Chinese loans placing South Asia in debt trap

The trade deficit in South Asian countries such as Nepal, Myanmar and Pakistan with China is rising year-on-year, in spite of Beijing extending bilateral loans to them by significant amounts.

According to the Kathmandu Post, in Nepal alone, the gap between import and export values with China has widened by 21.4 percent (Rs.124.57 billion in the first ten months of this fiscal year).

The Nepal Rastra Bank (NRB) reveals that the figure stood at Rs.91.18 billion during the review period in 2015-16.

Countering the view that China is slowly but steadily forcing these countries in South Asia into loan debt trap, Li Jiming, the Director General of the Yunnan Foreign Affairs Office, was quoted by the Kathmandu Post as saying that China's only aim in offering bilateral financial support to these South Asian countries is to bring out the economic potential of these countries.

 

"Rather than forcing these countries into a long term debt trap, we have increased the funding in the region to build necessary infrastructure that could help in enhancing their export potential," he said.

Denying the possibility of a debt trap in loan receiving countries, Li said, "We have been providing loans for business purpose only after serious consideration that involves a thorough study of feasibility report and financial calculation."

He offered this view during the first China-South Asia Cooperation Forum in Kunming, the capital of Yunnan Province.

The event was held on the sidelines of the fifth China South Asia Exposition.

Li said the newly formed forum is part of China's effort to further the Belt and Road Initiative (BRI), which is expected to bring together South Asian countries that share a geographical vicinity and cultural affinity with China.

According to the Kathmandu Post, the forum meeting has identified key areas of cooperation that include interconnectivity, business, local government, poverty reduction, finance and people-to-people exchanges, among others.

"China will work together with South Asian countries to make the cake of common interest bigger and strengthen the ties of result-oriented and win-win cooperation for common development," a press statement issued by the Yunnan Foreign Affairs Office said.