How China make small countries face Debt trap?

The session started with the discussion of the way how China is attracting developing nations to take multi-billion loans from them as they gave low interest rates and long grace period for the large scale infrastructure projects. It was highlighted that China targets underdeveloped countries and issue them loans which they find irresistible due to very low rate of interest. However, when the borrowing country realises that it will fail to repay the loan, China demands concessions or advantage in exchange of debt relief. It urges the borrowing countries to give China access to their assets like land, ports, etc. which China can use to their benefit. Some of the examples were also discussed by the participants i.e. of Hambantota port of Sri Lanka that was under the control for 99 years with China due to their failure in repayment of loan. This is how China entangles a nation in its debt trap. China also have a huge share in the Asian Infrastructure Bank.

Here, The question arises from the above discussion was that why countries are still approaching China other than IMF or other institutions . The reason highlighted by one of the participant was the credit worthiness standards that were not considered by China before granting a loan because China consciously gives loans to that nation who may not be able to repay it, however, other institutions were considering it before granting loans. China issue loans at interest rate as low as 2-3% which is literally “giving money for free” but China tends to increase the interest rate progressively which seizes the nations for their loan repayment. It was also brought into notice that China issues so much loan that its debt is even higher than the GDP of USA & Japan respectively.

At the start of 21st century China issued loan at interest rate of 6% whereas in 2019 it was noted that China is issuing loans at interest rate of 6%. Why is China doing this? The most compelling answer to this question is, that China aims to create a monopoly. It wants to make silk route ie., create assets all around the world. Also it is surprising that during global recession in 2020 when even the greatest countries’ GDP were negative, China was able to maintain a positive GDP of 3% even at that time. Another example of China’s trickery is the Laos case. Laos, a small country in the south-east Asia had the largest Hydrogen Electricity Generation facility. But one mistake it did was that it approached China for loan. Now China’s loan comprises of more than 1/4th the GDP of Laos. China now has access to the Hydrogen Electricity Generation facility of Laos, that they could literally switch off complete Laos into dark as per its will. Nothing is more painful than this for a country.

The discussion then took a turn to the army tactics & economics of China. China is gradually making ports around all the neighbouring countries of India, which could pose a danger for India. We can counter China geographicaly as we have Dukkam port in Oman, Junglee Naval base in Singapore which works in favour of the Indians Navy. However, the current PLA navy is greater than the Indian navy. And China literally has the philosophy of killing the cat to scare a monkey. China also have been gifted with rare earth metals that’s why it is leading in the electronics industry. Belt and Road Initiative adopted by Chinese government to invest in 70 countries and international organisations were added in the discussion.

The discussion was made more insightful by discussing about the GDP of China with comparison to other countries in the year 2020 as well as how India development is threat to Chinese economy. The discussion was a fruitful one consisting how China is influencing other economies through their brain and want the control over the world as a superpower surpassing USA.


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