China - A Shylock Of Our Times

Pakistan is paying a heavy price for willingly embracing the Chinese bear bug.

Far from being a fictional character in William Shakespeare's play, The Merchant of Venice', Shylock, is now an adjective, a synonym for a loan shark. A phrase, pound of flesh', from the play, has entered the lexicon as a slang for extortion by an unscrupulous lender from an unfortunate borrower.

In our times, China has earned this dubious moniker Shylock' because of its unsavoury record of arm twisting and squeezing the small countries which were gullible enough to fall into its debt trap.

Most of India's neighbours are victims of China's shenanigans and ceded to its $8 trillion project- One Belt One Road Initiative (OBOR), a part of their sovereignty and economic independence. Unable to repay, many of them have landed themselves in a state of utter helplessness - underlining the emergence of a new form of colonialism.

A leaked long-term plan for China's massive $56-billion investment in Pakistan exposes the goals of Beijing's OBOR initiative as a "ploy for economic domination, the creation of surveillance states, and allowing China to influence media landscapes ".

Pakistan is paying a heavy price for willingly embracing the Chinese bear bug. Blinded by its hate against its own pre-Islamic past, Pakistan has teamed with China, in a bid to form an anti- India gang-up. In the process, it has ceded its economic and political space to the dragon.

No wonder Pakistan is in dire-straits. The Islamic nation is tottering, and standing with a begging bowl in the global financial market. Its polity, which was never stable anyway ever, has reached its nadir.

According to State Bank of Pakistan, the Islamic nation's debt to the People's Republic of China which was $7.2 billion in 2017, moved to $19 billion by April 2018 and $30 billion by 2020, primarily due to loans to fund China-Pakistan Economic Corridor (CPEC) projects.

On the back of an envelope calculation shows that Pakistan would require nearly 40 years to pay back its debt to China. A number of scholars have said that the CPEC "subordinates Pakistan's interests to China's", and the CPEC and Pakistan's growing economic dependence on China could become a threat to Pakistan's sovereignty ".

China and Pakistan signed a 2017 agreement to build five hydropower projects, with China investing $50 billion. According to one calculation, project delays are likely to escalate costs to $98 billion. With accumulated interest of almost $5 billion per year, Pakistan would have to pay almost $200 billion over 20 years to China.

Will Pakistan be in a position to repay such heavy loans, given the fact it is desperately seeking funds from international agencies to fund the import of its essential requirements such as oil? Obviously, in such a scenario, China would have undue influence in an heavily indebted Pakistan's affairs.

About China's String of Pearls strategy in the Indian Ocean and China's motives in Malaysia and the Strait of Malacca, Malaysian Deputy Minister of Defense Liew Chin Tong said: "You look at a map and you can see the places where China is plotting ports and investments, from Myanmar to Pakistan to Sri Lanka, on toward Djibouti. What's crucial to all that? Our little Malaysia, and the Malacca Strait. I say publicly that we do not want to see warships in the Strait of Malacca or the South China Sea ".

China financed $22 billion in Malaysian projects during the administration of Prime Minister Najib Razak. Malaysia has several Chinese Belt and Road Initiative projects under construction.In September 2018, Minister of Finance Lim Guan Eng cancelled two contracts, worth approximately $2.795 billion, with China Petroleum Pipeline Bureau for oil and gas pipelines.

Mahathir Mohamad andthe Finance Minister criticised the projects as "expensive, unnecessary, superfluous, non-competitive" (because open bidding was prohibited), conducted with no public oversight, and favored Chinese state-owned firms.

While entering economic agreements, China usually subordinates due diligence of the proposed projects to its political goals and strategic objectives. As a result, it lends recklessly, financing white elephants like Hambantota in Sri Lanka. When the debtor gets into difficulties, the 'Shylock' in China bares its fangs, sucking the victim bone dry.

The IMF at present is considering a way to bailout Sri Lanka, fast emerging as the poster child of Beijing's unfolding new playbook. Except China, every other sovereign creditor to Sri Lanka, including India, has provided the necessary financing assurances to IMF to operationalise a $2.9 billion bailout package.

IMF requires all creditors to provide specific credible financing assurances, so that the burden sharing is equitable, not benefiting one over the other. But China is refusing to fall in line.

This would mean IMF risking going ahead with its bailout program without the approval of one of the principal creditors , leaving the field open for China to negotiate a separate deal with Sri Lanka to recover its debts at its own terms.

In that case, there is the possibility of China taking control of physical assets in Sri Lanka, as it happened with Hambantota Port. China is eying six Sri Lankan projects, where it may ask for more stake control, contracts or both against its debts.

These include Hambantota Oil Refinery, Floating LNG plant in Colombo, Outer Circular Highway cornering China built Colombo Port City, takeover of the second Colombo. Airport terminal deal for which Japan had extended a loan, the Central Expressway project, and Colombo Light Rail project.

China's predatory role while dealing with its borrowers, has come under global scrutiny. In August 2018, a bipartisan group of 16 US senators said that China engages in debt-trap diplomacy. In October 2018, U.S. Secretary of State Mike Pompeo said that China's loans are facilitated with bribes.

A number of U.S. government documents refer to debt-trap diplomacy, including the 2020 Department of State report "The Elements of the China Challenge". According to senior US government officials, Beijing "encourages dependency using opaque contracts that mire nations in debt and undercut their sovereignty".

Since 2013, Belt Road Initiative (BRI) has been endorsed by 139 countries, including European ones. BRI contracts are typically confidential and terms secret. Today BRI is in trouble and lending has been slashed. BRI is now nicknamed as "a road and belt to nowhere". A large number of developing countries today face a debt crisis brought on by over-borrowing during the heady 2010s.

The borrower nations are now in distress, with Shylock China breathing down their necks. BRI, that once helped China win friends, is now buying hostility.

The Global Sovereign Debt RoundTable (GSDR), is a new initiative where India will have to decide on its role with deftness. The country will be coordinator in its capacity as G20 chair. The first physical meeting is expected end February at Bengaluru on the G 20 finance track side-lines.

Both IMF and World Bank are looking forward to the G20 framework to break the impasse with China on the lines of the Debt Service suspension Initiative for low-income countries right after the pandemic.

The world is in 21st century, with many lulled into believing that the days of colonisation and slavery are over. Times may have changed, but baser human instincts such as- powerful exploiting the weak- going back to medieval era, haven't. Earlier, lancers on horseback, or gun toting soldiers backed by howitzers marched into weaker nations to colonise them. The modern world has new methods to achieve the same objective.

Now countries such as China are weaponing credit instruments to spread their influence and use smaller nations as side-kicks to achieve their strategic and imperialistic goals. Like Shakespearean fictional Shylock , imperialistic countries such as China are equally ruthless when it comes to extracting their 'pound of flesh'. Just look at what Pakistan, Sri Lanka, or several African nations are going through to know the sad truth that colonisation continues to be as ugly and heartless, as it was in the yore.

(Mr. Balbir Punj is a Former Member of Parliament and a Columnist. He can be reached at: [email protected])

Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of OneIndia and OneIndia does not assume any responsibility or liability for the same.