Nightcap

  1. Zombie history: a bleak vision of the past and present Sophie Pinkham, the Nation
  2. Pakistan’s elections and the precarious future of the China-Pakistan Economic Corridor Andrew Small, War on the Rocks
  3. Populism in less developed countries is somewhat different Pranab Bardham, 3 Quarks Daily
  4. The BRICS hit the wall Guy Sorman, City Journal

Nightcap

  1. Violent Conflict and Political Development Over the Long Run: China Versus Europe Dincecco & Wang, Annual Review of Political Science
  2. Why was the 20th century not a “Chinese Century”? Brad DeLong, Grasping Reality
  3. Law and border Jacob Levy, Niskanen
  4. The story of Indian magic John Butler, Asian Review of Books

Nightcap

  1. If Hillary Hates Populism, She Should Love the Electoral College Ryan McMaken, Power & Market
  2. Why Are Some Libertarians So Conservative About Immigration? Christopher Freiman, Bleeding Heart Libertarians
  3. The Idea and Destiny of Europe Nick Nielsen, The View from Oregon
  4. Jobs, technical progress & productivity Chris Dillow, Stumbling & Mumbling

Hegemony is hard to do: China, globalization, and “debt traps”

As a result of an increasingly insular United States, with US President Donald Trump’s imposition of tariffs, China has been trying to find common cause with a number of countries, including US allies such as Japan, India and South Korea, on the issue of globalization.

While unequivocally batting in favor of an open economic world order, Chinese President Xi Jinping has also used forums like Boao to speak about the relevance of the Belt and Road Initiative (BRI) (also known as the One Belt and One Road Initiative, or OBOR). At the Boao Forum (April 2018), the Chinese President sought to dispel apprehensions with regard to suspected Chinese aspirations for hegemony:

China has no geopolitical calculations, seeks no exclusionary blocs and imposes no business deals on others.

There is absolutely no doubt that the BRI is a very ambitious project, and while it is likely to face numerous obstacles, it is a bit naïve to be dismissive of the project.

Debt Trap and China’s denial

Yet China, in promoting the BRI, is in denial with regard to one of the major problems of the project: the increasing concerns of participant countries about their increasing external debts resulting from China’s financial assistance. This phenomena has been dubbed as a ‘debt trap’. Chinese denialism is evident from an article in the English-language Chinese daily Global Times titled ‘Smaller economies can use Belt and Road Initiative as leverage to attract investment’. The article is dismissive of the argument that BRI has resulted in a debt trap:

It is a misunderstanding to worry that China’s B&R initiative may elevate debt risks in nations involved in massive infrastructure projects. Countries are queuing up to cooperate with China on its B&R initiative, but many Western observers claim the initiative will create a problem of debt sustainability in countries and regions along the routes, especially those with small economies.

The article begins by citing the example of Djibouti in Africa, and how infrastructure projects are generating jobs and also helping in local state-capacity building. It then cites other examples, like that of Myanmar, to put forward the point that accusations against Beijing of promoting exploitative economic relationships with participant countries in the BRI is far from the truth.

The article in Global Times conveniently quotes Myanmar’s union minister and security adviser, Thaung Tun, where he dubbed the Kyaukpu project a win-win deal, but it conveniently overlooked the interview of Planning and Finance Minister, Soe Win, who was skeptical with regard to the project. Said Soe Win in an interview with Nikkei:

[…] lessons that we learned from our neighboring countries, that overinvestment is not good sometimes.

Soe Win also drew attention to the need for projects to be feasible, and for the need to keep an eye on external debt (Myanmar’s external debt is nearly $10 billion, and 40 percent of this is due to China).

The case of Sri Lanka, where the strategically important Hambantota Port has been provided on lease to China (for 99 years) in order to repay debts, is too well known.

The new government in Malaysia, headed by Mahathir Mohammed, has put a halt on three projects estimated at over $22 billion. This includes the $20 billion East Coast Railway Link (ECRL), which seeks to connect the South China Sea (off the east coast of peninsular Malaysia) with the strategically important shipping routes of the Straits of Malacca to the West. A Chinese company, China Communications Construction Co Ltd, had been contracted to build 530km stretch of the ECRL. On July 5, 2018 it stated that it had suspended work temporarily on the project, on the request of Malaysia Rail Link Sdn Bhd.

The other two projects are a petroleum pipeline spread 600km along the west coast of peninsular Malaysia, and a 662km gas pipeline in Sabah, the Malaysian province on the island of Borneo.

During a visit to Japan, Mahathir had categorically said that he would like to have good relations with, but not be indebted to, China, and would look at other alternatives. The Malaysian PM shall also be visiting China in August 2018 to discuss these projects.

Conclusion

While Beijing has full right to promote its strategic interests, and also highlight the scale and relevance of the BRI, it needs to be more honest with regard to the issue of the ‘debt trap’ (especially if it claims to understand the sensitivities of other countries, and does not want to appear to be patronizing). While smaller countries may be economically dependent upon China, the latter should dismiss the growing resentment against some of its projects at its own peril. Countries like Japan have already sensed the growing ire against the Chinese, and have begun to step in, even in countries like Cambodia (considered close to China). A number of analysts are quick to state that there is no alternative to Chinese investment, but the worries in smaller countries with regard to Chinese debts proves the point that this is not the case. China needs to be more honest, at least, in recognizing some of its shortcomings in its dealings with other countries.

Nightcap

  1. How did the West get religious freedom? Mark Koyama, Defining Ideas
  2. Are asylum rights misguided? Tyler Cowen, Marginal Revolution
  3. What Does China’s 5th Research Station Mean for Antarctic Governance? Nengye Liu, the Diplomat
  4. The forthcoming changes in capitalism? Branko Milanovic, globalinequality