In May 2018, scholars of the Harvard Kennedy School released a report written for the U.S. State Department on China’s ‘Debt-trap Diplomacy’.
Working of its debt-trap diplomacy:
• It is all part of Beijing’s “Belt and Road” initiative – also known as “One Belt, One Road” (OBOR) – a US$8 trillion plan to create a new Silk Road with sea and land links across Asia and Africa to Europe.
• Projects costing around $900 billion are currently underway or in the planning stage, paid for with billion-dollar loans from Beijing. Loans that cannot be serviced leave governments in the debt trap.
• Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social impact assessments.
• To strengthen its position further, China has encouraged its companies to bid for outright purchase of strategic ports, where possible.
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