The world’s collective debt is at a historic high. According to Fortunly’s infographic, China’s Belt and Road Initiative (BRI), aka the New Silk Road, is one of the biggest contributors to global debt.
The superpower’s flagship foreign policy program, unveiled in 2013, finances major development projects around the world. The program builds maritime and overland transportation links between strategic trade routes in Asia, Africa, and Europe.
The world’s second-largest economy loaned trillions of dollars to dozens of countries. The East Asian nation dubs its initiative as a win-win solution to address underdevelopment in emerging economies.
Many nations and organizations, however, consider the BRI an imminent disaster for participating countries. They see the BRI as a weapon for China’s “debt-trap diplomacy,” designed to coerce vulnerable nations away from Western powers and toward China’s orbit of influence.
Sri Lanka: The First Domino to Fall
The BRI enticed countries with great opportunities. Until Sri Lanka defaulted on its financial obligation in 2017. Sri Lanka South Asian, as a result, was forced to turn over its strategic Hambantota port to state-owned Chinese entities.
The news shocked the world. The seizure gave China’s geopolitical rivals more reason to attack BRI intentions.
Potentially Grim Fates for Eight
According to the Center for Global Development, eight other BRI countries will face financial distress due to over extended debt. These nations are Djibouti, Tajikistan, Kyrgyzstan, Laos, the Maldives, Mongolia, Pakistan, and Montenegro. Their debt-to-GDP ratios skyrocketed after receiving Chinese financing.
The fear of BRI countries becoming like Sri Lanka and losing national assets prompted many countries to reduce seizure risk.
An Eye-Opener to All Parties
After Sri Lanka’s BRI default, other countries moved to protect their sovereignty. Nepal and Pakistan, for example, cancelled projects. Malaysia also successfully renegotiated China’s unfair terms.
China, on the other hand, also began proceeding with greater caution. It wanted to avoid repeating the global backlash after taking Sri Lanka’s port.
The BRI is neither good nor evil. Although it sets up a major threat to sovereignty, it also provides an opportunity for much needed development. The unfortunate reality is that developing countries sought help in building infrastructure. However, China was one of few willing to funnel capital for such projects. The perception of many BRI recipients was Western powers’ focus on funding regional wars.
Sri Lanka’s foreign financial assistance did not work well. However, it did alert other BRI nations of the serious risks of overextended debt.
Infographic URL: https://fortunly.com/infographics/global-debt-history-infographic/