House Rules
Author’s note: This essay was originally published in August 2020
In a recently published research paper, scholars at Chatham House made the contention that Beijing’s Belt and Road Initiative is not only benign, but that the concept of “debt-trap diplomacy” is a falsehood. In fact, the authors of the paper contend that it is the fault of developing nations for accepting the terms of those loans and that Beijing has shown no interest in co-opting BRI economic initiatives for political and military purposes. Aside from the fact that I struggle with the idea that two PhDs in political economy have no idea what “predatory lending” means or looks like, I absolutely do believe that the paper willfully ignores the political and security factors that compound the issues of infrastructure loans. These loans, made by Beijing and its state-owned enterprises (SOEs) to vulnerable and often impoverished developing nations have incited great alarm in the international community as governments continue to default or face serious budgetary hardship under the weight of these supposed “no-strings” loans. I mean, if there was really nothing to worry about then we wouldn’t see leaders of developing nations growing cold on new loans and cancelling old ones before Beijing can trap them. Despite the case made in the Chatham House paper, the reality on the ground across the Indo-Pacific remains that the Chinese Communist Party, through its SOEs, engages in predatory lending behavior to further its strategic objectives and enable its rise to hegemony.
As a nation increasingly dependent on raw materials and hydrocarbons sourced from beyond its borders, Beijing possesses critical economic interests all over the world. These interests are most vulnerable along the Indian Ocean (the Maritime Silk Road in Belt and Road Initiative), so it makes strategic sense to support and protect its trade routes using Mahanian-style basing. Beijing is hardly the first to do so, but given that Xi has little time or political will to make genuine friends, China must force the issue on small states. Whereas the US may make security agreements with the countries in which it bases its forces, China behaves more like the mercantilist empires of old that relied on strong-arming and indebting smaller powers into ceding territory.
In the Chatham House paper, the authors use two case studies to justify their argument: Malaysia and Sri Lanka. This is interesting because given the number of debt-trap allegations, the use of only two case studies seems rather inadequate. It’s almost as if the goal of the paper was to muddy the water and give Western-made ammunition to China’s diplomats as the US and the rest of the world pushes back against Beijing’s debt-trap tactics. It’s not like that’s a common tactic by authoritarian regimes to use struggling Western academics to write papers in support of those regimes’ policies…
Weird.
Before we get into the details of the Chatham House paper, I want to make something perfectly clear: a state-owned enterprise (SOE) is just that, a corporation owned by the state that takes direction from the state. These corporations exist for the benefit of the state and are most common in critical sectors such as technology, security, and energy. China uses its SOEs for neo-colonial purposes, blending profit with political opportunity. The BRI is just one case of Beijing’s version of public-private fusion. What the authors suggest in their paper is that the malicious policies furthered by these SOEs are not in fact but malicious but completely well-intentioned. In addition, they contend that because not every investment project has succeeded as well as Beijing might like, that therefore there is no threat and in fact, very little coordination between SOEs and the CCP. To argue that incompetence or mission failure implies innocence is no different than arguing that a murderer is innocent because he left clues behind at the scene of the crime leading to his conviction. There are reasonable arguments to make about how successful elements of the BRI might be in the long run, or that Beijing does indeed make mistakes and the CCP is not run by supervillains with a perfect master plan. The authors of the Chatham House paper do not make these arguments, instead they seek to absolve Beijing of responsibility for the economic destruction it has wrought on small states and to push the blame onto the very states that it has bullied, bribed, and abused in the name of the BRI and pursuit of hegemony.
Let’s begin with Sri Lanka, one of the most frequently highlighted examples of debt-trap diplomacy. The basic backstory is that Beijing, using politicians that it and its proxies bought, agreed to the terms of a loan that Sri Lanka could never repay and then ensured that the deal could not be altered when it faced default. In return, Beijing gained access to a deep-water port that it has eyed as a base for its growing submarine fleet. Now, the authors of the paper will tell you that Sri Lanka swears that the port will not be allowed to be used for military purposes. It should be noted that the authors cite a Chinese media source to support their argument here and that most analysts dismiss the politicians cited in the article because of their entanglement with the PRC. Sri Lanka clearly does not have the political will or power to truly resist Beijing’s corrupting influence enough to restrict activity at the port. The 99-year lease Beijing signed for the deep-water port and future submarine base is also eerily similar to the unequal treaties that Beijing was forced to sign during its “century of humiliation” by Western colonial powers. The messaging is clear: Beijing is turning the tables and out for revenge as it rises to hegemony.
Moreover, Sri Lanka is strategically located at the underbelly of China’s regional rival, India, and at a key location between the Strait of Malacca and China’s interests in the Middle East and East Africa. A deep-water port in Sri Lanka clearly serves Beijing’s political, military, and economic interests and thus required coordination between the SOEs, CCP, and PLA in order to be obtained. Maintaining access to the Indian Ocean and boxing in its rivals is absolutely necessary for any long-term hegemonic goals. The authors of the paper flat out claim that Beijing has not benefited from the Sri Lanka or Malaysia case. Clearly a submarine base at a strategic site in the Indian Ocean that threatens its rival’s security is a pretty big win for Beijing regardless of whether or not the rest of the world is happy about it. The weak will suffer what they must, after all.
In the case of Malaysia, the Southeast Asian nation is home to two of the most strategically and economically important coastlines in the whole Indo-Pacific region. Located between the Malacca Strait and the South China Sea, and just north of the crown jewel of SE Asia, Singapore, Malaysia sits at the intersection between the Indian and Pacific Oceans. Without Malaysia in its pocket, Beijing cannot project power and expand its interests beyond the South China Sea. That so many of China’s investment projects in Malaysia and elsewhere often only benefit Chinese companies and not the local communities show that these projects are intentionally Malaysia is Beijing’s Achilles’ heel in its string of pearls. If it cannot control the ports in and around those waters, then it will remain trapped in the SCS during a time of war and lose access to many of the strategic resources that it relies upon to fuel its economic growth and military. Debt trap investments in critical transportation infrastructure at various ports and railways demonstrate that Beijing sees controlling traffic in and around Malaysia as critical for access to its far-off investments in both peace and wartime. 80% of the world’s seaborne trade passes through the Strait of Malacca. If Beijing cannot control the space around the Strait, then it is incredibly vulnerable in the long-term to being shut off from much of the world that provides strategic resources and materials that fuel its rise.
The Chatham House paper paints Sri Lanka and Malaysia, and many others, as greedy and corrupt addicts, desperate for more cash to fill their pockets. And to be sure, there’s plenty of corruption involved here, but to say the drug dealer does not play a role in addiction when the dealer gets the user’s house if the addict can’t pay is patently absurd. Beijing and its SOEs seek out corrupt politicians China in order to make debt-trap deals and put the developing world in a position where it has to cut deals for strategic territory and resources when they eventually cannot pay these “no strings” investment deals. China often derides the US as imperialist but there is no more imperialist mindset than how China conducts its debt trap diplomacy and subsequently defends it by blaming the victims as it builds strategic facilities to protect its neo-colonial interests around the world. The authors argue that Beijing works to support SOE objectives, portraying a one-way relationship when in fact the relationship is not only mutually beneficial, but SOE objectives often coincide with strategic objectives specifically because the SOEs are acting on behalf of the Chinese Communist Party.
Interestingly enough, and completely ignored by the authors, critical trade routes are not the only places where we see predatory lending and corrupt investment by Beijing. We also see it in places like the South Pacific that are far less important to the BRI but are critical to power projection both leading up to and in the event of great power conflict. Why is it that in the places where debt-trap diplomacy and overwhelmingly corrupt investment by SOEs take place, there is always development of ports and airfields that are suitable for military basing and operations? Beijing is loath to declare its intentions but it is very clear what is going on in the South Pacific and elsewhere. In the same way the empires once built coaling stations across the Pacific to protect their interests, Beijing is adopting a 21st century version of Mahanian tactics to project power and protect resources without officially claiming colonies.
In reality, Beijing has built a dual-purpose network of neo-colonial outposts to support its present and future ambitions. For example, a ChiCom SOE took out a 76-year lease with a very obviously corrupt local governor in the Solomon Islands for the island of Tulagi. Beijing bought an entire island and its surrounding economic zones in a secret deal, an island that is strategically located between Hawaii and US-ally Australia and was once a wartime HQ for both the UK and Imperial Japan because of its location and deep-water port. Everything about that deal suggests more than innocent goals for Beijing’s developing world investments and while this particular incident is not a debt-trap, it is indicative of how Beijing and its SOEs seek out corruption in strategic locations across the Indo-Pacific to further economic, political, and military objectives.
In conclusion, Beijing leverages infrastructure investment and bribery in order to advance its strategic goals across the Indo-Pacific. In making the case for Beijing’s innocence, the authors of the Chatham House paper conveniently ignore the political and strategic importance of many debt-trap and corrupt investment deals, ignore the very definition of predatory lending, and smear their own credentials of respectable researcher. No doubt the Chatham House paper will be used by CCP outlets and proxies to challenge the debt-trap diplomacy allegations. All the while, Beijing will continue to build ports, airfields, and whole bases, in the name of empire at the expense of the developing world. Indeed, the proclamations of China’s innocence by the authors often read like hostage statements. That academics who are supposed to deal in nuance and objectivity make such definitive statements that fly in the face of overwhelming evidence and basic concepts in their own fields should be cause for skepticism by any policy analyst to take such a paper and future publications by the authors and the organization seriously. I would make a call to action for Chatham House to retract the paper or at least acknowledge all of its faults, but I very much doubt that they will be that honorable.
