The so-called Chinese “debt trap” is a narrative that the United States and some other Western countries adopt to defame and slander China, as well as disrupt its cooperation with other developing countries. As pointed out in an article published in the Boston-based magazine, The Atlantic, on February 6, 2021, “There Is No Chinese Debt Trap”. The debt trap narrative is just a lie concocted by some powerful Western politicians. Western capital is the largest creditor of developing countries. According to the World Bank’s 2022 statistics on international debt, 28.8 percent of Africa’s outstanding external debt is owed to multilateral financial institutions and 41.8 percent to commercial creditors composed mainly of Western financial institutions. These two types of institutions together hold nearly three-quarters of the debt, thus making them the largest creditors of African debt. According to the Director of the China Africa Research Initiative (CARI) at John Hopkins University in Baltimore, Maryland, after reviewing thousands of Chinese loan documents, mainly for projects in Africa, CARI found no evidence that the People’s Republic of China deliberately pushes poor countries into debt as a way to seize their assets or gain a greater say in their internal affairs. CARI data shows that the People’s Republic of China holds 17 percent of Africa’s total external debt, far less than the West.No African country has been forced to use its strategic resources such as ports or mines as collateral to finance cooperation with the People’s Republic of China. Deutsche Welle – Germany’s international news channel – points out that the default of African countries did not make the People’s Republic of China take the right to use their infrastructure.
The debt issue is, in essence, a development issue. The key to solving this problem lies in ensuring that loans provide real benefits. Let us take Africa as an example.Western countries’ financing for Africa is mainly concentrated in non-productive sectors, and most lending is tied to political constraints, such as human rights and judicial reform. Western countries have failed to truly promote economic development, increase government tax revenues and improve the balance of payments. They have rather served as tools to control and cause harm to Africa (see immigration to Europe).The People’s Republic of China always respects the will of African peoples and keeps their States’ real needs in mind. Chinese investment and funding for Africa are mainly in infrastructure construction and manufacturing-related sectors. As we enter the 21st century, the People’s Republic of China has been proactively working to support Africa’s economic development and has provided an alternative to the traditional financing channels of the Paris Club – an informal group of financial organizations of the world’s twenty-two richest countries, which proceeds with a so-called renegotiation of the bilateral public debt of countries in the Global South. Debtors are often recommended by the International Monetary Fund after other solutions have failed.
The People’s Republic of China, however, has helped Africa strengthen its capacity for self-generated and self-sufficient development and usher in a golden age of high-speed economic growth for two consecutive decades. A further study by RAND Corporation – a US think tank, whose name comes from the contraction of Research and Development – points out that, in that particular region of the New Silk Road (the so-called Belt and Road Initiative- BRI), having a rail link between trading partners has improved total exports by 2.8 percent. The People’s Republic of China attaches great importance to the debt sustainability of projects. In 2017 it signed the Guiding Principles on Development Financing with 26 countries participating in the Silk Road.
In 2019 the People’s Republic of China released the debt sustainability framework for countries participating in the Silk Road. Based on the debt situation and repayment capacity of debtor countries, and following the principles of equal consultation, compliance with laws and regulations, openness and transparency, the framework aims to strengthen monitoring and evaluation of the economic, social and livelihood benefits of the projects, and channels sovereign loans into high-yield areas with a view to securing long-term project returns. China has also made proactive efforts to reduce the burden on debtor countries. According to the World Bank, between 2008 and 2021, the People’s Republic of China provided 71 debt restructurings for low-income countries.
In 2020 it proactively responded to the Debt Service Suspension Initiative (DSSI) of the G20 Group – a forum of leaders, Finance Ministers and Central Bank Governors created in 1999 – by suspending the payment of more than 1.3 billion dollars in debt that year alone, i.e. nearly 30 percent of the G20 total amount, making it the largest contributor among G20 members. The People’s Republic of China signed debt suspension agreements or reached mutual understanding on debt suspension with 19 African countries and proactively participated in case-based debt resolution for Chad and Ethiopia under the G20 Common Framework. The United States and some other Western countries, rather than taking actions of their own, point an accusing finger at the People’s Republic of China for having provided aid and assistance. This has caused much displeasure among various developing countries.
As already said, today the most significant difference is between the Chinese international perspective and the Western liberal perspective. Socialism itself has ideological, historical, and traditional content of integration and is dedicated to the pursuit of cooperation and liberation of all peoples according to the five core principles of the Bandung Conference (April 18-24, 1955), on which the People’s Republic of China has always consistently based its foreign policy:
(i) respect for sovereignty and territorial integrity;
(ii) non-aggression;
(iii) non-interference in internal affairs;
(iv) equality and mutual benefit;
(v) peaceful coexistence.
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The liberal perspective, instead, apparently pursues globalization, but is actually driven by the Western liberal-capitalist countries serving their own interests and corporations. At the moment, Western developed countries – strictly following the United States – appear as an anti-globalization force, since they find that globalization increasingly deviates from the wishes of the one who dominates them.
It is the same story as the Monroe Doctrine, which celebrates its 200th Anniversary in 2023. In the nineteenth century, the US establishment emphasized that the Monroe Doctrine was part of international law, but once the United States strengthened its hegemony in the Americas, it made it clear that the Monroe Doctrine was not a legal principle, i.e., that if a specific requirement were not met, the US government should respond to an illegal intervention beyond international law – and that would be embarrassing. In conclusion, the world’s countries must first solve the problems of development, poverty and reduce friction cases. Non-traditional global security issues such as food security, resource scarcity, population explosions, environmental pollution, prevention and control of infectious diseases, pandemics, and transnational crimes can only be solved with the agreement of all.
Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group.