Ideas to Action:

Independent research for global prosperity

CGD in the News

China's "debt trap" is even worse than we thought (Quartz)

June 29, 2018

By Tim Fernholz

An egotistical president, an influx of foreign cash, and a massive pile of debt led to Sri Lanka handing over an entire port to China in December 2017, on a century-long lease.

That handover gave China a strategic foothold just 100 miles from its rival India, akin to how the Soviet Union’s foothold in Cuba raised US blood pressure during the Cold War. Chinese submarines have already appeared there.

But now new details have emerged, including the news that despite ceding the port, Sri Lanka is more indebted to Beijing than ever thanks to the high interest rates on its existing loans. This year, the country owes nearly $13 billion, out of a forecast revenue of less than $14 billion.

​...

Sri Lanka isn’t the only country now fretting about debt to China. The Center for Global Development, a nonprofit research firm, analyzed debt to China that will be incurred while participating in the planned Belt and Road infrastructure investment scheme. It concluded that eight nations could find themselves vulnerable to above-average debt: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan.

Read the full article here.

Related Experts

Photo of Scott Morris
Senior Fellow, Director of the US Development Policy Initiative