Debt-trap diplomacy on the Belt and Road?


From Colombo, Reuters reports that Sri Lanka’s parliament last week approved “a raft of tax concessions for a Chinese-led joint venture which will handle the southern port of Hambantota under a $1.1 billion deal that has sparked public anger and concerns in India and elsewhere.”

  • The port is seen as a vital future node on the Belt and Road project.
  • The deal “leases the port to a Chinese firm for 99 years” and offers tax concessions for up to 32 years.
  • Sri Lanka handed over the port — built with Chinese loans of around $1.5 billion — to the Chinese joint venture on the weekend, receiving cash as well as debt forgiveness.
  • In response, Indian author and commentator Brahma Chellaney tweeted: “Debt-Trap Diplomacy: In a reminder of how Chinese loans are collateralized by strategically important physical assets, Sri Lanka today formally handed over the Hambantota port to China on a 99-year lease because it is simply not in a position to repay its onerous debt to Beijing.”

In Pakistan, the Express Tribune recently reported that the government had cancelled “its request to include the $14-billion Diamer-Bhasha Dam in the China-Pakistan Economic Corridor (CPEC) framework after Beijing placed strict conditions including ownership of the project.”

  • CPEC is usually considered a key part of the Belt and Road.
  • The South China Morning Post now reports that “China does not accept Pakistan’s claim that…Beijing was making demands that were impossible to meet.”
  • Other observers are unpersuaded: the Economic Times of India called the result of the Sri Lanka deal “a grim reminder” for Pakistan that it could fall into a debt-trap, and that “China gives loan, then grabs land.”

Lastly, in the Maldives: Reuters says that opposition groups in the Indian ocean island nation have criticized the government for the speed with which it rushed through a trade pact with China.

Aftermath of the migrant eviction campaign in Beijing

There were a few demonstrations in Beijing over the weekend involving hundreds of people protesting the city’s recent forced evictions that have left tens of thousands homeless.

  • See photos and reportage of the protests on SupChina.
  • The New York Times says (paywall) the evictions are driving not only manual laborers but also “the best and the brightest,” such as skilled young tech workers.
  • The Guardian’s Tom Phillips spoke to some of the evicted migrants. One exasperated man said he thinks the evictions show “Xi Jinping has water in his head,” and tied the events to “Xi’s China Dream”: “My nights are sleepless. How can I possibly dream?”

Join us in New York for a podcast

On December 18, we’re doing a live podcast with the New Yorker’s Jiayang Fan at the Cheung Kong Graduate School of Business — click here for details.