China’s New Silk Road Hits a Snag

03.09.17
Martha de Jong-Lantink
World News /09 Mar 2017
03.09.17

China’s New Silk Road Hits a Snag

China is facing unexpected challenges to its most recent economic projects in Sri Lanka. In response to the latest bilateral deal signed in December to further develop the port of Hambantota and to build a massive industrial zone nearby, hundreds of Sri Lankans rose up in protest at the prospect of being driven from their homes. It marked the first time that demonstrations against Chinese investment in Sri Lanka had taken a violent turn, as police officers dispersed protesters with tear gas and water cannons.

These protests are the latest example of how Beijing’s “New Silk Road” (NSR) initiative to open new land and maritime trade routes is stumbling over an increasing number of impediments – and fueling unstable situations in countries already primed with the potential for conflict.

This trend is unfolding not only in Sri Lanka, one of the baubles in Beijing’s “string of pearls,” a network of commercial and military interests that extends from the Chinese mainland to the Horn of Africa. It is also set to play out in Djibouti, known as a “superpowers’ playground” thanks to its hosting of American, French, Japanese, and now Chinese military installations. To avoid feeding further resentment – and potentially setting off a full-blown conflict that would eclipse what just took place in Sri Lanka – Beijing should proceed with caution as it rolls out the NSR.

In Sri Lanka, the most recent wave of strife arose after President Maithripala Sirisena, who had promised during his campaign to ditch Chinese contracts seen as unfair, approved an agreement to lease an 80% stake in the port to state-run China Merchants Port Holdings for 99 years in exchange for $1.1 billion in debt relief. Officials claimed he had been obligated to make the concession due to Sri Lanka’s high debt. However, opposition politicians shot back that the new deal conceded too much to China and trampled on Sri Lanka’s sovereign rights.

Such anger at perceived infringements on Sri Lanka’s sovereignty had been simmering for a while. Beijing first started to make inroads in the country in 2005, after India abandoned efforts to quell Sri Lanka’s intermittent civil war. China offered Sri Lanka $1 billion in military aid, a whopping sum for a country whose GDP was then a mere $25 billion. Now, Colombo is indebted to Beijing to the tune of $8 billion, or more than 12% of its entire debt. With Sri Lankans increasingly viewing Chinese investment through neo-colonial tinted glasses, the Hambantota project might have been the last straw.

While Sri Lanka desperately needs debt relief and investment, the protesters had plenty of reason to rebuff China’s wads of cash. After all, Beijing has not invested this money for Colombo’s interests. If Sri Lanka did not possess deep harbors and a strategic position near some of Asia’s busiest shipping routes, conveniently located along the “string of pearls,” it’s doubtful China would even have noticed the island nation. It seems that after the most recent economic deal was renegotiated even further in Chinese favor, Sri Lankans started to realize a pattern and reacted with justifiable anger.

Yet the riskiest components of the NSR are even more obvious in Djibouti, where China is building its first overseas military base. Much like Sri Lanka, the Horn of Africa nation has received wads of cash from Beijing – more than $14 billion at last count, which went into large scale infrastructure projects such as two airports, three ports, a railway to Ethiopia and a pipeline to transport water. Yet given the fact that Djibouti is indebted to China at a scale of 60% of its GDP, it might well end up regretting Beijing’s munificence.

What’s more, China’s new military base in the country has ruffled the feathers of the Trump administration. Ostensibly part of the NSR, the Chinese base is just a few kilometers away from Camp Lemonnier, the hub of operations for US Africa Command. The proximity of the bases is uncomfortable for both sides – as well as for Djibouti, which might end up regretting the presence of rival superpowers on its turf.

The Trump administration is unlikely to take kindly to the increased financial leverage that Beijing holds over Djibouti, and may shy away from providing support to Djibouti in the future after demonstrating his opposition to foreign aid during his campaign, the White House budget director has now confirmed that Trump will propose “fairly dramatic cuts” in the US foreign aid budget later this month. His administration is unlikely to make an exception for Djibouti, which has been led for nearly 20 years by an authoritarian president with a taste for political repression, restraints on basic liberties, and crackdowns on opposition politicians.

Whether or not the US cuts ties with Djibouti, the situation is unlikely to turn out well as Washington will have to confront the expansion of China’s overseas military interests at some point. The way Beijing has been barreling ahead with the NSR is becoming increasingly dangerous, resulting in just the past few months alone in the creation of preferential economic projects in post-conflict states like Sri Lanka and the buildup of military firepower in unstable dictatorships like Djibouti. If China does not proceed with more caution, the blowback in Djibouti could make Sri Lanka look like a schoolyard scuffle.

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