Claims Of Chinese ‘Debt Trap Diplomacy’ Are Propaganda – (Told You So)

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Moon of Alabama

In June 2018 we debunked a New York Times piece which accused China of 'financial imperialism'.

China's Port In Sri Lanka's Is Good Business - The NYT's Report On It Is Propaganda

The core of the NYT piece was about the Chinese financed development of the Hambantota port in Sri Lanka:

'China's financial imperialism' is a relatively new genre in western journalism. China is providing loans to other countries to build infrastructure. If those countries can not pay back the loans, China offers to lease and manage the infrastructure built with its money. That somehow is supposed to create a "debt trap for vulnerable countries".

Yesterday the New York Times lamented about Sri Lanka's Hambantota Port Development Project:
...
The port is in a strategic location right alongside the shipping lines between Asia and the Middle East and Africa.

There were several inconsistencies in the NYT piece. It used old statistics to claim that the port was rarely used. However up-to-date statistics proved the opposite. It also lied about Sri Lanka's debt burden only 10% of which was to China.

Thirty-two months after Moon of Alabama debunked the piece, and twenty- nine months after Peter Lee (aka Chinahand) did similar in greater detail, The Atlantic sets out to do the same:

The Chinese ‘Debt Trap’ Is a Myth
The narrative wrongfully portrays both Beijing and the developing countries it deals with.

It notes that the New York Times anti-China propaganda piece was often used by the Trump administration to attack that country:

The Trump administration pointed to Hambantota to warn of China’s strategic use of debt: In 2018, former Vice President Mike Pence called it “debt-trap diplomacy”—a phrase he used through the last days of the administration—and evidence of China’s military ambitions. Last year, erstwhile Attorney General William Barr raised the case to argue that Beijing is “loading poor countries up with debt, refusing to renegotiate terms, and then taking control of the infrastructure itself.”

But the NYT's central claim of 'finance imperialism' was completely wrong:

Our research shows that Chinese banks are willing to restructure the terms of existing loans and have never actually seized an asset from any country, much less the port of Hambantota. A Chinese company’s acquisition of a majority stake in the port was a cautionary tale, but it’s not the one we’ve often heard. With a new administration in Washington, the truth about the widely, perhaps willfully, misunderstood case of Hambantota Port is long overdue.

The Atlantic piece is well researched and it thoroughly destroyed the case the New York Times had tried to make. It also caught the NYT in an outright lie. The original NYT piece had claimed in its second paragraph:

feasibility studies said the port wouldn’t work

The Atlantic authors however found two studies that said the opposite:

It was the Canadian International Development Agency—not China—that financed Canada’s leading engineering and construction firm, SNC-Lavalin, to carry out a feasibility study for the port. We obtained more than 1,000 pages of documents detailing this effort through a Freedom of Information Act request. The study, concluded in 2003, confirmed that building the port at Hambantota was feasible, and supporting documents show that the Canadians’ greatest fear was losing the project to European competitors.
...
We reviewed a second feasibility report, produced in 2006 by the Danish engineering firm Ramboll, that made similar recommendations to the plans put forward by SNC-Lavalin, arguing that an initial phase of the project should allow for the transport of non-containerized cargo—oil, cars, grain—to start bringing in revenue, before expanding the port to be able to handle the traffic and storage of traditional containers.

They also found, just like MoA did, that the port debt to China was not relevant for Sri Lanka's payment problems:

Sri Lanka owed more to Japan, the World Bank, and the Asian Development Bank than to China. Of the $4.5 billion in debt service Sri Lanka would pay in 2017, only 5 percent was because of Hambantota. The Central Bank governors under both Rajapaksa and Sirisena do not agree on much, but they both told us that Hambantota, and Chinese finance in general, was not the source of the country’s financial distress.

The authors of the Atlantic piece, who are professors at John Hopkins and Harvard, conclude that there is no Chinese 'financial imperialism'. The whole concept is wrong:

The notion of “debt-trap diplomacy” casts China as a conniving creditor and countries such as Sri Lanka as its credulous victims. On a closer look, however, the situation is far more complex. China’s march outward, like its domestic development, is probing and experimental, a learning process marked by frequent adjustment. After the construction of the port in Hambantota, for example, Chinese firms and banks learned that strongmen fall and that they’d better have strategies for dealing with political risk. They’re now developing these strategies, getting better at discerning business opportunities and withdrawing where they know they can’t win. Still, American leaders and thinkers from both sides of the aisle give speeches about China’s “modern-day colonialism.”

'Financial imperialism' and 'modern-day colonialism' is what the U.S. exercises when it blocks IMF and Worldbank loans or binds them to political conditions. China is so far not known for doing such.

Thanks to The Atlantic for debunking that anti-China dreck the NYT had put on its frontpage.

Just one question: What took you so long?

h/t Ian Goodrum

Posted by b on February 9, 2021 at 18:20 UTC | Permalink

Comments Sampler (Original thread)

Projection at it's finest/worst. think IMF,USAID etc.etc. See "Confessions of an Economic Hitman"

The Book in Three Sentences:

The United States is engaging in a modern form of slavery by using the World Bank and other international organizations to offer huge loans to developing nations for construction projects and oil production. On the surface this appears to be generous, but the money is only awarded to a country if it agrees to hire US construction firms, which ensures a select few people get rich. Furthermore, the loans are intentionally too big for any developing nation to repay and this debt burden virtually guarantees the developing nation will support the political interests of the United States.

Posted by: Gazza | Feb 9 2021 18:29 utc | 1

Anyone paying attention recently is fully aware that the New York Times is often wrong. Now, the question becomes if the errors are just sloppy journalism or intentional misreporting with an agenda.
The fact that errors are rarely corrected and always seem to skew a certain direction leads to intentional misreporting.
Western media have become propaganda and serve to give readers their "two minutes of hate" at the enemy du jour.
But, many times the false reporting is psychological projection and accuses Russia and China of malicious actions actually committed by the west.
It is actually western habit to employ debt-trap diplomacy and to bankrupt entire countries through the IMF, World Bank et al. in order to seize natural resources and enslave the local population.
It is brilliant of China to deny the west their usual victims by offering a far better alternative and make money in the process.
The targeted countries are thankful to China for saving them and China expands their economic empire. A win/win for everyone but Wall Street and London.

Posted by: Mar man | Feb 9 2021 18:40 utc | 2

You want an example of recent "debt trap"? Here you go:

Ecuador: reversing the pandemic slump?

As the Ecuador economy deteriorated, Moreno took an IMF loan accompanied by stringent austerity measures. The IMF had done the same thing as it did with the right-wing administration in Argentina, offering money in exchange for austerity and pro-business measures. This provoked a massive protest movement in 2019 that eventually forced Moreno rescind some of the terms of the IMF package. Moreno’s popularity plummeted and he decided not to stand in these elections.

[...]

[With COVID-19 pandemic] Moreno’s solution to the slump was to take yet another IMF loan ($6.5bn), in return for the deregulation of the central bank and a hike in gasoline and diesel to world market prices. He also took a bilateral loan of $3.5bn from the Trump administration in return for privatising a major oil refinery and parts of the country’s electrical grid and to exclude China from its telecommunications development. Moreno also responded with ‘emergency’ $4bn spending cuts included liquidating the national airline and closing embassies.

[...]

Even after $7 billion in multilateral loans last year, Ecuador will need another $7.6 billion in new financing in 2021, according to an IMF report from December. And this assumes the country will agree to slash its government budget deficit to a target of $2.8 billion this year from $7.2 billion in 2020. Let me quote directly from the IMF on its conditions: “Discretionary spending cuts which would include wage restraint (0.6 ppts of GDP) and moderation of capital spending (0.7 ppts of GDP). Together with savings from the ongoing fuel subsidy reform and the roll-back of pandemic-related spending when the crisis subsides” And, “continued commitment to reducing deficits is needed to ensure sustainable public finances over the medium-term and lower the debt burden on future generations. Anchoring the medium-term path on the 57 percent of GDP debt limit in COPLAFIP entails a reduction of the NOPBS deficit by 5.5 ppt of GDP between 2019-2025, and of the overall NFPS balance by 5.3 ppt. Achieving these ambitious, yet realistic, goals requires a combination of a progressive tax reform— with permanent revenue yield of 2½ percent of GDP from 2022—and sustained expenditure rationalization.”

To achieve these targets, the IMF wants VAT hiked and measures to make the labour market ‘more flexible’ ie “maintaining the flexibility provided by those measures, such as shorter work weeks, more flexible shift and remote work arrangements, could support the labour market and the recovery.”

Posted by: vk | Feb 9 2021 18:46 utc | 3

@ b who wrote —
" Just one question: What took you so long?"

Kudos to you b but my question would be why at all? Admitting the existence of propaganda is a slippery slope I would posit.

What incentive does The Atlantic have for calling BS? I would think the owners would get a visit from some 3-letter agency politely asking them to support their country...So when is some media organization/journalist going to take on the cult of global private finance? This Atlantic piece is an attempt but is focusing on the other end of the finance spectrum...the public/humanist meme.

Posted by: psychohistorian | Feb 9 2021 18:52 utc | 4

Anyone paying attention recently is fully aware that the New York Times is often wrong.

Posted by: Mar man | Feb 9 2021 18:40 utc | 2

And after a day or two these hit pieces are faithfully republished in Australian papers with their faces buried deep in their US masters ass.

It's all part of a concerted demonization and consensus building effort to desensitize the populace when call for a selective renege of bonds and asset held by China comes. Oh and the draft will probably come right after that.

Posted by: A.L. | Feb 9 2021 19:03 utc | 5

The Atlantic is this the same group as the Neocon Atlantic Council or are they different. If they are the same group then why would they ever have a good article, the purge has not been completed yet?

Posted by: Christian J. Chuba | Feb 9 2021 19:12 utc | 6

French economist, Eric Toussaint, is the leading analyst of the Third World debt trap:

https://www.cadtm.org/The-debt-trap

Literally everything the USG says is projection.

Posted by: Prof K | Feb 9 2021 19:32 utc | 7

The port in Sri Lanka would have already been quite profitable for the country if the Modi government didn't align with the US and scrap BCIM.

As it stands, the port will probably remain unprofitable until the completion of CMEC, that is assuming the new coup government doesn't do a similar turn like Modi.

Posted by: Sid Victor Cattoni | Feb 9 2021 19:53 utc | 8

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