China and Debt-Trap Diplomacy: Fact or Fiction?

Watch the replay here. 

Key takeaways: 

• The China-Africa Research Initiative’s analyses is twofold; first to understand the dimensions of China’s lending and its role in debt profiles of borrowers in Africa and elsewhere in the developing world; and second, how Beijing and its multiple Chinese lending entities coordinate debt relief.
  
  
• Over 70% of Chinese lending in Africa is focused on economic infrastructure including roads, bridges, railways and ports. Chinese entities provide USD $10b in infrastructure loans each year though Africa’s funding gap remains $50-$100b annually.
  
  
• Misplaced fears of Chinese infrastructure loans and ‘dept-trap diplomacy’ have fed into the larger anti-China narrative within the US-China trade conflict. This is particularly evident when looking at the Hambantota Port in Sri Lanka.
  
  
• A number of misleading narratives have surrounded the project since China became involved. First, the loan for the Hambantota Port was conceived by Danish feasibility studies rather than Chinese. Second, Beijing did not retire Sri Lanka’s debt in exchange for control of the port, rather Colombo used the foreign exchanges from the private-public partnership and lending agreement to bolster its reserves. Third, the terms of the debt–which was lent at a commercial rate–was further relaxed for Sri Lanka over time rather than increasingly onerous.
  
  
• In recent years, Chinese entities have partnered with French companies in port developments and harbors in Nigeria and Cameroon, and with the UK-based Atkins Limited and Canadian firm SNC Lavalin in Sri Lanka.
  
  
• In the Covid-19 pandemic era, we have seen for the first time China joining a multilateral effort to provide debt relief despite overriding and misplaced narratives of Chinese ‘debt-trap diplomacy’ that have escalated tensions in the context of the US-China trade conflict.