December 30, 2018

China’s immoral economic strategies are turning them into a great world power

Aiden Wechsler ‘20
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The United States and China are currently locked in a tense trade battle, with each country placing tariffs on the other’s imported goods. The U.S. hopes to bring manufacturing jobs back to American soil, while also hoping to punish China for unfair trade practices such as intellectual property theft, forced transfer of technology and economic espionage.
On October 30, the Justice Department announced that 10 Chinese spies and hackers tried to steal confidential jet information from American and European aerospace companies. Weeks earlier, another spy was lured to Belgium where he was captured by American agents.
“This is just the beginning,” Assistant Attorney General of the National Security Division John Demers said. “Together with our federal partners, we will redouble our efforts to safeguard America’s ingenuity and investment.”
The U.S. and China are the world’s largest economies and the increasing competition between them may be the beginning of a new cold war. Vying for more world power, China is using its economy and military to slowly gain control over other countries in the region until they can assert their unofficial control over them.
One of their most effective methods is debt entrapment: giving large loans to small countries who don’t the ability to pay them back, who then become so indebted to China that they lose their economic autonomy.
Sri Lanka fell victim to this strategy when it borrowed money to finance the building of ports and other initiatives, which it falsely believed would create economic growth. China was willing to lend Sri Lanka billions of dollars despite unfavorable projections for these initiatives.
There was no need for a new port in Sri Lanka, but China still gave billions of dollars to the Sri Lankans for the Port of Hambantota on the condition that it would be built by Chinese companies and workers.
Sri Lanka had reached out to India before they reached out to China, “but India's economic foresight might have cost it in terms of strategic geopolitics, since the debt incurred on the port and the surrounding infrastructure undertakings now belong to its great rival,” said Austrailian journalist Jamie Tarabay.
While the port served no economic purpose to Sri Lanka, it served China’s political purposes. Sri Lanka was unable to pay back loans and this year it turned the port over to the Chinese. While the Chinese are forbidden from militarizing the port, they are expected to ignore the rule or use the debt to change the rule.
While Sri Lanka is one example, China has been applying the same method to various nations in Africa. Ethiopia, Kenya and Angola are all indebted to China, each nation owing billions of dollars that they are unable to pay back. It is estimated other African countries owe China a total of $14.3 trillion. As Africa becomes increasingly indebted, its nations are forced to give up money and strategic military positions to the Chinese.
China is also building strategic ports in Gwadar, on the Arabian Sea. China is believed to be creating military bases in Africa, Afghanistan, and other Indo-Pacific Countries.
China calls this the Belt and Roads Initiative. It is a multinational infrastructure network that will go throughout multiple continents in the hopes of offering commercial opportunity for nations that participate. In reality, the plan would place all participating countries in more debt to China.
A CNBC study found that eight major countries like Pakistan, Montenegro, Tajikistan and Djibouti, who have been identified as possible borrowers, would be unable to pay back the debt if they were to participate.
According to the Center for Global development, “This paper assesses the likelihood of debt problems in the 68 countries identified as potential BRI borrowers. We conclude that eight countries are at particular risk of debt distress based on an identified pipeline of project lending associated with BRI.”
China’s plans to become the preeminent world power become easier as the U.S. retreats from its position as a world leader and focuses on an “America First” foreign policy. As America places tariffs on foreign countries, it makes it more appealing to look to China for economic cooperation.
When the U.S. left the Paris Climate Agreement and the Trans Pacific Partnership agreement, it allowed China to assume a leadership role in Indo-Pacific trade and a world leader in climate change. America has fought back against China’s plans by encouraging nations not to participate in the Belt and Road and using money as diplomacy.
In August, Secretary of State Mike Pompeo announced $113 million for investment in infrastructure, digital connectivity and energy projects in the Indo-Pacific Region. He stressed the idea that the investments had “no strings attached” and were a better option than Chinese investment.
"With American companies, citizens around the world know that what you see is what you get: honest contracts, honest terms, and no need for off-the-books mischief," he said.
While all of this offers a rather pessimistic view, it is important to remember China is still held back by its own debt. If it continues its policy of giving money away, China will likely face its own economic problems.

While the situation is dire and while China’s advances into Africa and the Indo-Pacific should be stopped, China still faces its own problems, which could hinder its plans.

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