Inside China’s ‘debt traps’ costings BILLIONS as MI6 chief issues warning
ROADS to nowhere, abandoned railways and half-built bridges – China has been accused of using "debt trap" projects to ensnare poorer countries and expand its power worldwide.
The Communist Party's creeping influence and international ambitions are being seen through its Belt and Road Initiative- which sees nations in Asia and Africa wooed by Beijing's ambitious promises.
With promises of loans and expansive infrastructure projects like roads, railways and bridges, many countries end up getting more than the bargained for with China.
Wooed by the glitzy sales pitch, many cannot afford to keep up with the return payments when China comes knocking like an international loan shark.
And then the building projects end up being abandoned or unfinished until the debt is settled – with the Communist Party more than happy to take their pound of flesh.
The initiative has seen China get its hands on resource rich mountains in Tajikistan and allegedly take a stake in a key port in Sri Lanka.
Experts are concerned that as debt mounts, many more of these projects will go unfinished – and Chinese lenders will seize control of land and strategic assets in lieu of repayment.
Countries such as Sri Lanka, Kenya, Montenegro, Laos and Kazakhstan have found themselves crippled by debt and reliant on Beijing.
The Belt and Road Initiative – dubbed the "project of the century" by President Xi Jinping – has been billed by Beijing officials as a global infrastructure development fund which aims to connect China to the rest of the world.
However, some suggest that it is a plan to further China's ambitions using "predatory loans" and "debt traps" to bring nations' under their sphere of influence.
British MI6 chief Richard Moore described China's use of the money as a means to "get people on the hook."
Speaking to BBC Radio Four, he added that the country has also enlisted the use of "data traps" as it attempts to build it's global intelligence.
"If you allow another country to gain access to really critical data about your society, over time that will erode your sovereignty, you no longer have control over that data," he explained
"That's something which, I think, in the UK we are very alive to and we've taken measures to defend against."
His comments come as one-in-five infrastructure projects in Africa are now funded by China and one-in-three are built by Chinese companies, with many lucrative deals demanding the use of Chinese construction firms, according to East African Monitor.
But China's growing concerns over the viability of schemes along the Belt and Road Initiative has left infrastructure projects in a shoddy state for poor states to try and fix.
Shaun Breslin, professor of politics and international studies at Warwick University, said the West's "imposition of political conditionalities on aid and trade relationships has created a space for China to operate".
"China has made much of its no strings attached economic relations with developing economies," he told The Sun Online.
"But there have been increasing questions about the wisdom of becoming too reliant on Chinese finance and ending up in forms of debt dependence on China in various countries along the Belt and Road, and this might become more important."
Montenegro has found itself left with a disastrous Chinese-built road dubbed "the highway to nowhere".
Perched on top of massive cement pillars towering above Montenegro’s picturesque Moraca river canyon, Chinese workers started building a 270-mile state-of-the-art highway to the Serbian capital Belgrade.
Workers have spent six years carving tunnels through solid rock and raising concrete pillars above gorges and canyons – but the road goes nowhere.
The government can't afford to build the rest or repay the first installment of China's $1 billion loan – and it forced the government to raise taxes and partially freeze public sector wages.
The IMF estimated the project would cost another $1.2 billion to complete – and its feared China could seize land in Montenegro to cash in its debts.
'ROADS TO NOWHERE'
Meanwhile, The Chinese-built Mombasa-Nairobi Standard Gauge Railway in Kenya was supposed to weave 290 miles from the country's coast all the way to Uganda.
But the flagship project didn't quite reach the border and the railroad ended abruptly in a sleepy village about 75 miles west of the Kenyan capital, Nairobi.
Construction was halted in early 2019 after China withheld some $4.9 billion in funding needed to finish the line, Bloomberg reports.
Building was whacked on hold after China's President Xi Jinping called for tighter regulations on the financial viability of the infrastructure projects.
Kenya is now said to owe a whopping $9 billion to Beijing in infrastructure loans – and authorities have downplayed suggestions that the Communists could seize the port of Mombasa.
Uganda was also told to hand over it's only international airport to the Chinese capital as fears mount that it could become locked off from the rest of the world.
In Asia, a high profile project in Kazakhstan was put on hold after the collapse of a local bank which handled Chinese funds.
The $1.9 billion railway project was supposed to start operating in 2020, but China Development Bank halted lending after the collapse of the Kazakhstan bank where funding was deposited.
It means a series of concrete columns snaking through the capital of Nur-Sultan are the only evidence of the Chinese-funded project.
Officials in Kazakhstan have said they will now have to borrow from domestic banks to complete the work, Bloomberg reports.
Meanwhile, Tajikistan, which shares a border with China's Xinjiang province, was forced to hand over territory of 1,158 square kilometres of the Pamir mountains to China after defaulting on loans.
It meant the Chinese companies snagged rights to mine gold, silver and other mineral ores in the region.
And Laos has become the latest victim of China's so-called debt diplomacy.
The South Asian country has been struggling to pay back Chinese loans, and ended up handing over the majority control of its national electric grid to China Southern Power Grid Company, a state-owned enterprise.
Sri Lanka has also been trapped in a vicious cycle of taking fresh loans from China and repaying old ones.
The country defaulted on a Chinese contract to build Hambantota Port – and the company got a 99-year lease in return, prompting fury over Beijing's shady intentions.
'CORRUPT DEALS'
In a damning statement, former US Secretary of State Rex Tillerson once said Beijing "uses opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term, self-sustaining growth".
But Linda Calabrese, research fellow at ODI and PhD candidate at the Lau China Institute, said "no evidence of debt trap" has been found in the case of Hambantota.
"There is plenty of evidence right now, in the academic literature and in other sources, that there is no conscious decision by China to ensnare countries in a debt trap," she told The Sun Online.
"Chinese lenders provide money, sometimes at concessional rates, and sometimes at market rates, but they want to money back – they have no interest in trapping countries with debt.
"The most famous case of an alleged debt trap, the Hambantota port in Sri Lanka, has been examined by several scholars, and no evidence of debt trap has been found."
Yet fears over Sri Lanka becoming a "Chinese colony" have been reignited this week after China won another contract to build a 17 kilometre elevated highway on the outskirts of Colombo.
The terms of the deal allow China Harbor Engineering Company to own the highway, earn profits, before handing it over to the Sri Lankan government in 18 years, Nikkei Asia reports.
Jonathan E. Hillman, a senior fellow and director at the Center for Strategic and International Studies in the US, believes China's shady lending "provides an avenue for influence".
He said: "This can put pressure on borrowing countries to make additional concessions, such as granting preferred access to natural resources, future government contracts and diplomatic support.
"Those types of concessions are more likely than asset seizures because they are not as publicly visible and directly connected to specific projects."
In 2018, the Center for Global Development named Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan as "highly vulnerable to debt distress" due to China's Belt and Road Initiative.
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