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China’s Smart Debt Trap Diplomacy!

April 14, 2023

Is China’s smart debt trap diplomacy a threat to India?

When it comes to navigating the turbulent waters of foreign affairs, China has consistently proved to be a master strategist. Its sharp approach has played a vital role in the country’s meteoric rise to prosperity. One of the hallmarks of this approach has been China’s willingness to lend a helping hand to struggling countries by offering generous loans.

At first glance, this may seem like an act of kindness, but the reality is far from it. Yes, the real picture is that China wanted to secure the loyalty of nations that were in dire straits. While some nations could leverage these loans to their advantage, others sank deeper into debt.

But is India also a part of the picture? Let’s find out.

The Story
It all started in 2013 China launched the Belt and Road Initiative (BRI) – a massive undertaking to boost China’s economy and expand its network. To achieve this, China began lending money to countries to support infrastructure projects such as roads and railways, specifically under the Belt and Road initiative. As years passed by, China lent trillions of dollars to 22 countries.

Some countries that received this loan bailout were Sri Lanka, Pakistan, Djibouti, Angola, Ethiopia, and others.

Critics in the West accused China of leading poor countries into a debt trap, but China denies this. But was that the case, or was China using poor countries for its benefit?

Take the case of Sri Lanka’s Hambantota International Port. Until 2014, China had lent $1.26 billion for the port’s development. When Sri Lanka couldn’t repay its debt, it had to surrender the port to China for a 99-year lease in exchange for $1.1 billion. Sri Lanka also had to give up a 70% stake in its deep-water port.

A similar story can be seen in Djibouti, an East African country located at the mouth of the Red Sea, with close access to the Suez Canal. China invested over a billion dollars in the country over the last decade, mainly in transportation, to gain access to the entire East African market and facilitate the transportation of natural resources to Asia. But in the end, Djibouti was trapped in debt. It owed over 80% of its GDP to China, and in 2017, China established its first overseas military base.

But the twist comes when China offered additional bailouts to countries after pushing them into debt. The bailout was about $240 billion, according to the Guardian report.

China may have done this to maintain good trade relations and protect its regional economic interests. It is unclear whether the bailouts were offered without strings attached or if China has different goals.

Is India Also a Part of the Picture?
Thankfully, India is not a part of China’s Belt and Road Initiative (BRI). India refused to participate in the initiative due to concerns that China’s investment in ports in countries like Sri Lanka, Pakistan, and Bangladesh could be used to increase China’s military presence in important coasts like the Bay of Bengal and the Arabian Sea.

The initiative is often seen as a way for China to expand its String of Pearls strategy. It involves creating a network of military bases and ports around the Indian Ocean to project its power and influence.

By refusing to participate in the BRI, India has demonstrated its cautious approach towards China’s expanding influence and has safeguarded its own interests in the region.

(Article by Teji Mandi)

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