Five years in, China’s Belt and Road looks like a giant debt trap
Malaysia canceled China-funded projects worth billions of dollars last week
There’s a provocative quote attributed to the second President of the United States, John Adams, that’s been circulating on the internet lately. “There are two ways to conquer and enslave a nation,” the quote goes, “One is by the sword. The other is by debt.” While the John Adams Historical Society attributes the saying to Adams, no precise documentary source for the language has been identified, at least that we’ve seen.
Regardless of its provenance, the idea that debt and war are the two primary ways to control a nation is a great insight into the current geopolitical situation, especially the rise of China. China has benefited from the world order created by American military dominance, with its 11 carrier groups and hundreds of military bases straddling the globe. China is motivated by national pride and economic self-interest to extend its sphere of influence, but many of its thinkers are ideologically opposed to replicating the American model, a militarism that they still call ‘Western imperialism’.
While yes, China has built an aircraft carrier and continues to flex its muscles in the South China Sea, it’s also using soft power, like establishing thousands of Confucius Institutes across the developing world to teach Chinese language and culture. But surely the largest, most ambitious play to expand China’s power is its Belt and Road Initiative, also called the New Silk Road. The Belt and Road seeks to connect to Europe, Central Asia, Southeast Asia, the Middle East, and East Africa through a vast network of highways, high speed railroads, tunnels, bridges, and ports.
The Belt and Road Initiative, if it’s fully realized, would cover more than 68 countries, including 65% of the world’s population and 40% of global GDP. The total invested capital could reach $1T, but crucially this isn’t simply spent by China and the multilateral development banks hatched in Beijing, but would be loaned to governments of the nations hosting the infrastructure. China has already played a fairly heavy-handed role in dictating credit terms favorable to itself, and there’s increasing reason to believe that the BRI, as it’s called, could function as a huge debt trap to bring developing countries further under China’s heel.
The premise is simple: China finances an expensive, ambitious infrastructure project in a poor country, and when that country can’t meet its debt payments, China essentially repossesses the facilities and uses them how it wishes.
“We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries,” said Malaysian Prime Minister Mahathir Mohamad. Just last week, Mahathir cancelled his country’s China-funded projects, including a $3.1B project backed by the China Petroleum Pipeline Bureau.
Earlier this month, Reuters reported on pushback against