China's Belt and Road Initiative
In 2017, the Asian Development Bank estimated a spending deficit of $459 billion per year in Asia for infrastructure. In 2016, a report from consulting agency, Mckinsey, estimated whilst $2.5 trillion is invested annually in global infrastructure, it is still $800 billion short.
In 2013, China launched it's 'Belt and Road Initiative' (BRI), an initiative which finances infrastructure projects across Asia to support trade and economic growth. Most projects are funded by sovereign loans sourced from Chinese and Asian banks. Examples include the China-Pakistan-Economic-Corridor (CPEC), a flagship component of the BRI comprised of $62 billion worth of infrastructure project that Pakistan hopes wil alleviate constraints on its economy, such as its chronic energy shortages. More recently, in 2017, China acquired Sri Lanka’s Hambantota port and 15,000 acres of surrounding land. Whilst this deal erased $1 billion of Sri Lankan debt, the island nation remains more indebted to China than ever before, with excessive loans and high interest rates cited as primary drivers.
China has lent $1.4B to Djibouti, a tiny country located in the horn of Africa and a key partner of the BRI, over the last two years—a loan that is approximately 75% of it's GDP. China has also become Djibouti’s largest creditor, owning 82% of their external debt in 2016. “The Chinese ambassador to Djibouti has told diplomats privately that China expects to be repaid in cash or in kind”, alluding to the Hambantota Port deal Sri Lanka made with China.
Whilst foreign aid and soft loans are alternatives to sovereign loans, they are far more limited in size, and are generally used on everything but infrastructure.
The Belt and Road initiative: a belt of servitude or a road towards prosperity?
The Global Times; ‘Debt colonialism’ accusations on B&R ring false’
CNN; ‘Pompeo announces new US investments in Indo-Pacific region’; Hu Xijin; tweet.
Kenneth Roth, quoted in Reuters; ‘China’s development push in poor countries worries non-profits’
China Daily; ‘China’s One Belt One Road can boost global growth’
Asia Sentinel; ‘Desperate to Survive, Malaysia’s PM Sells his Country to China’; The New York Times; ‘’We Cannot Afford This’: Malaysia Pushes Back Against China’s Vision’; The New York Times; ‘Malaysia Steps Up $4.5 Billion Corruption Inquiry’; Reuters; ‘Malaysia investigates China-backed project links with 1MDB: official'.