discussion | | opinion | | South Asia
China may require few recipient countries on the front end. But choosing to engage with China is not without cost.
Xi Jinping has been appointed to a third term as China’s supreme leader, giving him time to unravel a strategy to overthrow the post-World War II US world order. China’s One Belt, One Road Initiative has made trillions of dollars in loans at market rates to fund his projects on infrastructure in developing countries that President Xi seeks to influence. As it becomes increasingly clear how useless these loans are, the United States must counter China’s debt-trap diplomacy by holding counterparties accountable.
China does not require any policy alignment or governance standards to be met before a project can be built. They just offer money. Policymakers in other countries often ask why the United States cannot do the same. But the United States cannot and should not compete with China on a dollar-for-dollar basis. Our model must be based on sustainable growth. China may demand little from recipient countries on the front end, but choosing to engage with China is not without cost. Recent events in Sri Lanka have shown the world how expensive it can be.
Former Sri Lankan President Gotovaya Rajapaksa, who recently had to flee his own people, should now recognize the cost. Attachment A is the Hambantota Port Deal, which was signed when the Rajapaksa family came to power earlier. China gave his over $1 billion loan to an unsustainable Sri Lankan port. Desperate for cash to pay off its foreign debt, Sri Lanka turned over control of the port to China for her 99 years. As such, China has strategically placed deep-sea ports in the Indian Ocean. China’s insistence not to use Hambantota port for military purposes is dubious at best given China’s grandiose strategy to usurp US global supremacy.
When a new government took office in Sri Lanka in 2015, the United States saw an opportunity to strengthen democratic and free market reforms and reduce poverty in Sri Lanka through assistance for economic development. Two years later, based on Sri Lanka’s political and institutional progress, the U.S. government provided approximately $500 million for infrastructure projects that directly benefit the Sri Lankan people. But in 2020, the government withdrew this support before putting the shovel on the ground. what happened?
Stories have started appearing online in Sri Lanka that the US grant aid to rebuild highways, improve roads and introduce a system of land reform around Colombo is actually a covert military program. Indeed, Sri Lankan politics hampered its success, but so did broader geopolitics. It’s hard to trace the origins of the “U.S. military hijacking” theory, but the Chinese press certainly amplified it, and Rajapaksas, once again in contention for the presidency, supported it.
The new Rajapaksa government ignored rather than accept partnerships designed to benefit its own people. why? Sri Lanka has about $51 billion in debt, about one-third of which is held by China, and is shrouded in uncertainty typical of Chinese lending. In contrast, US projects were funded by grants. Washington demanded only an open, transparent process and participation of social stakeholders. But in reality, Rajapaksa leaders want money first. They think little of the consequences of tying the nation into massive debt for generations.
Sri Lanka teaches us that the US should not compete with China. By providing $500 million, the US is essentially telling the Sri Lankan government that US money will flow even though they are unwilling to be good partners and look out for the best interests of their people. That would weaken the US position in the eyes of both Sri Lanka and China.
Soon Rajapaksa had to face his own people in his records. Infrastructure His project did not lead to Rajapaksa’s downfall or the widespread protests in Sri Lanka earlier this year. But the withdrawal reflects the overall dire economic reality created by the government’s decision-making. The verdict of the Sri Lankan people was clear: Enough.
The United States must now renegotiate with Sri Lanka and keep its principles intact. And Sri Lanka has incentives to pursue US re-engagement in other ways.
For those leaders who accepted Chinese loans without question, the deadline for the bill is approaching. The United States cannot fall into the trap of providing economic aid just to show its presence. China’s efforts to control developing countries through debt are broader and far more integrated than single country-to-state relations. It is a slow-moving, long-term strategy to increase the cost of confrontation and tip the global balance of power in China’s favor. It’s happening in the open. The United States must also fight a long-term game. It’s time to hold your partner accountable.