Why the West Criticizes China's "Debt Trap Diplomacy" Despite Its Infrastructure Efforts in Africa?

Imagine an African country needs $6 billion to build infrastructure for power generation. They approach the IMF:

The IMF says:

"We can lend you $6 billion, but we’ll start with $500 million and spread the rest over ten years. Of course, if you do anything that we (meaning the US, UK, and Europe) consider out of line with the 'rules-based order,' we can delay the remaining installments indefinitely. If your nation elects a leader that we don’t approve of, suspecting manipulation, we can also hold off on disbursing the funds. Plus, you’ll need to sell uranium to France at just 1/30th of the market price, or we’ll freeze the payments. Remember, this is unsecured debt we’re offering."

The African leaders respond:

"But what if the projects get held up after we’ve already started construction with your funds?"

The IMF's response:

"That’s not your problem. Out of the $6 billion, just keep 5%—about $300 million—for you, your ministers, and military leaders. Send your kids to schools in the US or UK. It doesn’t matter if your citizens suffer; we won't scrutinize how the money is spent. Historically, African nations had no other options."

But now, China is a viable alternative.

China says:

"$6 billion? No problem, that’s just a couple of days' trade surplus for us. Done! Who’s your contractor? A Canadian firm? No, we’ll use our own contractor who charges 40% less for the same quality. Your turbine supplier charges you a markup; we have our own manufacturer who can do it at 60% less. We’ll handle the entire infrastructure project for $2.5 billion, and we’ll still offer the same $300 million for your officials as the IMF did."

African leaders react:

"Wow! So, we get the $300 million bonus, and the infrastructure gets built quickly, benefiting our citizens? Plus, our debt exposure is only $2.8 billion instead of $6 billion? Even with higher interest, we’re still in a better position!"

China clarifies:

"Exactly. We’ll charge 1.61 times the IMF's interest, but since the overall debt is lower, you come out ahead. We gain some geopolitical influence, get contracts for our companies, and support our steel industry. It’s a win-win."

The African leaders ask:

"What if we can't repay you?"

The IMF's response:

"If you can't repay, we'll declare you a defaulter, tank your credit rating, cut off future lending, and publicize your economic struggles. We might also sanction you, starving your nation and potentially inciting unrest."

China’s response:

"If you default, we’ll just take control of the infrastructure and manage it until we recover our costs. We don’t care about internal politics or human rights."

So, here are the choices:

IMF:

1. Loan amount: $6 billion.
2. Conditions: Numerous requirements echoing colonial-era practices, including selling uranium at a fraction of its value.
3. Loan interruptions: Payments can be stopped anytime.
4. Contractors: Must use foreign companies, who can halt progress.
5. Terms: They define human rights and control your policies.
6. Timeline: Ten-year payment schedule, leading to potentially 15 years for project completion, spanning several Western elections.

China:

1. Loan amount: $2.8 billion, including a $300 million "bonus."
2. Completion: Guaranteed by China within 4.5 years, far faster than 15 years.
3. No legislative conditions: Minimal political interference.
4. Human rights: Not a concern.
5. Resource deal: Sell uranium at 50% below market price, a huge improvement over the IMF's terms.
6. Interest rate: Higher by 61%, but the total interest paid is still lower due to reduced debt and faster project delivery.

It’s clear why any rational choice leans towards China over the IMF and the West.

Debt Trap?

Data from 40 nations shows the so-called "debt trap" doesn’t hold up. Interest payments to China are increasing, except for a dip during COVID, compared to payments to Western lenders and Japan. Within a decade, China is likely to surpass Western influence in this area.

The West’s narrative is losing traction. Either they offer a better deal, or they lose out. Outperforming the Chinese in trade deals isn't easy, and propaganda alone won’t sway informed decisions anymore.