borrowers and written off many of its loans.
The narrative of debt-trap diplomacy has also been criticised for underestimating the decision-making power of borrowing countries, which have autonomy in entering into financial arrangements. Some argue that concerns about debt-trap diplomacy arise from anxiety around China's rise as a global superpower and its increasing financial influence, particularly in Africa.
In conclusion, while China's financial influence has undoubtedly grown, the evidence for the existence of a deliberate debt-trap diplomacy strategy is limited. The country's lending practices have been portrayed as more complex than a simple plot to undermine the sovereignty of borrowing nations.
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China's lending to risky borrowers
However, the existence of DTD as a deliberate strategy has been questioned by many academics, professionals, and think tanks. They argue that China's lending practices are not the primary cause of debt issues in borrowing nations, and there is limited evidence to support the DTD claims. For example, China has written off loans and provided debt relief to borrowers, and in some cases, such as Sri Lanka, the borrowing country actively sought financial assistance from China.
China's lending practices have been associated with its Belt and Road Initiative (BRI), which aims to enhance infrastructure and investment globally. While BRI has faced criticism for supporting authoritarian regimes, it is worth noting that China has also restructured or waived loan payments for many debtor nations without seizing their assets.
Additionally, China's role as a creditor extends beyond its official lending to developing countries. As of 2017, China had become the world's largest official creditor, surpassing the World Bank and the IMF. However, it is estimated that 50% of its official lending is not reported in official debt statistics, leading to concerns about debt sustainability.
While there is debate about the intentionality of China's lending practices, it is clear that the country has been a significant lender to risky borrowers. This has contributed to debt distress in some countries, particularly those with existing high-risk debt profiles, such as Zambia, Djibouti, and Congo. However, the impact of China's lending on a global scale is still being studied and understood.
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China's debt acquisition
The concept of "debt-trap diplomacy" (DTD) has been used to characterise China's lending policies, particularly in Africa, and describes how China lends excessive amounts of money to low-income, indebted states that cannot later repay Chinese debt. The borrowing state thus relinquishes some of its strategic assets to decrease its debt burden towards China (debt-for-equity swap).
There are varying perspectives on China's debt acquisition. Some critics accuse China of pursuing a policy of DTD by luring poor, developing countries into agreeing to unsustainable loans for infrastructure projects. The accusation is that when these countries experience financial difficulty, China can seize their assets, thereby extending its strategic or military reach. However, others argue that the evidence for such claims is limited and that China's lending practices are not behind the debt troubles faced by borrowing nations.
China has also provided debt relief to borrowers and written off many of its loans. For example, after the COVID pandemic, China engaged in restructuring and was willing to negotiate debt-relief measures for distressed African countries. Additionally, an analysis of 40 Chinese debt renegotiations found that asset seizures are very rare, and there is no evidence that China has ever attempted to seize the assets of indebted countries when they have been unable to pay.
The debate around China's debt acquisition is complex and multifaceted, with some arguing that the narrative of DTD underestimates the decision-making power of borrowing countries and their autonomy in financial arrangements. It is important to consider the broader context, including the role of other international lenders and the financial decisions of borrowing countries themselves.
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Frequently asked questions
Debt-trap diplomacy (DTD) is a term coined by Indian academic Brahma Chellaney in 2017 to describe a Chinese foreign policy tool. DTD is the idea that China lends excessive amounts of money to low-income indebted states that cannot later repay Chinese debt. When these debtor countries become unable to meet their repayment obligations, they are forced to relinquish strategic assets to China in exchange for debt relief.
There is some evidence to suggest that China engages in debt-trap diplomacy. For example, in 2024, the World Bank emphasised that numerous African nations are at high risk of economic collapse, primarily due to substantial debts owed to Chinese creditors. Additionally, in May 2023, it was reported that a dozen countries, including Pakistan, Kenya, Zambia, Laos, and Mongolia, were on the "brink of collapse" due to overwhelming foreign debt, much of it from China.
However, it is important to note that the existence of DTD as a deliberate strategy is debated by scholars and analysts. Some argue that China's lending practices are not behind the debt troubles faced by borrowing nations and that there is no evidence of predatory lending practices. China has also provided debt relief to borrowers and written off many of its loans.
Recipient countries of Chinese loans, such as Sri Lanka, have pushed back against accusations of debt-trap diplomacy. In the case of Sri Lanka, the country's ambassador to Beijing stated that the "Chinese government never asked [us] to hand over the port [...] this proposal came from Sri Lanka, asking [for] partnership from China". This suggests that borrowing countries have agency in negotiating the terms of their loans and are not simply lured into unsustainable agreements by China.
