China has given billions of dollars in loans to developing countries but now, as COVID-19 has increased the pace of record global debt levels, countries could be at risk of defaulting and China’s carefully cultivated relationships could be about to unravel.
In 2013, Chinese President Xi Jinping announced the launch of the “Belt and Road Initiative” (BRI), an ambitious multi-billion project dubbed the Chinese Marshall Plan, which China says is to improve economic connectivity and cooperation across the globe.
Consisting of overland corridors and maritime shipping lanes, the scheme involves 71 countries and half of the world’s population. China says the initiative is an economic stimulus package, designed to help state-owned businesses in what it sees as a win-win situation. Critics have accused it of being a scheme with the aim of creating a Chinese-centered order.
China’s lending to countries in Africa was $152 billion between 2000 and 2018, according to the South China Morning Post, much of which was spent on Belt and Road Initiative projects. It’s become known as “debt-trap diplomacy”, where a country loans money with the intention of political or economic concessions if the loan cannot be repaid.
Should any country default, it is feared that a similar situation could arise to the one in Sri Lanka, where the government was unable to service debt on the port. It was then leased by the government to Chinese firms on a 99-year lease. The U.S. has expressed concern that the port could be used by China as a naval base.
The Trump administration has repeatedly warned African nations that accepting Chinese loans could result in them losing control over strategic assets too. It has warned that a strategic port in the tiny Horn of Africa nation of Djibouti could succumb to the same fate, a prospect the government there has denied.