China’s Debt-Trap Diplomacy in Africa

Abstract: With the United States launching trade wars and isolating itself with an ‘America First’ foreign policy, and with Europe caught up in its own internal conflicts, including Euroscepticism, populism and growing political fault lines among EU nations, the traditional staples of world order are unable to heed the call for international order. On the other hand, China is more than willing to fill this power vacuum, and provide much needed financing for infrastructure development in emerging economies, particularly in South Asia and Africa. This often comes at a cost. Are these countries willing to allow themselves to be in hock to China for the next century, potentially compromising political autonomy and subjecting themselves to Chinese influence?

 

The classical understanding of colonialism generally references the type undertaken by European powers in the fifteenth century, such as Great Britain and France, or the Japanese empire during the early 20th century. Practices of colonialists include invasions, the alienation of indigenous populations, and forceful subjugation of locals. With the introduction of international diplomacy and law, organizations such as the UN condemn such practices in the modern-era. It would therefore appear that these practices have since been abolished, however according to the Centre for Strategic and International Studies (CSIS), a new, more subtle method of stripping away national sovereignty has become more prominent. Such an approach is not achieved through brute force, but rather political, economic and diplomatic influence.

 

Under China’s One Belt One Road initiative, China as a rising power, has the potential to undermine the United States’ position as a global superpower, This initiative is best explained as a twenty-first century version of the maritime silk road, in which China plans to spend an ambitious US$1 trillion on infrastructure and energy projects across Asia, Africa, and parts of Europe. The modus operandi of China in developing countries is to achieve state capture by providing loans to governments that are sure to default. In 2009, China replaced both the U.S. and the E.U. as Sub-Saharan Africa’s largest trading partner, and trade between China and Sub-Saharan Africa increased exponentially over the past quarter-century, roughly from US$1 billion in 1980 to US$166 billion in 2011. Between 2000 and 2014 Chinese institutions loaned more than US$84 billion to Sub-Saharan African countries, in which one of the top recipients, Angola, was also China’s largest oil importer outside the Middle East.

 

It should be noted that simply engaging in trade is not a predatory practice. In fact various countries such as the United States, tend to exert some degree of soft power, the ability to attract and co-opt, rather than by coercion (hard power), over trading partners, including Canada. Canada’s trade with the United States accounts for a whopping 20% of Canada’s GDP.  It is the manner in which China goes about its trade practices, however, that reflects malfeasance. China’s loan contracts do not come without stringent strings attached, as Chinese institutions claims they do. Much of the lending contracts are collaratorized by Africa’s natural resources, infrastructure, or securing military bases in the region. In 2017, debt-ridden Sri Lanka ceded majority ownership of the Hambantota port to China. In early 2018, China took over control of a Dubai-based Doraleh Container Terminal. Currently, Port de Djibouti S.A., a particularly key strategic port for American and European allies in Djibouti, is also vulnerable to capture by Chinese institutions. These are just a few examples of how the Chinese One Belt One Road initiative plays out in practice. That is, by enticing foreign countries with a supposedly win-win situation, when in reality they are unlikely to pay back. China is then well-situated to pressure countries to give up control of their assets, territory and influence to reconcile their debt obligations.

 

It should be noted that there is already an existing international framework to stimulate world trade and economic progress in developing countries. The Organisation for Economic Co-operation and Development (OECD) is an multilateral agency that consists of thirty-six member countries, including the United Kingdom, France, Germany and the United States, that has put in place various mechanisms to oversee this initiative. China is not a part of the OECD and thereby is not subjected to the OECD Creditor Reporting System. The problems with this are two-fold. First this allows China to provide potentially predatory lending practices to vulnerable states, such as those in Africa, under the guise of economic development. Secondly, this prevents the rest of the international community from seeing official Chinese data of loans, economic plans, and infrastructure projects funded by China.

 

Not only have economies in transition, such as those in Africa, been subjected to Chinese financial influence, North American countries have also been affected. Throughout the 2016 American presidential election, politicians such as Marco Rubio and President Trump made efforts to highlight the growing national security threat of a rising Beijing. The United States has also emphasized that Washington will prevent Chinese-based companies, such as mobile tech giant Huawei, from gaining a foothold in the country, citing national security risks. In May 2018, the Trudeau government blocked the Chinese takeover of Canadian construction company Aecon, also citing national security risks of our own, in an attempt to prevent Chinese institutions from monopolizing assets in Western countries.

 
Featured Photo: China Industry (2013), by AK Rockefeller via Flickr. CC 2.0


Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.

About Dakota Bewley

Dakota Bewley is currently in his final semester of his undergraduate bachelors degree studying Criminology, at Wilfrid Laurier University, all the while doing a Junior Research Fellowship at the NATO Association of Canada, and working for the City of Kitchener part-time. Throughout Dakota's time at university, and prior to, he has refined his interpersonal and communication skills, demonstrated good judgement and problem solving capabilities, refined analytical skills and attention to detail and gained knowledge in areas such as world history and cultures. Dakota has further expanded his interests in subjects such as, national security and global terrorism, international economics and crime, and other world issues. Following Dakota's fellowship at the NATO Association of Canada, and the completion of his bachelor's degree in 2019 he seeks either apply to a master's degree in national security, or get to work in the field of national security.