Strongly criticising China’s international development projects and lending practices under its Belt and Road Initiative (BRI), Alice Wells, the U.S.’s top diplomat for South and Central Asia, has questioned the China Pakistan Economic Corridor (CPEC), on its commercial viability. Ms. Wells also made a pitch for the U.S. model of private-sector led development.
“One of the greatest beneficiaries of that U.S.-led system of international rules and norms has undoubtedly been the Chinese people,” said Ms Wells, speaking at the Wilson Center, a Washington DC –based think tank, on Thursday afternoon.
China, as per Ms. Wells, had benefited when U.S. , European and Japanese companies opened shop there when Deng Xiaoping announced the Open Door policy in 1978 but that China had not done the same in Pakistan.
“CPEC doesn’t give Pakistani young people, it doesn’t give Pakistani companies the same opportunities that the Chinese themselves enjoyed decades ago. And that’s one of the reasons why Pakistan’s trade relationship with the People’s Republic remains so lopsided,” she said, criticising in detail aspects of the CPEC on cost, debt, transparency and jobs. The CPEC, comprised of highways, infrastructure projects and railways extends from Kashgar in China to the Gwadar port in southwestern Pakistan. India has objected to parts of the corridor that run through Pakistan Occupied Kashmir.
While Ms. Wells’s comments were a focused critique of China’s infrastructure lending and building practices, she made a distinction between the Chinese people and the Communist Party of China, saying that Americans and the Chinese people had a tradition of cherished friendship.
Ms Wells said there were reasons to “question the Chinese Communist Party’s largesse” based on the BRI experience and that China offers financing, usually loans, but is not a member of the Paris Club, an informal group of creditor countries that discusses solutions to debtor country issues, including debt relief.
China also does not report on its overall lending despite being the largest lender globally, Ms Wells said. “So, neither rating agencies nor the Paris club nor IMF are able to monitor those financial transactions.”
The lack of transparency was a means to hide risks to countries that borrowed from China to finance the development projects, as per Ms Wells. “Failure to repay those huge loans raises roadblocks to further development. It leads to a surrender of strategic assets and it diminishes sovereignty,” she said.
The case of Hambantota Port in Sri Lanka and a runway in the Maldives were among the projects cited as examples of China financing projects of questionable commercial viability, resulting in unsustainable debt. In 2017, Sri Lanka handed over a majority stake and a 99-year operating lease to Chinese state-owned enterprises as it could not service the debt owed to China.
Ms Wells described the first ministerial meeting of the Quad — a group comprised of India, the U.S., Australia and Japan — as “a real strong manifestation of our seriousness and being able to provide realistic alternatives for countries looking for infrastructure”. The Foreign Ministers of the four countries met in New York at the end of September along the sidelines of the United Nations General Assembly session.
Published - November 23, 2019 10:30 am IST
