China’s Debt Trap Diplomacy through investments
The China Communications Construction Company (CCCC), a state-owned multinational engineering and construction firm which builds infrastructural projects and under its cover expands China’s debt trapping agenda in countries with low GDP through its 60 subsidiaries. This debt trap diplomacy of China is a trend observed across the globe in nations with low GDPs.
The latest of this trapping action was seen in Sri Lanka, which is neck-deep in debt to China, amounting to approximately USD 6.8 billion. China’s Export-Import Bank (EXIM) funded for construction of the ‘Hambantota International Port’ and the ‘Mattala Rajapaksa International Airport’ in Sri Lanka. Thereafter Sri Lanka fell into a financial crisis due to which the government was unable to cover the project’s maintenance costs and interest despite the loan, and the country declared bankruptcy, defaulting on its sovereign debt.
It is seen that China has massively invested in over 150 countries majority of them being underdeveloped nations which portrays it as a Good Samaritan. But this infrastructural investment gradually increases the debt of poor countries beyond repayment. This puts them in a phase of default ultimately compelling them to make strategic concessions to China.
A case study is Argentina where a CCCC subsidiary the Shanghai Dredging Company submitted a bid in 2019 to take over the dredging of the Parana River. Parana River is an important strategic location as it transports approximately 80 per cent of Argentina’s agricultural exports including soymilk livestock feed, corn and wheat, is now controlled by China. Now China is the biggest importer of Argentina’s soybeans and hence Argentina is becoming an essential component of BRI expansion in the country and under full control.
The Hong Kong Post says that the Chinese state-owned conglomerate ‘Cofco’ being the country’s largest commodities export broker, Beijing’s efforts to invest across international agricultural supply chains demonstrate its dark desire to control commodity supply and pricing.
An African nation Uganda had issued a special audit examination for the maintenance of the Kampala-Entebbe Expressway in the 2020 project. According to the Uganda National Roads Authority (UNRA), the contractor EGIS, which is a link between CCCC and the government of Uganda, was paid Ugandan shilling SHS 918.47 million per month for the maintenance of the Expressway.
However, lights were not installed from the time of commencement of use, which led to accidents and a degree of insecurity on the road at night. EGIS claimed that operations and interest rates were impacted by UNRA’s failure to make maintenance payments on schedule. Although a formal report by the URNA clarified that CCCC had engaged in wrongdoing and demanded that CCCC fixes the damages within a grace period of three months.
Under the allegations of foul play and fraud by CCCC, in 2009 the World Bank (WB) blacklisted CCCC for eight years. This was because of fraud on roadway projects in the Philippines.
Later that year, CCCC dealt with numerous claims of fraud and corruption, including the claim that it sent USD19 million to Teodorin Obiang, the President of Equatorial Guinea, as disclosed by a 2013 asset forfeiture action brought by the United States. The CCCC has also been charged with gross financial malpractices, bribery and illegal employment over the past decades.
Although not every country feels the obvious risks involved in the Debt Trap of China. In order to celebrate Pakistan-China relations, the CCCC organized a fishing net distribution ceremony for Gwadar Port’s local fishermen in collaboration with the Pakistan Army.
This was after China Pakistan Economic Corridor (CPEC) was administratively controlled by Pakistan’s Maritime Secretary and operationally controlled by China Overseas Port Holding, a subsidiary of CCCC. This cooperation is based on the ‘Special Economic Zones of China’ with 91 per cent of the Gwadar Port’s revenue going to China and 9 per cent to Pakistan.
