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China in our neighbourhood NAAD Jun 2021
In the third week of May, the Sri Lankan parliament passed a law termed as the ‘Colombo Port City Economic Commission Bill’ that converted 660 acres of reclaimed land on Colombo’s waterfront into Chinese territory. China had already taken over the Hambantota port, the construction of which was approved, by the current regime during its previous reign, despite multiple studies mentioning that the port was financially unviable. The Chinese now have a naval base less than 300 kms from the Indian mainland. China, to display its control over the reclaimed land, even changed Tamil signages into Mandarin, angering the local population.
The Chinese did what they were best at, lend money for financially unviable projects, have it constructed by their own companies, and when the nation cannot repay, come forward and take control of vital strategic assets, based on the fine print in the agreement. This is the Chinese debt trap being sold under the garb of the Belt Road Initiative. Some South Asian nations have fallen into the debt trap, while few have skirted it. Some of China’s neighbours have faced land grabbing pressures.
China attempted to warn Bangladesh against supporting the QUAD. The Chinese ambassador to the country stated in an address to the local press club, ‘Obviously it will not be a good idea for Bangladesh to participate in this small club of four because it will substantially damage our bilateral relationship.’ He was shown his place by the Bangladesh foreign minister, Abdul Momen, who responded ‘as a sovereign country, Bangladesh will determine the course of its foreign policy in the interest of its people.’ He also urged foreign envoys in Dhaka to maintain decency and decorum while speaking in public.
The visit of President Xi Jinping to Dacca in 2016 led to the signing of multiple MoUs for investments. Bangladesh also joined the Belt Road Initiative (BRI). However, till end 2020, only five of the MoUs had been implemented. China, on its part, had distributed only a meagre part of the 24 Billion Dollars investment which was promised. Bangladesh is aware of the limits which it could borrow, without being debt trapped by China. China has also provided Bangladesh with two Ming Class submarines and a frigate.
The IMF supported Bangladesh’s policies, when it stated last year, that Bangladesh’s loans were sustainable and within its capacity to repay. This is because Bangladesh had not accepted all Chinese BRI proposals. Chinese attempts to influence Bangladesh’s power sector and enhance power production beyond long-term needs, as being done in Pakistan, was rejected. This has also been possible as other nations including Japan and India are investing in Bangladesh.
Maldives is moving back from the debt trap due to generous grants from India and other nations. China took over the country post President Nasheed being unseated in a coup by Abdullah Yameen, who was pro-China. The situation is reverse in Iran, where the signing of a 25-year comprehensive deal between China and Iran gave China leverage over Iran’s major economic decision making. The first casualty was India, when it was edged away from the Farzad B oilfields and Chabahar port- Zahedan railway line. India has been involved with the Farzad B oilfields since 2002 and invested over USD 400 million. The Chinese involvement would benefit the China-Pakistan-Iran grouping, keeping India at bay.
China-Pak proximity and Chinese investments in Pak, including the CPEC is well established. There are also reports that fearing Pakistan’s inability to repay, China has slowed down funding for in progress CPEC projects. It is turning down fresh loans to Pak. China, last week, refused to restructure USD 3 Billion loan due for its energy funded projects under the CPEC. The CPEC is just one part of Chinese debt trap for Pak. Added to CPEC loans are costs for submarines and frigates under construction in China, as also for other defence equipment being procured including aircraft and air defence systems.
Pakistan had already crossed the debt trap danger line in Dec 2020, as it owed, as per Pak government records, 109% of its GDP. It is being compelled to borrow to repay debts, an example being procuring high interest loans from China to repay low-interest loans to Riyadh. China, to whom Pak owes the maximum, will gain control over all its institutions and major decision-making bodies, apart from major strategic assets. It has already obtained a 49-year lease over Gwadar port.
Myanmar’s military leaders, currently depending on Chinese military supplies to subdue protests, and also for diplomatic support due to global criticism, had earlier objected to increased Chinese influence on their economy. Myanmar is part of the BRI, with Chinese investments in various sectors, most notable being the deep seaport at Rakhine. However, projects including Yangon mega city and Myitkyina economic development zone, have been stalled. Internal anger directed at China, including torching of its factories, as part of ongoing protests, will preclude enhancing of investments and influence, at least currently. However, with global isolation, Myanmar military junta would turn towards China unless India provides developmental support and the world eases sanctions.
Nations which have land borders with China face threats of salami slicing, aimed at compelling the nation to follow Chinese diktat. There are reports of China constructing three villages, backed by roads, hydropower projects and communication nodes well within Bhutanese territory. The intention appears to pressurize Bhutan to accept Chinese claims on Doklam and downgrade ties with India.
Similar reports of construction within Nepalese territory continue to flow. Nepalese online media also mention disappearance of border pillars along the Nepal-China border. These villages, in both countries, are planned for occupation by Tibetans, favourable to the Chinese government and function as check posts to prevent Tibetans fleeing from Tibet. Many schools in Nepal have made Mandarin compulsory for students. While China directly interferes in Nepalese politics, Nepal, fearing falling into a debt trap, has been going slow on clearing Chinese projects.
Chinese footprint in India’s neighbourhood is steadily increasing. Where nations have evaluated Chinese intentions, they have avoided debt traps. Where leaders were callous, China grabbed the opportunity. Nations which have a land border with China face Chinese pressures of salami slicing. Wherever China gains a foothold, either due to a debt trap or salami slicing, it is India whose security concerns increase.
Our neighbourhood first policy has not produced desired results as it was never backed with requisite funds. Indian projects, are slow off the starting block, take time to complete and are impacted by our red-tape syndrome. Compare this with China, which provides loans with almost no questions, employs its own companies and labour, thus enables local governments to project development in short time frames. Unless India changes its policy of supporting neighbours financially and in troubled times, Chinese forays will open doors to greater insecurity.