China’s debt-trap diplomacy, redolent of colonial-era practices, has claimed its latest victim — the small, resource-rich nation of Laos. Struggling to pay back Chinese loans, Laos has handed China majority control of its national electric grid at a time when its state-owned electricity company’s debt has spiraled to 26% of its gross domestic product.
Sri Lanka and Pakistan, meanwhile, are taking fresh loans from China to pay off old loans, highlighting the vicious cycle in which they find themselves trapped. Both have already been compelled to cede strategic assets to China.
Less than three years ago, Sri Lanka signed away the Indian Ocean region’s most strategically located port, and more than 6,000 hectares of land around it, on a 99-year lease to China. The Hambantota port’s transfer to Beijing was seen in Sri Lanka as the equivalent of a heavily indebted farmer giving away his daughter to a cruel money lender.
Pakistan has given China exclusive rights, coupled with a tax holiday, to run Gwadar port for the next 40 years. China will pocket 91% of the port’s revenues. Next to the port, which is located at the crossroads of the global energy trade, China plans to build a Djibouti-style outpost for its navy.
Tajikistan, whose borrowing binge from 2006 was followed by its ceding of 1,158 sq. kilometers of the Pamir mountains to China and then granting Chinese companies rights to mine gold, silver and other mineral ores, recently asked Beijing for debt relief.