Arthur B Culvahouse Jr, the new United States Ambassador to Australia has warned Australia not to fall into the Chinese Debt Trap. The United States Ambassador used purposely harsher language describing the trap, going as far as to say the Chinese so-called development loans function more like “payday loans”- known to be a horrific private Banking sector vulture loan practice that
This statement comes amid growing tensions between Beijing and Washington.
What Ambassador Culvahouse is implying, is that China is committing to an old left-wing style asymmetric warfare trick, debt trap diplomacy. He stated in the context of his remarks that the Australian government is to stay clear of this trap and assist other countries in securing themselves against this
It is well reported that China is increasingly becoming more assertive in the South China Sea using its hard power and military tactics, using bullying, threats
The trick is simple. Offer an attractive teaser loan to a poor country, such as Sri Lanka, to use for building vital infrastructure, ports or rail. Make sure the loan is large enough that the government could never repay the issuer (EIB), and when that government defaults on the loan, instead accept payment in land and facilities acquisition. In the case of Sri Lanka, the government defaulted on the loan and was forced to hand over 15,000 acres of land and port facilities for around 99 years to Beijing.
In Australia, academic’s such as Graeme Smith from the Australian National University are dismissive and downright
Tonga is fighting back against these predatory loans.
All Australians need to listen carefully to Ambassador Culvahouse, and put pressure on Canberra to stand up to this issue.
“I think it’s on us, all of the allies and the western or liberal democracies, to educate people about the dangers of these loans. “The money looks attractive and easy up front, but you better read the fine print.”