China is using debt traps to control the South China Sea


China’s One Belt One Road project and massive infrastructure loans are helping to weaken opposition to its claims in the South China Sea.

The South China Sea is of critical importance to China which has created new islands through dredging for military bases, and consistently defended its claims despite protests and legal battles with other regional competitors.

Eyebrows were raised when Malaysia’s president told his Philippino counterpart that signing deals with China would leave you under their “control” recently.

Rodrigo Duterte, the president of the Philippines, came under pressure this week to defend a series of infrastructure loans provided to the country by China, amid fears that failure to repay them could see the country lose key resources.

It’s part of a broader issue affecting Association of South East Asian Nations (ASEAN) countries as China continues to provide huge infrastructure financing as part of its One Belt One Road scheme. In principle, China’s ambition is simply to help develop better links between countries on its periphery with the added benefit of providing greater opportunities for Chinese companies abroad.

However, China is also hoping to overcome opposition claims to the strategically and historically important South China Sea. The country has laid claim to much of the area which contains enormous reserves of oil and gas but also possesses key strategic importance for the region.

“The South China Sea is a key transportation route. China currently gets 80% of its oil imports through the Malacca Strait and it also contains key resources,” according to Daniel O’Neill, Associate Professor of Political Science at University of the Pacific. “The biggest reason for increasing control there is to further China’s regional hegemony,” he told Business Insider.

The South China Sea territory holds an estimated 125 billion barrels of oil and 500 trillion cubic feet of natural gas reserves, according to Global Risk Insights. Similarly, some 10% of global fishing supply is linked to the area, per the Financial Times, and around $3.4 trillion of shipping trade passes through the region each year, according to Global Risk Insights.

China’s decision to boost its financing to The Philippines is part of its efforts to sway the country over the issue of the South China Sea. Since Xi Jinping’s visit in 2016 China has opened a $9 billion credit line to the country, much of which has gone towards infrastructure projects including dams.