Is China A Predator?

Sri Lanka is obviously in a debt trap. External debt stock of the govt at the end of 2019 amounted to US$ 34.7 bn. In addition, State-Owned Enterprises and other semi govt entities borrowed US$ 21 bn using sovereign guarantees. Effectively, the total foreign debt is US$55.9 bn, which accounts for 66.6% of GDP at the end of last year

- Ranga Jayasuriya

America’s Secretary of State, Mike Pompeo, who was in Colombo, making the second stop in his four-nation Asian tour slighted China as a predator, last week.

“We see from bad deals, violations of sovereignty and lawlessness on land and sea that the Chinese Communist Party is a predator, and the United States comes in a different way, we come as a friend, and as a partner,” he told a media conference winding up a 12-hour Sri Lanka visit.

Are China’s loans to the developing world predatory and exploitative by design - a ‘debt trap diplomacy’? It is not easy to find a uniform answer. China is investing in a wide variety of states, including some of the least salubrious, kleptocratic and nepotistic. Generally, domestic conditions tend to influence the lender’s behaviour, especially when the latter itself does not have a hard and fast code of conduct or domestic regulatory mechanisms that hold it accountable. Add to that is Chinese loan conditions are opaque.

But, for the specific case of Sri Lanka, the answer might be straight forward.

Sri Lanka is obviously in a debt trap. The external debt stock of the government at the end of 2019 amounted to US$ 34.7 billion. In addition, State-Owned Enterprises and other semi-government entities had borrowed US$ 21 billion using sovereign guarantees, making the government liable for repayment. Effectively, the total foreign debt of Sri Lanka is US$55.9 billion, which accounts for 66.6% of GDP at the end of last year.