Strategic default: A new way to think about combating China’s weaponization of capital

by J Michael Waller / Washington Examiner / December 18, 2018.

China’s trade war with the rest of the world has unfolded through speedy expansion of a network of maritime choke points and deep water ports worldwide. Tariffs and unfair subsidies are part of that trade war, but the big story is about control of international shipping.

The United States, as the most powerful guarantor of freedom of the seas, tends to view China’s network of imperial maritime outposts as a Navy problem. But the Navy, especially in the Indian and Pacific oceans, is stretched dangerously thin, even with allies and partners.

And it isn’t just a naval problem, either. China’s weapon of first resort is debt-trap diplomacyand weaponization of capital. The strategy is to build huge seaport, airport, and land transport networks along strategic trade routes from Africa to South Asia to the Americas. The key is to make poor countries pay Chinese firms to build economically unfeasible infrastructure projects through high-interest loans from communist Chinese banks. When the countries can’t keep their crippling payments, Beijing takes physical control of the infrastructure.

This conquest through finance and corruption requires new strategic thinking for the U.S. and its allies to devise low-cost, high-impact solutions. One idea is to help small debtors simultaneously default under a U.S.-led safety net, leaving China to hold the bag. . . .

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