Throughout much of the third wave of globalization (beginning from 1989 to the present), China has amassed much of its geopolitical sphere of influence through its lateral economic partnerships with many Global South countries, resulting in much financial strain for investors and governments alike. Extracting a few examples of this commercial trend, particularly in Ecuador and Kenya, China’s indubitable force of financial dominance has contributed towards the construction and upkeep of many transportation, healthcare, and telecommunications infrastructures; However, much of this so-called bilateral economic integration has come at the expense of governments receiving loans and not being able to follow through with repayment installations.
The Ecuadorian government has been involved in a slew of scandals since the inception of many infrastructure projects financed by the Chinese government. One project in particular, the Coca Codo Sinclair Dam, was constructed by the Sinohydro Corporation at the price tag of $2.25 billion USD. Considered the largest energy project in Ecuador’s history, the government soon realized that settling the loan required granting 80% of the country’s most valuable export to China as a method of repaying contracts – Oil. This practice of ceding control of Ecuador’s oil supply chain to Chinese companies has led to increased deforestation of the country’s most biodiverse regions. This scenario has not only played out in South American countries, but also in nations along the East African rift, with Kenya having received much financial assistance from the Chinese government and not much support from domestic partners.
Kenya’s bilateral relationship with Chinese investors is attributed to Beijing’s “One Belt, One Road” initiative, a multi-billion dollar infrastructure project aimed at improving land and maritime transportation routes between China and Europe, Asia and Africa. However, financing the project has been deemed too expensive by Parliament following the raising of the government’s debt ceiling to $87 billion USD, as well as the increasing in government spending up to approximately 55% of the nation’s GDP. Many analysts contend that the nation may not recover from its negative-sloping debt-to-income ratio, with President Uluru Kenyatta now banking on future investors to set up shop along the railway’s newly-built transportation hubs.
[2] https://www.nytimes.com/2018/12/24/world/americas/ecuador-china-dam.html
Tim,
Your blog topic this week is an interesting one. There has been substantial (and growing) criticism of China’s “foreign aid” programs, which appear to be driven (even more than those of the United States) by a desire to create dependencies and to accrue financial benefit. A far great share of Chinese foreign aid is in the form of loans–or barter arrangements, as you indicated. A serious argument can be made that this does not really help developing countries at all–it simply makes them more dependent. –Professor Wallerstein