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China struggles to fend off allegations of debt trap diplomacy

China debt allegations

Desperate for cash, Tajikistan is about to sell yet another vital asset to China at a time that countries like Sri Lanka and the Maldives are demanding renegotiation of debt settlements that either forced them to surrender control of critical infrastructure or left them with unsustainable repayments. The pending Chinese acquisition of a stake in Tajikistan’s aluminium smelter, coupled with earlier tax concessions to Chinese companies that would substantially reduce the trickle down effect of investments for the troubled Tajik economy, suggest that China has yet to fully take account of frequent criticism of its commercial approach to Belt and Road-related projects. The Washington-based Center for Global Development warned last year that “23 of 68 countries benefiting from Belt and Road (BRI) investments were “significantly or highly vulnerable to debt distress.” The centre said eight countries — Tajikistan, the Maldives, Pakistan, Djibouti, Kyrgyzstan, Laos, Mongolia, and Montenegro — were particularly at risk. “There is…concern that debt problems will create an unfavourable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI countries,” the report said. Progress on the construction of a road in Afghanistan’s Wakhan Corridor, a narrow strip in the east of the country that touches the Chinese border and separates Tajikistan from Pakistan and Pakistan-controlled Kashmir, may explain China’s seeming insensitivity to the concerns of beneficiaries of the People’s Republic’s largesse. The road would link the corridor to Central Asia in the north and Pakistan’s Chinese-built Arabian Sea port of Gwadar in the south, a crown jewel in China’s infrastructure- and energy driven Belt and Road initiative.

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