Chinese Money Trap – Belt And Road Initiative Explained

Everything around us is basically made in China.

Clothes, kitchen utensils, chairs, furniture, these stuff are produced at factories in China and exported to all over the world. 

Today, these are not only the things China makes, but the government is also giving financial support for developing countries and trying to build skyscrapers and develop infrastructures.

This sounds great, but there is a trap behind it.

In this article, I will explain why China is helping and providing financial support for developing countries.

Chinese Money Trap 

As mentioned above, Chinese government is actually helping many countries, especially in Africa and Asia.

If you go to those countries, you may notice trains, roads, and tall buildings are made in China, and there are so much Chinese influence in those countries.

Not to mention, China has great reputations among people in Africa.

However, this whole thing is a political strategy of Chinese government.

Venezuela

Venezuela is one of the countries in the world that is blessed by the natural resource of oil.

But right now, the government is facing financial crisis, and its inflation rate increased by 1,700,000% last year.

That means the product you could buy for 1 cent last year costs $10.000 today.

But why is this happening?

One of the reasons is on China.

In 1999, Venezuela established its new Communist government.

Since Chinese government also has the same political ideology and Venezuela needed a strong ally in Asia, they built great relationships right away.

In the name of financial support for Venezuela, China loaned $63bn in 2007 to 2017 for Venezuelan government.

Venezuela could invest the money for its education and infrastructure.

For the return, Venezuela was supposed to export oil to China.

So China needed oil from Venezuela.

Since the value of Venezuelan currency decreased dramatically, the government is not capable to pay back the debt to China.

As a result, Venezuela has to export twice more oil than the initial contract to China today.

Pakistan   

Pakistan is located in Central Asia and one of the closest countries to China.

It is one of a few countries around the world that owns nuclear power, and that was thanks to Chinese support that provided the technology for enriching uranium and experiments.

China also loaned money for the nuclear and its infrastructure development.

As a result, the country is over dependent on Chinese government today due to the military technology support and the large debt.

In fact, the government had no choice, but it gave the overall management autonomy of Gwadar port to a Chinese company. 

Sri Lanka 

After the civil war was finished in 2009, Sri Lanka built relationship with China.

Because the country was devastated by the war, the government needed financial support for reconstruction.

The exact same thing as Venezuela and Pakistan happened.

Sri Lanka couldn’t pay the debt back to China and had to give the autonomy of Hambanthota Harbour to China in 2017.

Debt Trap 

If you want to buy a car, you may loan money from a bank.

But when the bank finds out you can’t pay the money back, they will not take only your car, but also your house.

This is basically what China is doing to developing countries..

But why exactly is China doing this?

That’s because it wants autonomy over harbors and properties in foreign lands as well as natural resources.

At the same time, it can expand diplomatic influence over its neighbors.

And the government needs more sphere of influence all over the world to succeed the project: Belt and Road Initiative.

Belt And Road Initiative

In Ancient China, there was trade network routes that connected East and West. 

Belt and Road Initiative is basically the same idea, and they are trying to establish gigantic global trade network around the world.

It is also called “Modern Silk Road.”

Chinese government has been developing this project by involving infrastructure development and investments in more than 150 countries around the globe.

China’s Plan

Source: China’s Belt And Road Initiative Opens Up Unprecedented Opportunities

As you can see the map, China’s project involves so many countries.

And so many countries other than those mentioned above have China’s influence over politics and economy.

• Tajikistan
• Kyrgyzstan
• Djibouti
• Laos
• Maldives
• Mongolia
• Montenegro

Chinese government has provided financial support for those countries, and they all have huge debt over China.

The common thing to those countries is that they are all located very important places for the project. 

In order to make it work, China wants to make sure the autonomy of harbors and strategic locations in the route.