Neo-colonialism

Neo-colonialism is the use of economic, political, cultural, or other pressures to control or influence other countries. This differs from the use of military power, known as imperialism. The debt-trap is created when a country lends to poorer countries, intentionally overwhelming them with unsustainable debt, forcing them to surrender strategic assets

or concede increased political leverage. Due to its element of political influence and leverage, some portray China’s lending of money in African countries as a form of neo-colonialism.

How is China said to be involved?

How is China said to be involved? For the past 15 years, China has directly invested $5.4 Billion (as of 2018) in African countries. Additionally, Chinese loans for energy and infrastructure projects within Africa have almost tripled, from $3 billion (2016) to $8.8 billion (2017), meaning that Chinese banks are transforming into active lenders across 19 African nations. This investment at a low interest rate targets certain areas critical to economic development and stability, including industrialization, agriculture modernization, infrastructure, financial services, green development, trade, poverty reduction, and public welfare. This gives China an incredible amount of political and economic leverage over these countries, leading some people to believe that Beijing (China’s Capital) may harbour ulterior motives to boost diplomatic relations and economic cooperation with African countries.

What does China gain from low-interest investment in Africa?

Africa has an abundance of natural resources, therefore the majority of the projects that China invests in are ones that allow it to mine natural resources in African countries to provide its population the raw materials needed. This is facilitated by the newly constructed railways which allow for easier transport of goods to the ports. Essentially, China is offering loans to African countries allowing them to build their infrastructure at competitive rates compared to other countries in order to stimulate their economies. However, in exchange for this, China receives natural resources to power its own economy. Secondly, these investments are also a way of gaining presence and influence through a strategy called the ‘Debt-Trap Diplomacy.’ China uses its state-owned policy banks like the China Development Bank and the Export-Import Bank of China, which are more interested in advancing China’s foreign-policy goals than making a profit, to support various infrastructure projects across Africa. Many see this as China giving debt after debt to a financially struggling economy and eventually drowning them in it. This occurs until the country has no other way to pay them back, leading them to then to surrender cities, roads and ports to China.

Countries in China’s so called ‘Debt-Trap’

Nigeria

On July 29th, clauses in a loan collected by the Nigerian Government from China, uncovered by Members of Nigeria’s House of Representatives, concedes the country’s sovereignty to the Asian country. The loan agreement which had been signed between Nigeria and Export-Import Bank of China concedes sovereignty of Nigeria to China in the $400m loan for the Nigeria National Information and Communication Technology Infrastructure Backbone Phase II Project signed in 2018.

Zimbabwe

In March 2011, China signed a $700 million loan deal with Zimbabwe. Then, in May 2014, China demanded that Zimbabwe use its minerals deposits to guarantee future loans. Zimbabwe attempted to monetize its minerals in order to obtain further loans from China which they approved. However, Beijing became more controlling of its expenditure and restricted the amount of money available to be spent on Zimbabwe’s struggling economy. Soon after, Chinese companies were exempted from local labour laws and given the first priority to copper and diamond explorations while mineral rights were sold off to the Chinese as part of the loan repayment plan.

Djibouti

China owns over 82% of Djibouti’s external debt, with 88% of Djibouti’s $1.72 billion GDP being debt. Djibouti is home to a vital trade route called the Port of Doraleh, which allows China to export consumer products to Europe and import crude oil from Azerbaijan, Russia, Libya, and Egypt and more. Due to its accumulated debt, Djibouti may have to hand this port, that overlooks the strategic Bab el Mandeb (connecting the Mediterranean Sea and the Indian Ocean through the Red Sea with the Gulf of Aden) over to China.

The origins of Debt Trap Diplomacy

To illustrate, the narrative of China’s asset seizure of the Sri Lankan port of Hambantota due to Sri Lanka being unable to repay its debts is often used to further the idea of Debt Trap Diplomacy. Hambantota port’s construction began in 2008 and was completed in 2010, but by 2016 Sri Lanka had lost over 360 million dollars. Five loans were taken out from the Exim Bank of China to construct the port, and by 2016, Sri Lanka had over 112 million to pay back in construction fees. However, the majority of their debt (41%) come from Euro Bonds, with the top lenders such as BlackRock, Ashmore Group, Allianz, UBS, HSBC, JPMorgan Chase and Prudential being from the U.S., Switzerland, Britain and Germany. Prime Minister Ranil Wickremesighe went to China to find a solution for the immense debt coming from these bonds. As a result, China Merchants Port, a state-owned company, was granted a 99 year lease on 70% of the port for 1.12 billion dollars in 2017. This deal did not involve the cancellation of debt in exchange for the equity of an asset - the loan agreements still remained. The money from the deal was used to strengthen Sri Lanka’s foreign reserves- not to repay China, as China only holds 10% of Sri Lanka’s debt. Today the term Debt Trap Diplomacy is used to describe Chinese economic relations with developing countries like Malaysia and Kenya.

Western views

China’s lending practises are commonly portrayed as a ‘Debt Trap Diplomacy’. This phrase was popularised after being used in Government documents during Trump’s administration. The focus on debt-trap diplomacy may be part of wider Western anxieties towards China’s presence in Africa. We've already seen that Chinese investments and Chinese infrastructure projects have been linked to increasing Chinese influence within the host country ruling elite. This may end up being used as a leverage point for China to push some of these countries or powerful individuals to side with China on critical issues that are important to the U.S. or to its allies. The U.S. approach has been focusing its Africa strategy on aid and social services, while on the other hand, China focused its strategy on building and advancing the infrastructure within select African countries. African governments have previously stated that they are tired of aid and charity, and instead want to trade and be treated as partners.

Some may see the so-called ‘Chinese Debt Trap’ in Africa as simply just Western Propaganda, pushing the west’s agenda of ‘yellow peril’ because when America intervenes in developing countries it is clean and nothing to be worried about, whereas when Asia does it, it’s malicious and deliberately planned for strategic advantage and a threat to the rest of the world.

Larger issues

This is not to say that there haven’t been any issues with China’s relationships with developing countries. For example, Venezuela and the labour strikes surrounding the railroad development deal with the China Railway Engineering Corporation that ended in 2015 due to ecological issues, labour policy violations and corruption. Journalists, academics and politicians have a responsibility to set aside bias to analyse developments case-by-case. When it comes to Sinophobia, many have an understanding that it’s rooted in East and Southeast Asia, being portrayed as an existential danger to the western world. For instance, there’s the yellow peril which was a common stereotype in film, literature and art, depicting East and Southeast Asians as intent to dominate the civilised western world. There is also techno-orientalism, often seen in Western Sci-Fi films, illustrating a fear of Asian superiority in technology. This all links in to what scholar Colleen Lye calls the Asiatic Racial Form which fetishizes life under Capitalism and illustrates the Asiatic as a conniving entity, calculating with excessive economic efficiency.

By Angelique Rees

Sources

• The Myth of the Chinese Debt Trap in Africa by Bloomberg- https://www.youtube.com/watch?v=_-QDEWwSkP0

• Lab-Leak Theory and the “Asiatic” Form by Andrew Liu- https://www.nplusonemag.com/issue-42/politics/lab-leak-theory-and-the-asiatic-form/

• Real debt trap: Sri Lanka owes vast majority to West, not China- https://multipolarista.com/2022/07/11/debt-trap-sri-lanka-west-china/#:~:text=Real%20debt%20trap%3A%20Sri%20Lanka%20owes%20vast%20majority,allies%20Japan%20and%20India.%20China%20owns%20just%2010%25.

• The Chinese train derailed on Venezuela’s plains- https://dialogochino.net/en/infrastructure/40823-the-chinese-train-derailed-on-venezuelas-plains/

• THE SPECTRE OF GLOBAL CHINA- HTTPS://NEWLEFTREVIEW.ORG/ISSUES/II89/ARTICLES/CHING-KWAN-LEE-THE-SPECTRE-OF-GLOBAL-CHINA

• China: Is it burdening poor countries with unsustainable debt?- https://www.bbc.co.uk/news/59585507

• Should Africa be wary of Chinese debt?- https://www.bbc.co.uk/news/world-africa-45368092

• The Chinese ‘Debt Trap’ Is a Myth- https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/