Unlike grants or concessionary loans offered by World Bank, China provides project-related loans at market-based rates and collateralized by strategically important natural assets. How this has affected the debtor countries? Discuss taking examples of Hambantota and Mombasa.

The china’s plan of providing project related loans to other countries which are collateralised with the strategically important natural assets from mineral resources to ports is perceived to be very predatory and is an illustration of creditor imperialism. It is on the similar lines as the European Colonisation in the 19th century.
China’s recent acquisition of Hambantota of Srilanka is the example of China’s malicious debt trap diplomacy. China lends out to the poorer countries for infrastructure development at market prices rather than at the concessionary prices like IMF and World Bank. The loans offered are easy and procedure followed isn’t as transparent as well. Thus, when the country fails to repay, China acquires the collateral which is generally a natural asset which has long term returns. This way, China is trying to increase its footprint across the globe.
China is acquiring strategically important lands not only with a debt servitude from growing nations but also with the private players. The Mediterranean port of Piraeus has been obtained by a Chinese firm from cash strapped Greece. This method of acquiring lands for a 99-year lease is a plan to gain relative advantage over other powers. It also acquired Darwin of Australia, Djibouti of Africa on similar lines. It established a military base in Djibouti just a few miles away from US naval base.
The long standing debt of Mombasa- a gateway to East Africa is on the verge of getting acquired by China. These examples show that the Belt Road Initiative of China is essentially imperial at the core and that the states which owe China are on the peril of losing their natural assets and sovereignty.
 

Question for UPSC Mains:
Unlike grants or concessionary loans offered by World Bank, China provides project-related loans at market-based rates and collateralized by strategically important natural assets. How this has affected the debtor countries? Discuss taking examples of Hambantota and Mombasa. [Mint]

Published: December 26, 2017 | Modified:June 27, 2019

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