The world has very well realized the cost of Chinese debt. The Chinese are known to offer cheap loans to smaller nations and force unneeded infrastructure projects leading to bankruptcy and debt trap. Right from the Pacific to Latin American, from Africa to Europe and Asia, the number of countries facing an economic crisis, Chinese blackmail and local unrest due to the Chinese debt trap is large. However, the pandemic has come as an eye-opener as it has forced smaller nations to resist cheap Chinese debt and pushed world powers to offer an alternative to Beijing.
G7 (Group of Seven)
G7, or the Group of Seven, is the group of seven rich nations of the world. In June this year, the G7 nations came together to announce a major infrastructure plan that will compete with China’s Belt and Road Initiative. Named the ‘Build Back Better World Initiative’, the B3W will provide a transparent infrastructure partnership to help the developing nations.
To take the B3W Initiative forward, yesterday, the United States identified 5 to 10 major infrastructure projects for investing. US Dy. National Security Adviser, Daleep Singh, is leading this step, and the initial projects selected could be in Senegal and Ghana in Africa. The American delegation has also visited Ecuador, Panama and Colombia in Latin America in the same regard. The US plans to offer equity stakes, loan guarantees, political insurance, grants and technical expertise to these countries to focus on climate, health, digital technology, etc.
Flag bearers of the European Union, Germany and France are a part of G7, which has planned the B3W Initiative. Seeing a resistance front take shape, China tried to drive a wedge in it. Immediately a month after the G7 meet, Beijing floated the idea of ‘Africa Quad’ in which it proposed to partner with France and Germany for the so-called development of African nations. However, considering the mutual opposing interests of these countries and after the cancellation of the EU-China investment deal, this trick by China appears uncertain to succeed.
The United States has called upon the Paris Club, a group of big creditor countries, for faster progress on restructuring loans of highly indebted countries. The US has made a similar appeal to the G-20 countries as well. With debt levels worldwide reaching record highs due to the China-created pandemic, proactive steps by Paris Club, like the one it took to cancel Sudan’s $14 billion debt, may save many nations from the Chinese Debt Trap.
India, Japan, UK, Australia
India and Japan have together been financing and developing several infrastructure projects across Asia and Africa. Noteworthy are those in Myanmar, Sri Lanka, Bhutan, Bangladesh, etc. The two Asian democratic giants thus present the developing countries with an alternative to CCP’s predatory policies.
Last week, India, the United Kingdom and Australia stitched a partnership named ‘Initiative for the Resilient Island States’ (IRIS). Under it, the three countries will help small island nations to develop infrastructure.
As all major world powers come up with alternatives to China’s debt, the global influence of the Chinese Communist Party could diminish vastly, further sinking China’s already faltering economy.