Debt-trap diplomacy is an established political tool that has existed long before China started lending money to others. It even existed during imperialism and was used as an excuse to obtain favourable trade concessions or even to annexe territories. In fact, China learnt it from the west by observing and learning (from western economists) how the west used financial institutions like the IMF and World Bank to exert pressure on their debtor countries to favour (mostly) American policy.
... but China keeps renegotiating and cancelling debt while it is lending at a much lower rate than commercial lenders from Europe and the United States.
Two points to note here:
- They lend at a lower rate.
- They keep negotiating and cancelling debt
Why do you think that is? Does that make business sense - you lend money to earn interest on it. The higher you charge the more profit you make. If you have to keep renegotiating and cancelling debts, you suffer a loss.
Is China stupid?
No, ofcourse not. They do it to reduce western influence and to increase their own with the debtor country. That is essentially what a "debt-trap diplomacy" is - to use the indebtedness of the debtor country to earn favours or get political concession out of them. I have given some examples of how China has been doing this.
So how can we measure or assess that a country does it objectively and are there other countries than China practising debt-trap diplomacy?
The only way that these loans can be assessed as "fair and free" is when they are given without coercive conditions and when failure of repayment doesn't invite even more coercive measures. Any pre-conditions and post-conditions associated with a loan that work against the debtors country's own sovereign interest is a clear sign of debt-trap diplomacy. Some of these include:
- Forcing debtor to change some government policy.
- Forcing debtor country to import goods from them.
- Forcing debtor country to use business services from lender country.
- Forcing debtor country to give up or lease strategic assets.
- Using the debt as an excuse to invade the country.
IMF, World Bank, New Development Bank (BRICS bank), Asian Infrastructure Investment Bank etc. - basically financial institutions with government influence created to lend money to other countries are all created for varying levels of debt trap diplomacy. The west, the US especially, has done this many times and have used debt-traps to force the debtor country to change their agricultural policies in favour of the US by coercing them to grow cash crops for western industries, instead of food their citizens need (which they are forced to buy from the US). Or when someone defaults or struggles to make payment, the debtor country is forced to make changes to their economic policies.
Debt-traps as a political instrument is a fact. China doing it today is a fact. Any western magazine claiming otherwise is simply doing so to reduce the negative publicity towards such international loans or because it has been paid by the Chinese to do so.