China strategically leverages recipient country debt

China strategically leverages recipient country debt

 In November 2020, Zambia defaulted on state loans, then China emerged as Zambia's largest bilateral lender and made it dependent on China. As quoted from ANI News, reflecting on the collapse of Pakistan and Sri Lanka, Zambia, which is also dependent on Chinese debt, has now canceled its agreement and managed to negotiate a new IMF loan of US$1.4 billion to restructure its foreign debt of US$17 billion. 

China's cancellation of loans worth 1.6 billion US dollars on Saturday (6/8) appears to be the path taken by Zambia to avoid the collapse of China's dept trap diplomacy which has plunged many countries into economic crisis. International creditors have complained that the lack of details about China's Zambian loans has hampered Zambia's debt restructuring process. According to a China Africa Research Initiative (CARI) report, Zambia's debt to Chinese public and private lenders is US$6.6 billion. 

This amount is almost double what the previous Zambian government disclosed. "There are fines or other interest arrears that continue to pile up. Copper-rich Zambia has used Chinese loans for more than 69 projects over the period 2000-2018, mostly in the transportation and electricity sectors," the CARI report said. The lack of transparency of debt terms agreed by African countries has resulted in China being flooded with domestic and international criticism, which claims China is taking advantage of the lack of clarity. 

Debt trap diplomacy is a fraudulent method adopted by China under the BRI scheme, in which China first lends big money under unclear loan terms to developing countries. China strategically uses the debt of recipient countries for economic, military, political interests or to seize its assets as a means of payment.

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