China is expanding its reach with its Belt and Road Initiative. This has been going on for a number of years.
Where third world countries could not get financing for large infrastructure projects, China is willing to provide financing and building of these huge projects. These projects are of great benefit to the host country
- Host countries get financing for large infrastructure projects that they would not normally be able to afford
- China has projects that employ Chinese workers and use Chinese products such as steel and equipment. This keeps Chinese workers in China employed.
- projects get completed and are functional
- Projects are created that are too large and too elaborate for the host country. This tremendously increases costs
- If a host country cannot repay the loan, China will lease the infrastructure, sometimes for 99 years. This is a form of taking control of parts of the host country. There is currently a 99-year lease on Sri Lanka’s Hambantota port because they could not afford the loan repayment
- Projects use Chinese financing, hire Chinese firms and employ only Chinese workers. Local workers do not benefit
State-owned enterprises carrying out BRI projects have also been criticised for not using local labour forces, for disregarding environmental concerns and for corruption.
- Projects are signed with the host country but there is no transparent bidding process for contractors. Chinese firms are chosen, all without the host country’s input. This lack of transparency is concerning.
According to the few financial details of CPEC that are available, Pakistan is not benefiting significantly from the programme. Reportedly, although China has lent Pakistan US$26 billion-US$30 billion for power and transport projects that are part of the economic corridor, not a single dollar has entered Pakistani banking channels.
Instead, Chinese banks give the loans to Chinese companies, which buy equipment in China and use it in Pakistan.
- The lack of transparency from these Chinese loans may disqualify host countries from IMF and World Bank loans.
- Loans to host countries may have been skimmed and paid to country politicians, all without any proof on paper