Last fortnight NYT carried an article on how debt-ridden Sri Lanka was forced to relinquish its rights over the strategic Hambantota port. This explosive investigative report blew lid off Chinese claims of OBOR’s (One Belt One Road) professed “win-win scenario”. It substantially confirmed claims of strategists who described the signature initiative as “debt trap diplomacy”. Besides highlighting quasi-opaque loans and financial assistances of China, it exposed the hard-ball tactics of China. After ballooning debts and its financial strangulation ensnared Sri Lanka into an abyss of debt, Myanmar decided to embrace a cautious approach.
Pushing for a deep economic cooperation in Asian economies and to overcome the Malacca Dilemma China planned to acquire Kyauk Pyu deep port in the Rakhine state of Myanmar. Initially China forged an agreement with Myanmar for building a parallel oil and natural gas pipeline from Kyauk Pyu to Kunming in China. With China as major stake holder, the construction was completed by 2015 and began operations in 2017. Cognizant of Kyauk Pyu’s strategic geographic advantage, in 2016, China’s CITIC group clinched a contract for construction of $7.3 billion deep port and $2.7 billion special economic zone along the coast of Bay of Bengal. As per initial terms of agreement, CITIC will build the port and run it for 50 years which can be extended to another 25 years with proposed stake of 70%. China even pledged to create 100,000 jobs that can potentially transform the region. In December 2017, Myanmar Councillor Aung San Suu kyi agreed to the proposal of the China-Myanmar Economic Corridor connecting Kyauk Pyu to Kunming. A 30% of stakes for Myanmar for the port $2.2 billion and a 50% which is $3.5billion or 5% of GDP. Currently, Myanmar is facing international condemnation over Rohingya issue and EU invoked arms embargo. Two years into power, Trump administration failed to revive the resurrected US-Myanmar relations. US indifference has pushed Myanmar has pushed into Beijing’s tent. With western doors closed, Myanmar may not get loans from any other multilateral financial institutions. It must turn to China again for loans to keep this huge project afloat. The tales of Sri Lankan spiralling debt and Pakistan’s ever-increasing demand for more loans from China to fund CPEC generated new fears about nation’s sovereignty and Chinese financing. Going by the Sri Lankan experience of poor economic viability of port which is far flung from the capital, Myanmar Minister believes that Kyauk Pyu project must be “as lean as possible”.
As of 2017, Myanmar’s external debt is $9.6 billion of which it owes 40% to China. A huge project of $10 billion would further increase the burden of debt financing. Further, Sean Turnell, Suu Kyi’s financial consultant cited that while Panama Canal Expansion project is $5.25 billion. “The idea that a port in Myanmar would cost $7 billion is absurd”. With reference to China obtaining Hambantota for 99-year lease as debt relief, “the example that stand out, that has been really taken notice of in Myanmar”. He added, “what is on the table here is exactly what was on the table in Sri Lanka”. Clearly, the baneful consequences of debt distress are impelling nations to tread in caution.
After the arrest of former Prime Minister and other government officials on charges of corruption in Chinese projects, Kyrgyzstan is growing wary of increasing Chinese influence. While GDP of the country is $7 billion, it has $4 billion foreign debt of which China accounts for half of it. Kyrgyzstan worried of its dependence on China is trying to diversify its relations with Turkey and larger neighbours Kazakhstan and Uzbekistan. Rapid expansion in economic and trade partnerships between the two countries led to a marked increase in Chinese cultural and humanitarian influence. China’s deliberate soft power push and its utter disregard towards environmental concerns, is brewing discontent among the locals. Investigations now reveal that officials are bribed to award contracts to Chinese companies without proper tenders. These contracts are funded by Export-Import Bank of China perpetuating the never-ending cycle of debt.
In Vietnam, protestors hit the streets in large numbers after government passed a special zone act to create Special Economic Zones in three strategic locations to boost investment and economic reforms. With allegations that these zones are being offered to Chinese investors flew thick and high, protestors held placards, “No Special Zone-No leasing land to China-Even for one day” and forced the government to postpone the passage of law until next parliamentary session. Vietnamese in general are distrust of its northern neighbour, Beijing which is rapidly militarising all the geographical features in South China Sea and preventing Vietnam from fishing and oil exploration in its exclusive zone. The protests which started in Ho Chi Minh city have soon spread to entire country.
Chinese investments in Cambodia are causing severe resentment among locals. Sihanoukville, a beach city in Cambodia has become hub of entertainment activities with as many as 30 casinos built in last 10 years. All these casinos frequented by Chinese tourists employ Chinese workers brewing anger among the locals who are very poor. Massive influx of Chinese tourists has escalated the rents and cost of living. Resentment is mounting among locals with meagre financial resources who are severely disadvantaged by the unhindered Chinese inflow of investments. Besides, an unusual onslaught on their personal freedoms is creating tension between locals and Chinese visitors. China accounts for over 90% of foreign investments of Cambodia. China backs Hun Sen, the authoritarian leader of Cambodia despite his crackdown of opposition, human rights activists and media is condemned by west. To improve flagging economy, Cambodian government has opened all channels for Chinese investments and has turned the country into a major frontier of OBOR.
Last month, armed men attacked Chinese cement factories, part of OBOR initiative in Laos and confiscated huge amounts of money and other expensive equipment. Sources revealed that Laotian partner of Chinese companies sought the help of security personnel who attended the raid in their official capacity to recover allegedly lost assets. Lao partner alleged that Chinese company has siphoned off several millions of dollars from the joint venture which turned out be a fraudulent contract. An official later clarified that armed men are security men deployed to “prevent the bitter fraud from boiling over”. It emerged that Laos employed similar methods earlier when Chinese companies tried to defraud.
Unlike in the past few years, enthusiasm of East European countries towards Chinese investments seems to have faded. In an aggressive bid to romp in these smaller European nations towards expanding the horizons of connectivity network, China has started 16+1 arrangement back in 2012. EU which initially overlooked China’s overtures at its own peril has now woken up. Even IMF began to alert these nations of the plausible outcomes of the beguiling diplomacy. China’s annual summits are now eliciting tepid response from the East European nations. The 16 countries are EU member states-Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia and non-EU states Albania, Bosnia and Herzgovina, Macedonia, Montenegro and Serbia. There is palpable disgruntlement among nations who expressed dissatisfaction at the results, extensive use of Chinese men and material and Beijing’s incongruent functioning that is not in line with EU standards. Baring Hungary and Serbia which are upbeat about Chinese investments for the new rail link between Belgrade and Budapest all other countries are visibly distraught. Poland, Romania, Slovakia expressed their scepticism towards Beijing’s inability to fulfil financial pledges. EU has expressed severe concerns over the economic viability of the much touted $2.89 billion Belgrade-Budapest high-speed rail link funded by 85% of EXIM bank of China loans. The 350-kilometer rail project will cut down travel time to three hours is part of China’s OBOR in Europe. It is vital for China, as Beijing aims to use this rail to transport its exports from the Greek port, Pireus to the hinterlands of Europe. Now the project is now facing glitches for failing to comply with EU norms and regulations. Stalling of this project can be a major embarrassment for China which is masquerading a divide and rule policy under the garb of connectivity.
Ironically, while countries are dialling back on their economic and trade links with China, Nepal Prime Minister, KP Sharma Oli’s paeans of Chinese generosity and signing of $2.4 billion infrastructure and connectivity deals is rather intriguing. Contentedly cuddling in Beijing’s new-found warmth, Kathmandu perilously ignored the massive public furore in Sri Lanka on loss of sovereignty and potential land grab by a foreign power.
Unlike the stoic rise of Super powers, China’s rapid global expansion has evoked massive public unrest and discontent. Public in general are upping ante against its investments and loans. Nations are mistrustful and sceptical of Beijing’s ambitions. Till now all major powers had cultivated a reliable ecosystem of coterie of nations that extended unstinted support to them. World had always witnessed the rise of bloc as such with a nation leading them. But China’s professed “peaceful rise” has been lonely. It transactional and duplicitous approach hasn’t enthused even single nation. Even China’s all-weather friend, Pakistan is threatening to cripple CPEC (China Pakistan Economic Corridor), cornerstone of OBOR, if Beijing fails to bail it out from looming currency crisis. China’s former client state, North Korea has masterfully slipped away from China’s cudgels by tactfully keeping Beijing away from its denuclearisation talks with US. By employing guile, tact and the time-tested neo-colonial practices, a lonely Beijing is inching towards the coveted major power status. Is the world ready for a notoriously distrustful, intimidating and coercive global power?