How can we escape from Chinese Debt Trap...??
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TOKYO REPORT
How Japan Can Help Africa Escape China’s ‘Debt Trap’
Japan should export its profitable public transport business model to help African countries repay Chinese infrastructure loans.
By Xiaochen Su
March 29, 2020
How Japan Can Help Africa Escape China’s ‘Debt Trap’
Credit: Flickr/ yagi-s
After years of watching Chinese-financed infrastructure blossom across Africa, Japan is finally getting in the game. At the 2016 Tokyo International Conference on African Development (TICAD), the Japanese government reportedly pledged $30 billion in financing, including $10 billion for infrastructure loans.
To be sure, the amount Japan pledged is much less than what China offers. The Diplomat reported that in 2018 alone, China pledged $60 billion in aid and loans. However, having an additional choice is good for African countries in need of infrastructural development.
That additional choice is particularly welcome today, given the increasing suspicions toward Chinese financing. As I argued in a 2017 article for The Diplomat, massive Chinese loans for building infrastructure saddle African countries with unsustainable debt. The resulting “debt traps” threaten African countries’ very sovereignty as they face the potential of ceding strategic assets to China as a form of debt repayment. African countries should think twice about taking up additional loans from China after witnessing Sri Lanka ceding a port and previously enthusiastic loan-takers like Malaysia and Pakistan distancing themselves from China-financed infrastructure projects.
One might argue that it is unfair to blame China wholesale for unsustainable infrastructure debt. After all, profitability in public transport projects is not easy to achieve. China’s signature infrastructure project in East Africa, the Nairobi-Mombasa railway, faced a loss of 10 billion Kenyan shillings ($99.4 million) in its first year of operations. The problem is not unique to China-backed projects in Africa. Even China’s own state-owned railway corporation is mired in unsustainable debt after a massive high-speed railway building spree. Insufficient revenue makes infrastructure loans difficult to repay, no matter who is doing the lending. Japan simply handing out more loans does not solve this problem.