China's Debt Traps

China's ambition dealt blow ahead of G20 as Tanzania and Kenya projects grind to halt

By Sophia Yan

The hopes of China’s dictator Xi Jinping to play a more assertive role on the world stage were under pressure on Thursday as he headed to the G20 summit amid a trade war with the US and blows to his flagship Belt and Road Initiative (BRI).
Eleven, who has reversed years of foreign policy caution, landed in Osaka amid reports that Tanzania had suspended a port project and Kenya halted construction on a coal power plant, dealing a major blow to Beijing’s ambitions in Africa.
The port in the Tanzanian town of Bagamoyo was worth $10bn and would have been the largest in east Africa.
But financing terms presented by the Chinese were “exploitative and awkward,” said John Magufuli, Tanzania’s president.
“They want us to give them a guarantee of 33 years and a lease of 99 years, and we should not question whoever comes to invest there once the port is operational,” said Mr Magufuli. 

“They want to take the land as their own but we have to compensate them for drilling construction of that port.” When Xi launched the BRI in 2013, developing nations enthusiastically signed on for loans to fund big projects that would set them on the path to prosperity. 

But six years on new governments are starting to cancel and renegotiate contracts given the weight of Chinese debt, casting doubt on the $1 trillion initiative set to inaugurate a new ‘Silk Road’.

Sri Lanka’s Hambantota port was a cautionary tale for many. 

After the country struggled to pay up on billions in debt, Beijing used hardball tactics to acquire a 99 year lease to the port in exchange for loan forgiveness.
The case was a stunning example of what critics had long feared – that the Belt and Road project amounted to a debt trap for weak countries around the world. 

It sparked worries China would again leverage similar defaults elsewhere to acquire key infrastructure assets; last year, the Zambian government even had to deny rumours it was planning to hand over control of major public assets.
On Wednesday a court in Kenya also halted plans for the construction of a $2 billion Chinese-backed coal power plant near the island town of Lamu, a UNESCO World Heritage site famed for its twisting alleyways and stunning coastline.
The plant, which activists say would have increased Kenya's greenhouse gas emissions by 700 percent, was cancelled after judges ruled the environmental assessment was inadequate.
Other African projects, including massive rail construction projects in Ethiopia and Kenya, have also come under scrutiny, leading China to write-off some loans.
Meanwhile Beijing is facing enormous protests in Hong Kong against a law that would extradite suspects to face trial in the mainland, where the Communist Party controls the courts. 

On Thursday hundreds of protesters in Hong Kong rallied outside the offices of the justice secretary, blocking roads as they called for the extradition bill to be dropped for good. 

Carrie Lam, the city’s chief executive, suspended it indefinitely after one million residents took to the streets decrying a power grab by Beijing.
The protesters have appealed for world powers to raise the plight of Hong Kong at the G20, although Chinese officials have already warned they will not discuss the matter.
Instead, Xi is slated to meet Donald Trump on Saturday as the US demands economic reform in return for the lifting of tariffs on roughly $200 billion of Chinese goods.
Mr Trump, officials said, was hopeful for some kind of accord as his 2020 re-election hopes hinge on a strong economy.
According to the Wall Street Journal, Xi will request that the US end its block on the sale of US technology to Huawei, and drop the demand for Beijing to buy even more American exports than it agreed to when the sides met in December.
Analysts doubted the G20 would see an end to the dispute. 

On Wednesday Mr Trump said he was happy with the status quo. 

“They want a deal more than I do,” he told Fox News.