On September 24, The Hill Times published a signed article by Ambassador Lu Shaye titled “China’s ‘Debt Trap’ Is a Myth”. Here is the full text:
China’s ‘Debt Trap’ Is a Myth
Recently, some Western media are hyping up the so-called “China’s debt trap”, claiming that by providing a large amount of loans to some African and Asian countries and Pacific Island countries, China attempts to gain control over resources, infrastructures and even sovereignty of those countries once they are gripped by debt plight due to their inability to repay the loans.
This proposition, while sounds so imaginative, is utterly groundless and irresponsible. And the truth is that, among China’s partners, no country is beset with a debt crisis because of the co-operation with China.
For years, China has been providing within its capacity some assistance to developing countries in Africa and Asia and on Pacific islands in the framework of South-South cooperation. In addition to non-reimbursable assistance, China has also provided various forms of loans to these countries, including interest-free loans, concessional loans and so on.
It should be emphasized that the loans work on certain principles. First of all, the relevant Chinese loans have no political strings attached. China never interferes in the internal affairs of the recipient countries, and fully respects the development paths and modes of their own choice. Second, China fully respects the will of governments of the recipient countries. By funding those countries’ infrastructure and other areas that lag behind for short of money, China, on the basis of their specific needs, has helped them break bottlenecks, enhance their capacity for independent development, so as to realize their economic and social sustainable development. Third, China always bears in mind the debt-paying ability and solvency of recipient countries, avoiding causing too much debt burden to recipient countries. All relevant projects have been conducted with thorough feasibility studies and market research, so that they deliver the desired economic and social benefits.
Facts speak louder than words. And facts have proven that Chinese loans have not plunged recipient countries into the “debt trap”.
Recently, the Philippine Foreign Affairs Secretary told the media that the Philippines will not fall into a debt trap because only one percent of its debt is to China. According to statistics from Sri Lanka’s central bank, as of 2017, Chinese loans only accounted for around 10% of the country’s foreign debts, of which 61.5% is preferential loans at interest rates below that of the international market. Sri Lankan officials stated early on that there is no such thing as a “debt trap” for Hambantota Harbour. The Pakistani government’s statistics show that 42% of its debts are loans from multilateral institutions, while Chinese loans merely account for 10%. China provides preferential loans to Pakistan at a rate of around 2%, far below the rate offered by Western countries. From 2000 to 2016, China’s loans only accounted for 1.8% of Africa’s foreign debts, and most of them are offered to infrastructure area. According to data recently released by the Lowy Institute for International Policy, an Australian think tank, China’s donations and loans to the South Pacific Island countries amounted to 1.263 billion US dollars since 2011, accounting for only 8% of the total received by these countries, which is far less than those from Australia in the same period which add up to 6.6 billion US dollars.
Rather than setting up debt crises, China’s assistance to the above-mentioned countries has made major contribution to the local economic and social development, gaining a high reputation from them. CNN reported on August 30 that McKinsey & Company, after surveying more than 1,000 Chinese companies in eight African countries, published a report in 2017 which found that on average 89% of their employees were Africans. Totally several million African jobs have been created by China on the continent. The China-assisted Mombasa-Nairobi Railway in Kenya, with a total length of 480 km, was completed in only two and a half years. It has reduced 79% of logistic costs and 40% of commercial costs and created 46,000 job opportunities for Kenya as well as other East African countries, driving Kenya’s GDP up by 1.5% to 2% per year. As a result, African countries and many other developing countries are looking forward to expanding investment and financing cooperation with China.
During the just wrapped-up Beijing Summit of the Forum on China-Africa Cooperation, Chinese President Xi Jinping said ultimately it is for the peoples of China and Africa to judge the performance of China-Africa cooperation. And leaders from African countries asked why those countries that accuse China do not contribute more to Africa’s development? This may be the best answer to the question of “China’s Debt Trap”.