CHINESE MEDIA: B&R IS NOT A CHARITY PROGRAMME, CHINA SHOULD GIVE LOANS AT HIGHER INTEREST RATES

The article originally appeared on India Today.

Though China terms baseless India’s worries that it is trying to establish foothold in India’s neighbourhood by trapping countries in a debt trap, its steps say otherwise.

India’s neighbourhood countries that China is eyeing are Pakistan, Bangladesh, Sri Lanka, Nepal and Myanmar. Having a strong Chinese presence in these countries would give China strategic advantage over India. So, China, in the name of building economic corridors linking Asia, Africa and Europe, offers these countries huge loans for infrastructural projects at higher interest rates and when these economically poor countries are not able to repay the loans, China acquires controlling stakes in them, as high as 85 per cent.

China rubbishes all such claims and says in its One Belt One Road or Belt & Road (OBOR or B&R) is a venture aimed at mutual benefit for all in the region. But an editorial in Global Times, one of the official publications of China, has clearly stated that “it should be made clear that the B&R is not a charity program, and most projects under the initiative are reciprocal, rather than aid.”

Though the editorial is written in context of an Indian publication’s report that claims that China is trying to convert its soft loans to Bangladesh to commercial credit, it gives a hint of what the Chinese designs are going to be, especially in countries where China is investing heavily in projects under its One OBOR or B&R initiative.

Pakistan is the classic case here where China is establishing China-Pakistan Economic Corridor (CPEC) with an estimated investment of $50 billion that could go up to $75 billion. Though Pakistan’s power elite sound bullish with CPEC as if it will miraculously transform Pakistan, protesters and activists in Pakistan rue that the mammoth infrastructural exercise, that passes through the disputed territory that India considers its own, will convert Pakistan into a Chinese colony.

China is already acquiring controlling stakes in projects in Myanmar and Sri Lanka. According to a Reuters report, China has demanded 70-85 per cent stakes in the projects funded by China in Myanmar including Kyauk Pyu, a strategic deep sea strategic on the Bay of Bengal. In Sri Lanka, China funded projects Hambantota Port and Mattala Airport, both strategically important, especially for India, have gone into China’s control. With Bangladesh, China signed projects worth $25 billion during Chinese President Xi Jinping’s Bangladesh visit in October 2016. Earlier this month, Nepal signed a $ 2.5 billion deal with China to build the country’s largest hydroelectric dam. In May, Nepal and China signed a MoU on OBOR.

China, known for territorial expansionism and autocratic rule, is also an economic powerhouse now. It is now financially big enough to first pump its money in small, poor nations and then acquire controlling stakes in organizations as the nations fail to repay, be it the poor or financially weaker nations of Asia or Africa and the editorial narrative that “China needs to take a more sophisticated approach in clarifying its loan arrangements in overseas cooperation and should maintain its bottom line by avoiding interest rate competition in loan offerings” fits in the expansionist mindset of its one-party regime.

Soft loans come with symbolic interest rates of around 1 per cent or even less or in some cases with no interest rates and are given to the borrowers for development projects while commercial credit is given at much higher interest rates. The editorial argues that “there is no need for China to compete with other countries in offering competitive interest rates just to please partners or win contracts, to the detriment of its own interests” referring to India’s $7.5 billion line of credit to Bangladesh at a nominal interest rate.

Pakistan, Bangladesh, Nepal, Sri Lanka, Myanmar, all these countries are in India’s neighbourhood. China is either funding huge projects there or has signed deals worth multiple billions of dollars. And as it intends to charge a much higher interest rate for its loans, something that may result in countries defaulting on Chinese loans and thus ceding the projects’ control to China, India has a valid reason to get worried, especially after the historically hostile attitude that China has harboured against India. China has always tried to encircle India by increasing its presence in the South Asian countries.

©SantoshChaubey

IS CHINA BLACKMAILING MYANMAR, LIKE IT DID WITH SRI LANKA?

The article originally appeared on India Today.

China is known for territorial expansionism and autocratic rule but its increasing economic prowess has added another dimension to its clout – the economic imperialism. Now China is financially big enough to first pump its money in small, poor nations and then acquire controlling stakes in organizations as the nations fail to repay, be it the poor or financially weaker nations of Asia or Africa.

That is a deepening line of analysis by the experts. Confirming similar developments, an exclusive Reuters report has claimed that China is expected to take controlling stakes, as high as 85 per cent, in Myanmar’s China funded projects, even if the initial agreement for some of them was on a 50/50 basis. According to the report, China has asked for a 70-85 per cent stake in a strategic deep sea strategic on the Bay of Bengal, Kyauk Pyu, and is expected to get it due to the financial constraints of Myanmar. The $7.3 billion project is China funded.

The deep sea port fits in the Chinese narrative of its ‘One Belt One Road’ initiative under which it is pumping huge sums of money in financially weaker countries like Sri Lanka, Pakistan, Bangladesh, Nepal, or Myanmar, albeit, at much higher interest rates. If the international line of credit by different organizations or countries for soft loans ranges from 0.1 per cent to 3 per cent, the Chinese lenders charge anything above 6 per cent. In 2015, Japan sanctioned a loan amount of $50 billion with interest rate of 0.1 per cent and a repayment period of 50 years for India’s Mumbai-Ahmedabad bullet train corridor.

In case of Myanmar, the Myitsone dam project is a classic example to see China’s hegemonic designs through economic imperialism. The $3.6 billion dam project was financed by China. Built on the Irrawaddy River, the project was doomed from the beginning. After being in making for years, the project was suspended in September 2011 amid democratic reforms as the Burmese Junta government had taken a unilateral decision to allow the controversial project that was expected to bring cultural, environmental and sociological disaster for Myanmar and its people. The ethnic Burman majority of Myanmar is against any dam on the Irrawaddy River as it traces its roots of civilization there.

Add to it the cunning Chinese business model. The project was sold saying the electricity it would produce, 90 per cent of it would be sold to China while 10 per cent was to be given free to Myanmar. Being a power starved country, protests were held against it in Myanmar. Under pressure, China later said Myanmar was the primary market and rest was to be exported. That was when Myanmar is among the countries with lowest electrification rate and no grid structure to connect its cities and town. A World Bank report says only 33 per cent of the country’s population has an electricity connection.

Now China is using this junked project that has displaced thousands of people to leverage its position in Myanmar or we can say, to blackmail the Myanmarese government. If Myanmar finally cancels this project, it would have to return China $800 million that would hit it badly.

Or the way China wants it, i.e., “concessions on other strategic opportunities in Myanmar – including the Bay of Bengal port Kyauk Pyu”, as the Reuters report says.

Another large scale project in Myanmar that is on the radar of China’s hegemonic designs is Kyaukphyu Special Economic Zone in one of its poorest regions, Rakhine. This $10 billion project is also China backed. China has also taken a controlling stake in another industrial park. China even owned 80 per cent of Myitsone dam project with Myanmar’s share just at 15 per cent. China has a bad reputation in Myanmar, especially about its hegemonic designs and exploitative nature, and large scale protest have been held against it.

Earlier this week, an Indian publication, The Economic Times, had come up with a report that “how China was putting some South Asian countries on the road to debt trap under its One Belt One Road initiative”. The report was focused on Pakistan and Sri Lanka. The report showed that how Chinese firms are pumping up money in these countries at unusually higher interest rates. When countries see that they are not able to repay, they convert their debt into equity and that literally translates into the ownership of the lender, i.e., China here.

This is already happening in Sri Lanka where Hambantota Port and Mattala Airport, both strategically important, especially for India, have gone into China’s control. Sri Lanka took Chinese loans for these projects and could not repay. Like Myanmar, even in Sri Lanka, violent protests were held when Hambantota went to China.

And experts say Pakistan is going to meet the same fate. Everyone in Pakistan nowadays talks of the China Pakistan Economic Corridor (CPEC) like a panacea for Pakistan’s every misery. China has promised a $50 billion line of credit for the CPEC that is expected to bring economic miracle in China. But the truth is, as per the experts, Pakistan is borrowing heavily from China and at much higher interest rates. Anyone can expects the future if the CPEC fails.

And all these countries are in India’s neighbourhood. So, India has a valid reason to get worried, especially after the historically hostile attitude that China has harboured against India. China has always tried to encircle India by increasing its presence in the South Asian countries. India has vocally opposed the CPEC and has been apathetic toward the One Belt One Road initiative. And now even Bangladesh and Nepal are realizing the Chinese designs. Bangladesh has backed out from an international summit that China is holding on the One Belt One Road initiative while Nepal has decided to send its deputy prime minister in place of its president.

©SantoshChaubey