debt trap myth

Interestingly, write-offs are often conceded by Beijing without a formal renegotiation process. Instead, Beijing usually unilaterally agrees to cancel part of a borrowing country’s debt, even when there are few signs of financial stress on the part of the borrower. Such cases of debt forgiveness are therefore probably used to signal support to the recipient countries, and improve bilateral relations.
Yet a few write-offs were also conceded in cases of acute financial distress within the host country: USD2.6bn of Cuba’s debt in 2010, about USD40mn of Zimbabwean loans in 2015, and an undisclosed part of Sri Lanka’s debt to China in 2017-2018 (which also included control passed to China for to the Hambantota port). Forced or constrained, these write-offs were often accompanied by a decision on the part of Beijing to withhold further lending. This was notably the case in Zimbabwe, where Beijing rejected Harare’s calls in 2014-2015 to finance a USD1.5bn rescue package. This also constituted part of Beijing’s response to Venezuela’s recent economic woes.
Negotiation outcomes are more diverse where financial stress proves more manageable. Beijing has repeatedly agreed to a mix of repayment deferments and some degree of refinancing (as in Mongolia in 2017), although often under harsher terms (as in Angola in 2015, or Sri Lanka in 2012). And where external events such as changes in leadership, or large movements in commodity prices, prompted renegotiations, Beijing was often compelled to agree to term renegotiations, usually to borrowing countries’ advantage (Ecuador in 2017-2018, Ghana in 2014-2015).