Real debt trap: Sri Lanka owes vast majority to West, not China
Facing a deep economic crisis and bankruptcy, Sri Lanka was rocked by large protests this July, which led to the resignation of the government.
Numerous Western political leaders and media outlets blamed this uprising on a supposed Chinese “debt trap,” echoing a deceptive narrative that has been thoroughly , .” But after speaking to locals, he reluctantly came to the conclusion that the narrative is false.
“The truth is that many independent experts say that we should be wary of the Chinese debt trap narrative, and we’ve found quite a lot of evidence here in Sri Lanka which contradicts it,” BBC host Ben Chu acknowledged
He explained, “The Hambantota port, well, that was instigated by the Sri Lankans, not by the Chinese. And it can’t currently be used by Chinese military naval vessels, and actually there’s some pretty formidable barriers to that happening.”
“A lot of the projects we’ve been seeing, well, they feel more like white elephants than they do Chinese global strategic assets,” Chu added.
In our latest film from Sri Lanka, which faces financial collapse as the global Big Squeeze bites, Ben Chu examines the effect that Chinese loans and investment are having on the country:#Newsnight https://t.co/GBFZ1ItP0G
— BBC Newsnight (@BBCNewsnight) June 22, 2022
The British state media outlet interviewed the director of Port City Colombo’s economic commission, Saliya Wickramasuriya, who emphasized, “The Chinese government is not involved in setting the rules and regulations, so from that standpoint the government of Sri Lanka is in control, and it’s up to the government of Sri Lanka’s wish to flavor the city, the development of the city, in the way it wants to.”
“It is accurate to say that infrastructure development has boomed under Chinese investment, Chinese debt sometimes, but those are things that we’ve actually needed for a long, long time,” Wickramasuriya added.
Chu clarified that, “Importantly, it’s not debt but equity the Chinese own here,”
“So is the debt trap not all it seems?” he asked.
Mainstream US academics debunk the ‘Chinese debt trap’ myth
Mainstream Western academics have similarly investigated the claims of “Chinese debt traps,” and come to the conclusion that it is a myth.
Even a professor at Johns Hopkins University’s School of Advanced International Studies, which is notorious for its revolving door with the US government and close links to spy agencies, acknowledged that “the Chinese ‘debt trap’ is a myth
Writing in 2021 in the DC establishment’s de facto mouthpiece, The Atlantic magazine
, scholar Deborah Brautigam stated clearly that the debt-trap narrative “a lie, and a powerful one.”
“Our research shows that Chinese banks are willing to restructure the terms of existing loans and have never actually seized an asset from any country, much less the port of Hambantota,” Brautigam said in the article, which was co-authored by Meg Rithmire, a professor at the stridently anti-socialist Harvard Business School.
The Chinese "debt-trap" narrative is a false one which wrongfully portrays both Beijing and the developing countries it deals with, Deborah Brautigam and Meg Rithmire write: https://t.co/FagExsdeNT
— The Atlantic (@TheAtlantic) February 7, 2021
Brautigam and Meg Rithmire published their research in a 2020 report for Johns Hopkins’ China Africa Research Initiative titled “Debt Relief with Chinese Characteristics
They investigated Chinese loans in Sri Lanka, Iraq, Zimbabwe, Ethiopia, Angola, and the Republic of Congo, and “found no ‘asset seizures’ and despite contract clauses requiring arbitration, no evidence of the use of courts to enforce payments, or application of penalty interest rates.”
They found that Beijing cancelled at least $3.4 billion and restructured or refinanced roughly $15 billion of debt in Africa between 2000 and 2019. At least 26 individual loans to African nations were renegotiated.
“Chinese lenders prefer to address restructuring quietly, on a bilateral basis, tailoring programs to each situation,” they wrote.
The researchers noted that China puts an “emphasis on ‘development sustainability’ (looking at the future contribution of the project) rather than ‘debt sustainability’ (looking at the current state of the economy) as the basis of project lending decisions.”
“Moreover, despite critics’ worries that China could seize its borrower’s assets, we do not see China attempting to take advantage of countries in debt distress,” they added.
“There were no ‘asset seizures’ in the 16 restructuring cases that we found,” the scholars continued. “We have not yet seen cases in Africa where Chinese banks or companies have sued sovereign governments or exercised the option for international arbitration standard in Chinese loan contracts.”
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