Although infrastructure projects can create jobs, provide an opportunity for skills development and the transfer of new technologies, Chinese loans amounting to more than $86 billion bring dangerously high levels of debt that can prove unsustainable for vulnerable African nations.
The lure of short-term benefits for developing or troubled economies while masking long-term burdens is exactly the scenario now playing out in Pakistan, which is becoming progressively subjugated by Chinese loan-based investment.
In an analysis by the European Foundation for South Asian Studies, the China-Pakistan Economic Corridor (CPEC), the lynchpin of China’s Belt and Road Initiative in South Asia, is described thusly:
"The Chinese master plan conceives a picture where the majority of Pakistani socio-economic sectors are deeply penetrated by Chinese companies and Chinese culture; thus, Islamabad puts itself at risk of facing its finances and societal structure experiencing a colossal wreck. The combination of high upfront tariffs, interest rates and surcharges will complicate Pakistan’s efforts to repay its loans, forcing the State to increase its domestic and export prices, making it difficult to compete with neighbouring and other countries which maintain lower prices."
Similar to the devastating consequences experienced by the United States, the Free Trade Agreement between China and Pakistan has resulted in a net outflow of jobs from Pakistan and a net influx of Chinese products, tripling Pakistan’s trade deficit with China in less than five years.