Dragon is swallowing Political System too

China's debt trap is believed to be one of the main reasons behind the political instability in Sri Lanka. China has indebted many countries in Asia and Africa. This leads to political unrest in many countries.

 

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Sri Lanka's economic bankruptcy and the resulting political instability have been the talk of the town for weeks. While searching for the causes of Sri Lanka’s bankruptcy, everything from failed farming policies, the prevalence of the covid and tourism to failed projects like Hambantota are being analyzed. The economic and political upheaval in Sri Lanka also appears to be the main reason for China's mountain of debt. Considering the region from Southeast Asia to South Asia and Africa, many of these countries are stuck in China's 'debt trap', which has led to political instability in many countries. Even though the Sri Lankan chapter is currently underway, the issue of China has been instrumental in the transition of power in Pakistan, Malaysia and the Maldives. Now the events in Nepal are repeating in the same way. China has also been shown to be directly and indirectly responsible for this instability. Even though the Sri Lankan chapter is currently underway, the issue of China has been instrumental in the transition of power in Pakistan, Malaysia and the Maldives. Now the events in Nepal are repeating the same thing in these countries. China has also been shown to be directly and indirectly responsible for this instability.

 

 

China's economic rise is a matter of attraction for all. In particular, from 2000 to 2015, China's growth rate averaged more than 10 per cent, and even after that, the growth rate did not remain above 7 per cent. As a result, China's economy expanded rapidly. With an export-oriented policy and surplus production capacity, China has emerged as the world's manufacturing hub. In the very early stages, from the time of Mao Zedong, China had ambitions to become a world power. At the time, however, communist ideology and the expansion of Chinese influence was the reason for financial aid. However, after 1980, China's policies changed, and in this growing economic relationship, China's needs and ambitions to expand its influence. When Xi Jinping took over the presidency, he launched the ambitious Belt and Road Initiative. Through this programme, China has invested in infrastructure in more than 70 countries.

 

Along with the Belt and Road Initiative, the effects of China's debt crisis are now being felt in various countries. It is noteworthy that China has been laying in this debt trap for more than 20 years and now many countries are infiltrating it. Sri Lanka is an ideal recent example. Former President Mahinda Rajapaksa had started talking about the development of Hambantota port in 2000. Hambantota is a stronghold of the royal family and the development of this port was conceived by his father D. A. Rajapaksa had started proposing in the 1970s. He brought up the issue after the port development department came to Rajapaksa. His idea was to set up a large maritime freight centre in Hambantota. Sri Lanka Government did Three to four project studies. However, none of the reports showed the feasibility of the project. Finally, the final report showed the feasibility of one phase and work on this project began. Mahinda Rajapaksa become president in 2005 and China supplied large amount of weapons during the civil war against the LTTE. Therefore, Mahinda, leaning toward China, also sought Chinese help for this project. Then, Chinese Exim Bank lent up to 1.25 billion USD for the port of Hambantota. The interest rate is up to six per cent. The port's revenue in 2016 was 11.8 Crore USD, while the port's operating costs were up to 10 million USD. According to the Sri Lankan government, loss was 230 million between 2011 and 2016. It is noteworthy that between 2014 and 2018, the traffic of ships at this port decreased and an average of 400 ships arrive at the port during a year, according to government statistics. Finally, the port was leased to a Chinese company, the Chinese Merchant Group, on a 99-year lease. In addition, billions of dollars were borrowed from China for projects such as the Hambantota Airport, the Convention Center in the same area, Colombo Port City, and the highway project. All these projects are nothing but a white elephant. On the other hand, China's debt mountain is growing. As a result, there is a big leak in their foreign lands. The International Monetary Fund (IMF) accounted for 38.6 billion USD or 47.6 per cent of Sri Lanka's total debt. China and Japan each account for 10 per cent of foreign debt. India's debt is around two per cent.

 

China's debt terms are another area of concern. Until a decade ago, Japan was the leading lender for Sri Lanka. Now, China has almost overtaken Japan. In terms of interest rates on loans, Japan offers loans at 0.7 per cent, while China offers interest rates of up to 3.5 per cent. In addition, Japan has a repayment period of 34 years, while China has a repayment agreement of 18 years. As a result, China's debt repayment installment is huge, and small economies are stuck in a quagmire.

 

A massive 66 billion project is being implemented in Pakistan through the China-Pakistan Economic Corridor (CPEC). In addition, China has invested in other projects in the form of loans. Pakistan's economy is begging for the repayment of this loan. They do not receive loans from Western countries or international organizations for allegedly feeding corruption and terrorism. As a result, China is a now ringmaster and Pakistan’s government is an animal in the cage. This led to the removal of Imran Khan and the return of Shahbaz Sharif to the post of Prime Minister. It should not be forgotten that the Opposition, the Army and China had a consensus on Shahbaz Sharif’s name.

 

While instability is rife in Sri Lanka and Pakistan, there are signs of political and economic instability in Nepal as well. Nepal is also trapped in debt to some extent after borrowing from China for two major projects. The floods also damaged crops. As a result, during the period from July 2021 to March 2022, the foreign exchange rate decreased by 18 per cent. His concern is that his debt has risen to a quarter of GDP. To get out of this, the Nepalese government has banned the import of cars, cosmetics and gold jewellery. By making working hours five days, the government has tried to reduce the cost of working. It should not be forgotten that the Government of Nepal has been trying to enhance relations with India for a few months.

 

 

We can look at Malaysia as another example of China's political interference. Malaysia is one of the important country in the Southeast Asia. China has also invested heavily in the country. When Najib Razak was prime minister from 2009 to 2018, during his regime China invested in several infrastructure projects. As Razzak's popularity plummeted, China pressured Razzaq to hold early elections. Representatives of the contractor company of the East Coast Rail Link held several meetings with him on the election issue. Even after that, Mohammad Mahathir, who came to power, reduced the cost of this railway project by 16 billion USD. He also accused the opposition of trying to sell the country. In a short time, Mahathir had to step down and the new government again increased the cost of the project by 12 billion USD. It should not be forgotten that there have been three governments in Malaysia between 2018 and 2022.  

 

While the United States and other Western nations have focused on Europe and Asia, China has focused on Africa. Thirty-two countries in Africa are trapped in China's debt trap. Together, China lent almost 145 billion USD. According to a study by the Johns Hopkins School of Advanced and International Studies, China's various financial institutions have approved 1,141 loan proposals for African countries or their state-owned companies, between 2000 and 2019. According to the African Development Bank, every year African countries need between 160 and 170 billion USD for development projects. This includes infrastructure projects such as railways, dams, canals, roads, pipelines, bridges, airports, and ports. Recognizing the need of the African countries, China entered the region. Since 2010, an average of 70 projects and 180 million USD loans have been disbursed annually, by China. Of this, 66 per cent is on energy and infrastructure projects. Among the countries that borrowed from China in 2017 were Angola (21 billion USD), Ethiopia (13.7 billion USD), Kenya (9.8 billion USD), the Republic of Congo (7.42 billion USD) and Zambia (6.38 billion USD), Cameroon (5.57 billion USD). Now all the countries are realizing that the mountain of debt is rising. Nigeria's debt rose from  1.4 billion in 2010 to 3.3 billion USD in 2015. It has to repay 19.5 million USD annually. In Djibouti, China’s loan is 1.4 billion USD or 75 per cent of the country's GDP. As a result, voices are being raised against the authorities in many countries. The situation is similar in Kenya. Therefore, at least 18 countries are renegotiating the terms of the loan. In addition, China's borrowings from China have been declining over the years. So, more funding is coming from Europe and America. However, it will be difficult for these countries to get out of the current debt.

 

According to a study, China has provided loans to 150 countries through various projects and bilateral relations. That figure is up to 1500 billion USD. This figure is claimed to be higher than the World Bank and International Monetary Fund loan figures. In particular, the Belt and Road Initiative has lent up to 385 billion USD in development projects. It is a kind of hidden debt, in which many countries are stuck. More than 40 countries have borrowed more than 10 per cent of China's GDP. However, Laos, Djibouti, Zambia and Kyrgyzstan borrow up to 20 per cent of China's GDP. So, we can realize how serious this rift is. When lending from institutions such as the International Monetary Fund, the national policies of those countries are considered. The criteria of corruption and transparency are also important. However, such conditions do not apply to loans from China. As a result, leaders in developing countries turn a blind eye to interest rates and terms of return. However, as the grip of the Chinese dragon grows stronger, the examples of Pakistan and Sri Lanka show that they are swallowing the country's economy but also to its political system.