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HomeGeopolitical CompassEast AsiaIs China Creating Debt Traps in the Developing World?

Is China Creating Debt Traps in the Developing World?

Author: Mustafa Metin Başbay

Affiliation: TRT World

Organization/Publisher: TRT World Research Centre

Date/Place: March 15, 2021/Turkey

Type of Literature: Discussion Paper

Number of Pages: 16 

Link: https://researchcentretrtworld.wpcomstaging.com/2021/03/15/is-china-creating-debt-traps-in-the-developing-world/

Keywords: China, Diplomacy, Foreign Policy

Brief:

Beijing’s engagements with developing countries have been accused by several analysts and academia, especially in the US and Western countries, who say that China has been using a ‘debt-trap development’ in the developing countries. Accordingly, a ‘debt-trap diplomacy’ is a rhetoric to give a big loan to poor counties, of which China already knows they will be unable to pay back, thereby granting China determination on political and economic affairs in exchange for debt relief. On the other hand, Beijing has been denying the accusation by saying that China’s presence in the region as a creditor is to promote mutual benefit and respectful manner in trade, and not to exploit its resources, by being an alternative option from Western countries and International institutions. Furthermore, the author extends the discussion by comparing Chinese financial pressure with the old colonialism of Europe. What Western colonialism did was transfer natural resources and raw material to Western countries by force while selling its own manufactured goods in the colonized country. China’s engagement with developing countries looks similar. By using the notion of ‘trading partners’, China with its ‘debt-trap diplomacy’ has been forcing its partners to hand over their sovereignty as part of negotiations. What makes China different from old colonialism is that Beijing tends to use more gentle and soft language in engaging with developing countries instead of using military power. Yet, the question is whether China will use its military power if those in-debt countries refuse to pay or revolt against them. Although China’s engagements seem to be exploitative in nature, the author gives an optimistic view on the situation. Since the 1980s, Western countries and international financial institutions have been dominating the policy making of developing countries, often disadvantaging the development process. The existence of Chinese power as a competitor to Western power may give an opportunity and option for developing countries to counter the Western institutions and thereby convert the competition between the two major countries to increase their own autonomy and bargaining power.


By: Salman Nugraha, CIGA Research Intern

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