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Is China an asset or liability for the developing world?

This is the second edition of Bridging Divides, a series in which I raise some challenges facing the developing world and open them up for discussion.

Is China an asset or liability for the developing world? Let’s address that question today.


The context

In the Cold War era, China’s relations with the developing world were based on a combination of ideology and foreign policy interests.

During those times, Beijing used solidarity with the “third world” to distinguish itself from the United States and the Soviet Union, both of which China considered hegemonic powers.

But things have changed since then. The dragon woke up and China registered phenomenal growth over three decades.

According to World Bank, with the evolution of its economic system starting in 1990 and its embrace of the global market, China lifted over 800 million people out of poverty.

Today, as world’s second largest economy, and the largest manufacturing economy, China is among the chief drivers of global growth.

It is also the world’s fastest-growing consumer market and its growing middle class has tremendous spending capacity.


The dichotomy

China’s relentless supply of cheap goods has destroyed various cottage industries around the developing world.

It is believed that the country’s “debt-book” diplomacy invests its way through to gaining foothold on strategic assets in poor countries.

China’s acquisition of the strategic Hambantota port from Sri Lanka is said to be an example of “debt trap” and ambitious use of loans to gain influence.

Pakistan, for example, is banking heavily on China’s contribution to its infrastructure projects but they have been described as “Chinese projects built for China’s geopolitical and economic advantage”.

This model doesn’t create sufficient local jobs as manpower is mostly brought from China.


Unsustainable debt

A recent survey revealed that Southeast Asian countries should be cautious in negotiating with China on its Belt and Road Initiative to avoid being trapped in unsustainable debt.

Some African countries are beginning to realize that infrastructure indeed assists rapid economic development but can also become a heavy burden in the long-run. China is not necessarily helping them strike that balance.

A country in Africa recently accused China of mining gold in the garb of development. Some of China’s neighbors view the country’s territorial disputes and expansionist overdrive as those of a “hegemon”.

Remember! China calling Cold War powers as hegemons? It was then all about ideology, now it is all about economy.

Here is the question of the day though. With its economy projected to experience a downward trend this year, will China remain an asset or liability for the developing world?

 

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