share

China Is Not Conducting Debt Trap Diplomacy in the Pacific—At Least Not Yet

by 

Jonathan Pryke

East-West Wire

Publisher:

Honolulu, HI: East-West Center

Publication Date: 2 March 2020
Binding: electronic
Pages: 2
Free Download: PDF

 

In an atmosphere of heightened geostrategic competition, China’s Belt and Road Initiative (BRI) has raised questions about the risk of debt problems in less-developed countries. Such risks are especially worrying for the small and fragile economies of the Pacific. A recent report by the Lowy Institute in Australia did not find evidence of Chinese debt-trap diplomacy at present, but the sheer scale of China’s lending and its lack of strong institutional mechanisms to protect the sustainability of borrowing countries pose clear risks. China needs to adopt formal lending rules similar to those of the multilateral development banks, providing more favorable terms to countries at greater risk of debt distress. This would help borrowing countries manage their debt more sustainably and would encourage greater cooperation between China, the International Monetary Fund (IMF), and other official creditors, helping to reduce some of the geopolitical tensions surrounding the BRI.