Chinese loans to Pakistan, Sri Lanka may be used for 'coercive leverage', warns US

The US is deeply concerned that the loans being given by China to Pakistan and Sri Lanka may be used for coercive leverage, a senior State Department official said on Friday. "Concerning Chinese loans to countries in India’s immediate neighbourhood, we are deeply concerned that loans may be used for coercive leverage,” Donald Lu, Assistant Secretary of State for South and Central Asia, said ahead of Secretary of State Antony Blinken's three-day visit to India.

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China has emerged as a major global power and its loans at higher interest rates to countries like Pakistan and Sri Lanka have caused fears that it may coerce these countries to corner India in case they fail to pay back their debts. Beijing has already taken Sri Lanka's Hambantota Port on a 99-year lease as Colombo failed to service its debt by China.

Pakistan, too, is crumbling under enormous debt, and just the other day China again approved a $700 million credit facility for the cash-strapped country. While debt per se is not a bad thing, China's debt comes at a higher cost which makes interest payment a little difficult for struggling economies like Pakistan and Sri Lanka.  
 
During a press conference on Friday, Donald Lu faced questions on Chinese loans to Pakistan and Sri Lanka. When asked whether Blinken during his visit will be discussing two of India's neighbour which are facing economic problems because of Chinese loans, Lu said America was concerned and it was talking to countries of the region about how it can help them make their own decisions.  

"We are talking to India, talking to countries of the region about how we help countries to make their own decisions and not decisions that might be compelled by any outside partner, including China,” Lu said.

Blinken will be on a three-day official visit to India from March 1 to 3. During the visit, he will meet External Affairs Minister S Jaishankar. They will talk about the strategic partnerships, and focus on how both countries are working together in the Asian Quad and in the G20. They will also discuss defense cooperation and the Initiative for Critical and Emerging Technologies.

On March 3, the Secretary will also participate in a meeting of the foreign ministers of the Asian Quad, which is the United States, India, Japan, and Australia.  

Lu said that there has been a serious conversation between India and the US on the issue of China. "We have had serious conversations about China, both before the latest scandal over this surveillance balloon and in the aftermath. So, I fully expect those conversations will continue," he said.

On a question about the military and security side of the Quad, Lu said the grouping was not a military alliance. "The Quad is not, in fact, an organisation that is against any single country or group of countries," the US official said, adding that the Quad stands for trying to promote activities and values that support the Indo-Pacific – free and open Indo-Pacific.