China’s belt and road: ‘sour grapes’ claims of debt-trap diplomacy are not supported by evidence

China has often been attacked for using debt to entrap partner nations, but loan recipients are most often willing partners rather than passive victims
The sometimes-heated reaction to the belt and road is a microcosm of the polarising impact China’s economic and strategic rise has had on the world

Anthony Rowley

Published: 3:30am, 2 Nov 2020

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The Royal Institute of International Affairs, better known as Chatham House, recently held an event with the unusual and rather controversial title of “Debunking the Myth of Debt-trap Diplomacy: How Recipient Countries Shape China’s Belt and Road Initiative”.

It seemed a bold move given the torrent of criticism that China’s Belt and Road Initiative (BRI) has faced from key figures such as US Vice-President Mike Pence and others. They have accused China of luring developing nations such as Sri Lanka and Malaysia into debt so that it can seize strategic assets.

The move coincided with the World Bank’s annual meeting in Washington. World Bank president David Malpass revealed there that the bank hopes to “standardise” what is becoming a spaghetti bowl of international infrastructure initiatives that compete with the Belt and Road Initiative.

As pressure mounts for increased fiscal stimulus to counter recession and raise the productivity of economies in general, the need to end wasteful infrastructure competition – involving mainly China, Japan, the United States, Australia and India – and focus on stepping up investment is becoming apparent.

This is happening at a time when the political spotlight is being trained on infrastructure in pre-election America and elsewhere. The realisation is dawning that the money and time involved in infrastructure building are huge and demand concerted, not competing, effort and resources.

This is far from the case at present. Since President Xi Jinping announced the hemisphere-girdling belt and road in 2013, it has spawned competing initiatives including the Asia Africa Growth Corridor, the Trilateral Partnership and the so-called Blue Dot Network.

It was thus intriguing to hear Malpass say, “it’s vital the world move towards a financing structure where multiple infrastructure projects can be pooled to reduce the risk to the entire package and that’s difficult right now because of the difference in the contracts”.

Malpass also said that, “we have a very low-interest rate environment, and it should be an environment that provides much more infrastructure investment than is currently occurring. A key step in this is the documentation and the standardisation of the quality of infrastructure projects”.

World Bank officials later declined to elaborate on Malpass’ comments beyond saying that ideas are still being thought through. However, at least the World Bank appears ready to step into a much-needed coordinating role.

This is all well and good if it can be achieved on the basis of a consensus involving China among other key powers. Up to now, the quality of Chinese infrastructure has been widely criticised even though the US and Italy, for example, have experienced recent infrastructure collapses.

China has been attacked even more often for its “debt-trap diplomacy”. The Chatham House event challenged this position, however, arguing that economic and not strategic factors have been the primary drivers of the Belt and Road Initiative.

“China’s development financing system is too fragmented and poorly coordinated to pursue detailed strategic objectives,” argued Lee Jones and Shahar Hameiri, speakers at the event and authors of a paper by the same name. “Developing-country governments and their associated political and economic interests co-determine the nature of BRI projects on their territory.”

Jones and Hameiri offered frank and sometimes blunt analyses. It was suggested, for example, that countries receiving belt and road loans have often been not passive victims but willing partners in China-funded infrastructure schemes. The now well-known case of the Hambantota port in Sri Lanka and highway projects in Malaysia were cited in particular.

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Sri Lankan authorities used Chinese loans made in connection with Hambantota partly to pay off debt incurred from other sources, the speakers claimed at the London event, and no Chinese naval vessels have used the port as was suggested as a Chinese motive for financing it.

In Malaysia, China made loans under the initiative to help finance the East Coast Rail Link, a major rail project being built across the peninsula. Part of those loans were used to cover holes in the country’s sovereign wealth fund that were discovered during former prime minister Najib Razak’s time, Jones and Hameiri argued.

If events such as the Chatham House event serve to lower the heat of debate on the Belt and Road Initiative, and in the event of a Joe Biden victory in the US presidential election, attention is likely to shift to domestic infrastructure concerns and away from what have been called “sour grapes” attacks on the initiative.

The belt and road is a microcosm of the polarising impact that China’s economic and strategic rise has had on the world’s major and minor powers. This could result in either a new cold war or a new era of detente and cooperation. There are still risks of the former but also glimmers of hope for the latter.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs