US Senators Call Attention to Developing Countries Hit by China’s Debt Diplomacy Amid Pandemic

April 26, 2020 Updated: April 26, 2020

Sixteen Republican U.S. senators have expressed concern about developing countries being weighed down by Chinese debt amid the COVID-19 pandemic.

The debts are in connection with loans that the Beijing regime has offered to countries under its foreign policy project, the Belt and Road Initiative (BRI, also known as One Belt, One Road). Rolled out in 2013, the strategy aims to build Beijing’s geopolitical influence along trade routes linking China, Southeast Asia, Africa, and Europe.

“We urge the State Department and the Treasury to consider the impact of the Chinese-financed Belt and Road Initiative (BRI) on the finances of many troubled economies and policy implications of additional International Monetary Fund (IMF) or World Bank support,” the senators wrote in a joint letter to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, according to an April 24 statement from Sen. Marco Rubio (R-Fla.).

Other signatories include Sens. David Perdue (R-Ga.), Ted Cruz (R-Texas), Marsha Blackburn (R-Tenn.), John Cornyn (R-Texas), Mike Crapo (R-Idaho), Kevin Cramer (R-N.D.), Steve Daines (R-Mont.), Chuck Grassley (R-Iowa), Kelly Loeffler (R-Ga.), Martha McSally (R-Ariz.), Jerry Moran (R-Kan.), Rick Scott (R-Fla.), John Thune (R-S.D.), Thom Tillis (R-N.C.), and Roger Wicker (R-Miss.).

BRI Debt

On April 13, the International Monetary Fund (IMF) announced that it would provide immediate debt service relief to 25 of its poorest and most vulnerable members—including Sierra Leone, Nepal, Gambia, and Mozambique—so these countries can allocate their financial resources to pandemic relief efforts.

Many countries that have signed on to BRI are heavily indebted to China, including Nepal, Gambia, Sierra Leone, and Mozambique.

The senators pointed out that “Chinese lending is inconsistent with global standards of governance,” such as loans that require existing assets or sources as collateral.

In 2017, Sri Lanka handed over control of its key port of Hambantota to Beijing via a 99-year lease, after it was unable to pay off over $1 billion in debt for the BRI port project.

Last week, Tanzania President John Magufuli canceled a BRI project signed by his predecessor—a Chinese loan of $10 billion to construct a port at the country’s Mbegani creek in Bagamoyo, according to several media outlets.

Magufuli said the terms of the deal signed in 2013—such as the Tanzanian government would have absolutely no power to voice opinions on future investors for the port throughout the 99 years it will be leased to China following construction—would only be accepted “by a drunken man.”

The senators noted that as China is suffering economic consequences of the virus outbreak, China would be “less willing to roll over debts as they mature, which could exacerbate emerging-market liquidity challenges, and “as projects struggle in areas of strategic interest, China will be tempted to safeguard its investments and political influence.”

The letter called for specific U.S. actions, including pressuring Chinese institutes to renegotiate the underlying debt of developing countries, and requiring any country that asks for IMF assistance to come clean with all outstanding financial obligations, including BRI agreements and Chinese debts.

Without these actions, “U.S. and other Western taxpayers would be in essence bailing out Chinese financial institutions and enabling China’s debt-trap diplomacy,” the senators concluded. Member nations are assigned quotas to finance the IMF, usually funded by taxpayer dollars.

‘Health Silk Road’ 

The senators’ letter also pointed to the fact that China has been promoting its “Health Silk Road,” the health component of the BRI initiative, amid the pandemic.

In January 2017, the World Health Organization (WHO) and China agreed to become partners in implementing health projects under BRI, naming the partnership the “Health Silk Road,” according to Chinese state-run media China Daily. The agreement was signed by then-WHO Director-General Margaret Chan, who was succeeded by Dr. Tedros Adhanom Ghebreyesus in 2017.

Ghebreyesus visited China in September 2018. According to the WHO, the two sides agreed to reaffirm “their commitment to improving the health” of citizens in countries that were engaged with China’s BRI.

The current WHO chief also praised the Chinese regime during his trip, calling China “a model for universal health coverage, a bulwark against health emergencies, and a reminder that transformations can be far-reaching.”

In March, Chinese state-run media Xinhua reported that Chinese leader Xi Jinping told Italian Prime Minister Giuseppe Conte in a phone call that China would be willing to work with Italy on the “construction of a Health Silk Road.”

Italy, which signed on to China’s BRI in March 2019, is the first G-7 nation to join.

Many U.S. lawmakers have criticized China for not being transparent about the virus outbreak, with some proposing legislation to hold Beijing accountable for the spread of the virus.

On April 15, U.S. President Donald Trump declared that U.S. funding for the WHO would be halted for 60 to 90 days, pending a review “to assess the World Health Organization’s role in severely mismanaging and covering up the spread of the coronavirus.”

François Godement, senior advisor at the Paris-based nonprofit think tank Institut Montaigne, suggested in a blog post published in March that China has greater influence at the WHO than the United States, despite the fact that China has donated considerably less to the agency.

U.S. contributions to the WHO exceeded $400 million in 2019, while China provided $44 million in the same year, according to State Department statistics.

One of the reasons for China’s powerful influence in the United Nations is the control Beijing had over the budget-setting Fifth Committee of the U.N.’s General Assembly, Godement wrote.

For example, the U.N. Refugee Agency (UNHCR) “heaps official praise” on China’s BRI year after year, despite Beijing having contributed a paltry $1.3 million to the agency, compared to the $1.6 billion from the United States in 2018. Furthermore, China’s BRI “simply has no discernible relation to refugee issues.”

Currently, a petition on the website change.org calling for Ghebreyesus’s resignation has collected more than 1 million signatures. The petition states that Ghebreyesus acted too late in declaring a global health emergency and failed to be politically neutral, accepting Chinese data and information about the virus without scrutinizing them.

Follow Frank on Twitter: @HwaiDer