The United States has recently raised concerns over China’s international development projects and lending practices under its Belt and Road Initiative (BRI), including the China Pakistan Economic Corridor (CPEC). Questions have been raised on the commercial viability of these projects, leading to a broader examination of China’s global financial practices.
Opacity in Lending Practices
China is the largest lender globally, yet it does not disclose any detailed reports on its lending activities. This lack of transparency does not only make monitoring of the financial transactions challenging for institutions like the Paris Club or IMF, but it also hides potential risks from the borrowing countries. The ending result is often failure to service the debt, halting development, and surrendering of strategic assets, thus compromising the recipient country’s sovereignty.
Questionable Investments and Unsustainable Debts
Examples of China’s questionable investments resulting in unsustainable debt include the Hambantota Port in Sri Lanka and a runway in the Maldives. In 2017, unable to service its debt owed to China, Sri Lanka was forced to hand over a majority stake and a 99-year operating lease of its port to Chinese state-owned enterprises. With projects of dubious commercial viability, such issues raise questions on China’s true intent under the guise of BRI.
The Contrast with China’s Open Door Policy
Under the Open Door Policy, US, European and Japanese companies opened their ventures in China, significantly benefiting its economy. However, there seems to be a marked contrast in how China is handling its international development projects, particularly in Pakistan under CPEC, which has invited criticism.
| Fact | Description |
|---|---|
| Open Door Policy | A trade agreement between US, China, Japan and several European countries issued in 1899-1900, aimed to protect the rights of all countries to trade equally with China. |
| Paris Club | An informal group of creditor nations seeking coordinated solutions to payment difficulties of debtor countries. It was founded in 1956 and has 22 members currently. |
| China Pakistan Economic Corridor (CPEC) | A bilateral project between Pakistan and China, promoting connectivity across Pakistan with infrastructure development projects. Links the Western part of China to Gwadar Port in Balochistan, Pakistan. |
India’s Stance and the Role of the Quad
India has expressed opposition to parts of the CPEC that pass through Pakistan Occupied Kashmir (PoK) citing infringement on its sovereignty. India, as a member of the Quad (a strategic forum comprising India, the U.S., Australia, and Japan), views this alliance as capable of providing viable alternatives for countries seeking infrastructure development, positioning the Quad as a potential counter to China’s influence.
