The Washington PostDemocracy Dies in Darkness

Opinion China’s debt traps around the world are a trademark of its imperialist ambitions

Malaysian Prime Minister Mahathir Mohamad at a welcome ceremony last week hosted by Chinese Premier Li Keqiang at the Great Hall of the People in Beijing. (Jason Lee/Reuters)

Last Tuesday in Beijing, the Malaysian prime minister, Mahathir Mohamad, announced that his country was canceling two multibillion-dollar Chinese projects because Malaysia can’t repay its debts. “We do not want a situation where there is a new version of colonialism,” Malaysia’s leader told his grim-faced host, Premier Li Keqiang.

To say that Mahathir’s performance was rich in irony would be an understatement: Here you had Mahathir, an Asian politician who cut his teeth on anti-Americanism, warning China that it, too, risked becoming an imperialist nation. He made his statement in the Great Hall of the People, a veritable temple to China’s communist revolution and Beijing’s vaunted claims to represent the downtrodden of the earth.

But the 93-year-old leader, who recaptured the premiership this year on the back of a campaign that questioned China’s intentions, has a point. Is China becoming a new type of imperialist power?

This question is being asked around Asia and other parts of the world after the rollout of China’s Belt and Road Initiative in 2013. Once likened to the Marshall Plan that revived Europe’s struggling economies after World War II, the trillion-dollar program to fund and build ports, railroads, power plants, dams and pipelines in some 70 countries is now being framed by critics as not exactly an imitation of American largesse but more as an example of debt-trap diplomacy in which China angles to gain influence overseas by bankrupting its partners and bending them to its will.

Albeit slowly, poorer countries are awakening to the downside of Chinese cash. Montenegro took Chinese money, labor, construction material and engineering to build a highway from its port on the Adriatic Sea toward Serbia. But now with the highway less than halfway built, the tiny Balkan nation faces the prospect of incurring debt of more than 80 percent of its gross domestic product. The International Monetary Fund says Montenegro can’t afford to finish the project.

Sri Lanka was so indebted to China after approving a string of ambitious projects that it was forced last year to lease a port in Hambantota to a Chinese company for 99 years. American and Japanese concerns that China planned to use the port as a naval outpost have caused them to increase their military assistance to the island nation. On Wednesday, Sri Lanka’s defense minister announced that it would not allow China to use the port for military purposes — at least a temporary setback for Beijing.

Pakistan is facing a full-blown debt crisis, partially due to years of incompetent and corrupt political leadership but also thanks to its unquenchable thirst for the Chinese yuan. In Pakistan, the Belt and Road Initiative goes by another name, the China-Pakistan Economic Corridor. To date, some $27 billion in projects are being built as part of what is envisioned to be a $62 billion plan to resuscitate Pakistan’s sputtering economy. But, as with Montenegro, the IMF has warned Pakistan that it can’t afford to repay its Chinese debts — at least $10 billion and counting.

Now Pakistan’s new government is considering asking the IMF for a bailout. Secretary of State Mike Pompeo, for one, was not amused, telling CNBC in a late July interview that “there’s no rationale for IMF tax dollars, and associated with that American dollars … to go to bail out Chinese bondholders or China itself.” Befitting its role as Pakistan’s “all-weather” friend, China coughed up $2 billion more to Pakistan last month, just days after Pakistan’s new prime minister, cricket legend and international playboy Imran Khan, won an election.

In addition to Malaysia, several countries have stopped or scaled-back Chinese projects. Myanmar is trying to renegotiate a $10 billion port project; Nepal wants to halt construction on two Chinese-built hydroelectric dams. Other nations are so in hock to China that they say little, but things there have already approached a point where analysts believe that debt crises are almost inevitable.

A Chinese-built railway through Laos is worth half of that little nation’s GDP.  In a report by two researchers from Harvard’s Kennedy School, former Australian foreign minister Gareth Evans is quoted as saying Laos and Cambodia, each of which has borrowed more than $5 billion, are now “wholly owned subsidiaries of China.”

In Malaysia, the specific trigger to Mahathir’s concerns are a group of Chinese development projects that were approved by his predecessor, Najib Razak. Najib was voted out of office this year and is now facing corruption charges. Investigators in Malaysia are looking into whether people close to Najib brokered the deals with China so that they could use Chinese funds to, among other things, bankroll Najib’s reelection campaign. This would seem to violate a key section of Chinese Communist catechism: the Five Principles of Peaceful Coexistence. Number three on that list vows “mutual noninterference in each other’s internal affairs.”

The irony doesn’t stop there. Number one on that list is: Mutual respect for each other’s territorial integrity and sovereignty.” And yet, in both Malaysia and Pakistan, Chinese firms want to build Chinese-only gated communities, an unintended throwback to the bad old days of international settlements in Shanghai, Guangzhou and Tianjin when Westerners lorded it over the Chinese.

At the tip of the Malaysian peninsula, Forest City is a metropolis being built on four artificial islands. It has space enough for 700,000 people. Marketed at prices too high for the average Malaysian, the development is targeted at mainland Chinese. It was even designed by a Chinese company. But that, too, risks a backlash and has raised fears in Malaysia about upsetting the delicate ethnic balance between Malays, Indians and Chinese.

Pakistan, too, is reportedly to be the site of a Chinese-only community, this one for 500,000, near the port of Gwadar, which China is building as part of its “string of pearls” project to construct ports, possibly for the use of its navy, across the Indian Ocean to Africa. In addition, Chinese companies in Pakistan, worried about terrorism and kidnapping, employ thousands of Chinese security forces who appear to act outside of Pakistani law. If this isn’t extraterritoriality, it isn’t clear what is.

The Chinese have called their system “socialism with Chinese characteristics.” Perhaps “imperialism with Chinese characteristics” makes more sense.

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