Victorian Premier Dan Andrews has reiterated that he will not back down from the Belt and Road agreement with China despite warnings that it has been a debt trap for other nations and that it poses significant national security risks.
Speaking on ABC Statewide Drive program on May 25 Andrews said: “Im not going to apologise for a trade policy that is all about growing Victorian jobs.”
Speaking to Sky News on May 24, Pompeo acknowledged that every nation has sovereign rights to make decisions for themselves, but warned that Australians should know “that every one of those Belt and Road projects needs to be looked at incredibly closely.”
“Theres often money loaned at concessional rates, or conditions placed in the debt documents, or government concessions that have to be made to the Chinese Communist Party,” he said.
Pompeo said the BRI builds up the risk to the people of those nations who sign up to the BRI and it builds up the risk of the CCP to do harm in other ways as well.
Belt and Road Has Been A Debt Trap
Initiated in 2013, the BRI is promoted by the CCP as a 21st-century version of the Silk Road, but it has ensnared developing nations in debt.
The Centre for Strategic and International Studies (CSIS) explained that BRI is financed heavily by the Chinese regime through predatory loans or deals.
BRI projects have become popular with poorer nations and countries that need infrastructure development but cannot afford the construction on their own.
In a report released on April 20, the London based Oxford Business Group noted: “By early January 2020, 2,951 BRI-linked projects valued at $3.87 trillion were planned or underway across the world.”
CSIS noted that this has made the Chinese regime one of the largest lenders in the world with an estimated $1 trillion given in loans.
After tracking 5,000 Chinese loans and grants to 152 countries, a 2019 study by the German Kiel Institute argued that this is because “China does not provide details on the direct lending activities of its Belt and Road initiative.”
One reason for this is that Chinas state-owned banks often dont transfer any money to the accounts of the partner government, the Kiel Institute noted.
The study noted: “Instead, the loans are disbursed directly to the Chinese contractor firm that implements the construction project abroad—a closed circle.”
Writing in The Strategist last year, the Australian Strategic Policy Institutes (ASPI) analysis publication, David Wren said that Chinas loans are often compounded by high-interest rates, short repayment times, and are frequently secured by collateral over commodity export revenue—which can lead BRI partners into a debt trap.
These nations then make some concessions to the CCP to ease its debt burden. Wren cites Tonga as a notable example.
When Tonga could not make a $14 million principal payment on a loan in 2019, China deferred the “payment for five years in return for Tonga signing up as a participant in the BRI.”
Worse still, the Oxford Business Group noted that in 2017, after it was unable to service a $1.3 billion loan, Sri Lanka had to hand over a 70 percent control for the strategic Hambantota Port to a Chinese state-owned firm for a 99-year lease.