Chinese Debt Trap Will Trigger Trade
Colonialism For Small And Weaker Nations In Belt And Road Initiative: What Does
It Presage?
China’s Belt and Road
Initiative is feared to be a cobweb for debt trapped small and weaker nations.
It woos small and weaker nations with loans in the name of infrastructure
development and when their debt are not paid, it captures their land and
resources. It violates the global norms for development loan, while leaving
little room for debt relief. So far, eight countries have fallen prey to debt
trap. They are Djibouti, Tajikistan, Kyrgyzstan, Lao, Maldives, Mongolia,
Pakistan and Montenegro, according to a study by Centre for Global Development.
There are other weaker nations
which are underway to fall prey to debt trap. They are Nepal, Bangladesh and
Myanmar.
India is not party
to Belt and Road Initiative. Even then, it is not far from the ripple impact of
Chinese debt trap, since its neighbours are likely to succumb to Chinese debt
trap.
Sri Lanka plunged
into debt trap, which caused handing over its Hambantota Port to China.
Djibouti – an African nation — is tending to cede its control on a key port,
which is linked to Beijing linked company. The Malaysian newly elected Prime
Minister Mahattir Mohammad cancelled US $ 20 billion East Coast Rail Link
project – a massive Belt and Road project. Tonga’s Prime Minister Akilis Pohiva
urged the Pacific Island nations to request China to wave the debts. Pakistan
is creeping into debt trap, running pillar to post for aid.
The growth of debt
trap clouds over the leaders of African and small nations in South East Asia,
who accepted substantial development loans from China as a part of their
participations in Belt and Road Initiative. They feared that when these leaders
lose power, the successive governments plunged into huge debt and are stuck
with the task of repayment.
Indonesia is a case
in point. The debt trap will push these nations in financial turmoil and deter
to finance their own development projects.
The Chinese loan is
viewed a surreptitious attempt to spread Chinese economic outreach in South
East Asia. The growing burden of debt will give more opportunities to China to
dominate the terms for trade and investment with the debt ridden countries. This
will eventually lead to Chinese colonialization of small and weaker nations in
the economic realm. It will pose a strong challenge to India to increase its
trade and investment relations with its neighbor and nations in ASEAN. India is
on the mega project for the development of North East through development of
connectivity with its neighbor and ASEAN.
The Chinese debt
trap means the loss of the sovereignty of small nations like India neighbors
and weaker nations in ASEAN. Debt are turning into equity and finally ownership
goes to China. Besides losing trade opportunities, it will create security
concern. For example, with the transfer of the ownership of Sri Lanka’s
Hambantota Port, China aggravated the security concern for India. The port is
likely to be used for China’s military base.
The debt trap
triggers concern for India to join RCEP ( Regional Cooperation for Economic
Partnership) – the biggest trade block in the world. Every likelihood, RECEP
will take a shape by this year end, after failing two targets.
China is the
biggest stake holder in RCEP, which includes ASEAN 10 + 6 (China, Japan,
Australia, South Korea, New Zealand and India). At present, India has trade
deficit with RCEP. Given the China’s predominance in RCEP, the major concern
for India is that China’s trade colonization will act headwind to India’s trade
expansion in RCEP.
In 2017-18, RCEP
accounted for 64.4 percent of India’s world trade deficit. China was the main
reason for India’s trade imbalance with RCEP. It alone accounted for 60.4 percent
of India’s trade imbalance with RCEP.
The surge in debt
burden will increase India’s vulnerability in the trade block. Instead of
reaping benefits, it would impart a reverse impact on India. It will peer for a
major import market for China and its colonized partner countries. The spill
over impact will prove double whammy for India.
In other words,
China and its debt trapped nations will be the game changer in the trade block.
Indian entrepreneurs feared that the debt ridden nations would open a new
platform to China to reap the benefits of tariff concessions through back door.
India offers less opportunities for tariff concessions to China, as because it
does not have FTA with China.
Under the
negotiations for RCEP, India offered concessions three tier tariff structure.
India offered big elimination of tariff on 80 percent traded goods with ASEAN
countries and 62.5 percent to Japan and South Korea as because It has FTAs with
these countries. To China, Australia and New Zealand, India offered least elimination
of tariffs on 42.5 percent traded goods , since it does not have FTAs with
these countries.
It was earlier
perceived that three tier tariff structure would plug Chinese exports to India
under RCEP, based on strict Rules of Origin. But, a close view analysis says
that the surge in debt trapped nations in the block will give leeway to China
to for a back door entry in Indian market. The debt trapped nations will be
forced to open the door to Chinese investment more liberally , after losing
bargaining power and helped China to make push exports through their land.
India is the biggest consuming country in the block. Eventually, India will be
the dumping ground for China.
This means that
even though sensitive goods , such as electronic goods, may be excluded from
tariff concessions from China under RCEP negotiation , they will find new
passage to enter India through debt trapped nations. This will cause damage to
domestic industry and the country would witness import surge of Chinese goods.
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