Opinion

How to Stop China's Debt-Trap March to World Domination

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Posted: Jan 13, 2019 12:01 AM
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How to Stop China's Debt-Trap March to World Domination

For those with their eyes open, China's long-term strategy to achieve worldwide domination is obvious.  It is a basic strategy that has been used for millennia to subjugate others.  It goes as follows: provide loans that are beyond the ability of a distressed or unsophisticated borrower to ever pay back; and when the borrower inevitably falls behind in the required debt-service payments, foreclose and seize the borrower's desirable assets and/or extract wanted concessions.  It's called "debt-trapping."

Predators have long used this strategy to turn poor people into indentured servants; payday lenders to get worker's paychecks; monopolies to crush competitors; mafiosos to muscle businesses into their hands; and nations to seize key strategic assets of other nations. 

China is currently waging an unprecedented silent global war, using debt-trapping to accomplish what its armies previously did.  And China is masking its true intentions by branding its actions with benign terms like the "Belt and Road Initiative" to convince the world of its goodwill and altruistic motivations.  

China's strategy is now playing out all across the developing world — Pakistan, Egypt (Suez Canal), Nepal, Sri Lanka, Maldives, Malaysia, Laos, Cambodia, Kenya, Zambia, Djibouti, Montenegro, Venezuela, Argentina, Brazil, Nicaragua, and nearly everywhere else you look. China is even making approaches in Panama, home of the strategic Panama Canal built by the United States, and paid for with immense American blood and treasure.

If you identify a key strategic asset in the developing world, odds are that you will find the Chinese offering gobs of money (as loans) to that nation for untenable projects. China plays the sympathetic uncle willing to loan where capital markets (wisely) refuse. Four examples of the results:  

  • Montenegro accepted Chinese loans to build a highway from its port on the Adriatic Sea to Serbia.  This highway is less than half built, and yet Montenegro has taken on debt equivalent to 80% of its GDP to do so.  This highway will never be finished, and China now effectively owns Montenegro. 
  • Kenya accepted vast loans from China to build the Standard Gauge Highway stretching from Mombasa to Nairobi.  Kenya is now in default and China is about to foreclose and take over Kenya's critically important Mombasa sea port.  
  • Sri Lanka is so over-indebted to China that they were just forced to give a 99-year lease of the Hambantota sea port to a Chinese company.
  • Pakistan embraced the 'China-Pakistan Economic Corridor', taking Chinese loans to do so.  With its debt to China at $19 billion and rising rapidly, Pakistan will never be able to pay it off.  China is seeking an overland link to Pakistan's warm-water deep-sea port at Gwadar on the Arabian Sea.  A Chinese state owned enterprise has already taken over operations of Gwadar's port.

In addition to key asset seizures, China's strategy is intended to induce the cooperation of these indebted nations to China's requests, needs, and strategic goals.  For the indebted, it is difficult to say "no" to the entity that can foreclose on you at any moment.  China's military interest in sea ports, canals, and passageways is no mystery.

We aren't talking about a Rotary Club here folks.  China's President Xi Jinping has a beautiful smile and looks like your affable neighbor down the street, but he is not.  He is leader of the exact same Chinese Communist Party responsible for the murder of 45 million of its own people, extinguisher of Tibet as an independent nation, instigator of the Tiananmen Square Massacre, enforcer of the inhumane one-child policy, and denier of internet freedom (even just google access) to its 1.4 billion people.

Has this same Chinese Communist Party turned a new leaf to devote itself to helping the less fortunate around the globe?  Certainly not.  Since the communists came to power in 1949, there have been no revolutions or turnovers in power.  The same Chinese Communist Party with the same strategic goals remains firmly in control.  The only thing to change is China's tactics — which are now based on money, smiles, and stealth. 

Not only is China not helping the developing nations, it is gravely hurting them, as well as the billions of people within their borders collectively.  As these developing nations become over-indebted to China for pie-in-the-sky projects (that never should have been undertaken), they are being forced to re-direct their limited tax revenues to debt-service payments to China.  In turn, less and less money is available for their own people's needs.

When a rising nation like China becomes wealthy, there isn't anything wrong with that nation becoming a global investor with the intent of making money and diversifying its asset base.  Japan was investing all around the globe in the 1980's when it economy was roaring — but it wasn't laying debt-traps for others.  Likewise, the United States has been investing around the globe for well over a century, without laying debt-traps.  In fact, in what may be the most benevolent act in history, the United States spent trillions (in today's dollars) of its own money to rebuild Europe after World War II via the Marshall Plan, helping both allies and former enemies alike.  The goal was to help, not subjugate.  This is what real friends and good neighbors do.  

This is not what China is doing.  China is seeking to subjugate and enslave everyone.  

This predatory Chinese strategy has been very successful thus far, primarily because the United States and its allies have been asleep.  America needs to wake up now, before it's too late.  China's audacious approach to the Panama Canal in 2018 should be viewed as the absolute final straw for Washington, D.C.

As such, President Trump and the United States should immediately consider a new policy aimed at peacefully stopping China's debt-trap predatory strategy in its tracks.  It will succeed if implemented.  It has seven components and requires no cash to execute:

1.  Deploy the Presidential bully-pulpit (and Twitter-feed) to relentlessly awaken the world to China's Debt-Trap Predatory Strategy.  No one wants to be a sucker, and when the world's leaders recognize that China is playing them for fools, they will be less apt to fall into their trap.  

2.  Issue a "List of Victim-Nations" to China's predatory policies.  The goal being to put the limelight on what China is doing, as well on the foolish leaders of the Victim-Nations, so others are embarrassed to follow suit. (This will also shine the light on those leaders being paid off by China in exchange for betraying their nations.)  

3.  Announce United States support for the identified Victim-Nations, and issue a roadmap out of China's debt-traps.  Roadmap: Victim-Nation declares its Chinese loans as "Debt-Trap Predatory Loans," thus immediately null and void, and ceases payments.  The Victim-Nation then sends a Petition for Relief based on China's Conspiracy to Defraud to the United Nations and World Court demanding a court date and restitution.

Perhaps the most important part of having a judicial system and courts is to be a great equalizer — meaning to protect the little guy from powerful entities that seek to do them harm or steal their assets.  China is doing exactly that on a global scale with mafiaoso-style tactics.  Uncle Xi might as well be the Godfather's Michael Corleone.  The World Court needs to take this case for all the world to see.  In a fair court hearing, China will lose this case, and be discredited on the world stage.

4.  Announce that the United States (and allies) will back the Victim-Nations by allowing said nations to continue tapping capital markets to their financial ability (without their Chinese loans on the balance sheet) while their case is tried in the World Court.

5.  President Trump continues his full-court press on China economically, with the goal of achieving fair and free trade, and the cessation of all illegal Chinese activities including their widespread intellectual property theft, cyber-warfare, economic sabotage, and so on. 

6.  United States opens up new negotiations with Mexico and all interested Latin America nations to explore a mutually-beneficial treaty (with massive free trade zones) to incentivize and spur the mass relocation of manufacturing from China to the Americas over the next decade.  A key condition of this treaty will be the firm commitment of each participating Latin American nation to assist in the prevention of illegal immigration into the United States.  

If the U.S. is going to continue exporting its wealth to nations that are low-cost producers, it would be far better off directing it to nations that border it, as well as to nations not laying debt-traps for others.  Likewise, the resultant jobs and wealth going to Latin America will organically help relieve the illegal immigration pressure on the U.S. southern border.

7.  Launch a new global economic campaign based on "Made in the Americas," "Buy in the Americas," and "Americas First" to both undercut China and help Latin America.  This inclusive approach will bring significant benefits and goodwill to both Latin America and the United States.

This new policy will drive an incredible wedge between China and all of the developing nations caught in its trap, prevent other nations from falling into its trap, and make the United States the hero of the developing world for standing up to China and giving the Victim-Nations a way out.  The United States is the only nation that can make this happen.

China will abandon its predatory policy when it sees it backfiring. 

Don't we all wish the world had stepped in to oppose Hitler in 1935 when 85 million World War II deaths could still have been averted?  With China today, we may once again be in a 1935 moment. 

China is not America's friend, nor anyone else's.  Each day we continue to play "polite politics" and pretend it to be otherwise, we lose a little more of the advantage we still have.  

Time to play hardball America.

George Mullen authored "The Coming Financial Tsunami" (2005) and "Welcome to the Bubble Economy" (2006) which accurately predicted the 2007-08 global economic crash. He is a principal of StudioRevolution.com in San Diego, California.