The Chinese government is leveraging billions of dollars in debts to gain political leverage with developing countries across Asia and the Pacific, a new report presented to the US State Department claims.
The independent report, written by a pair of Harvard University scholars, identified 16 countries targeted by the Chinese government for "debtbook diplomacy, " with Pakistan, Djibouti and Sri Lanka identified as being most vulnerable.
According to the report, in some cases the huge debts grow to a size too large to pay back, allowing Beijing to leverage the loans to "acquire strategic assets or political influence over debtor nations."
This could allow the Chinese government to extend its influence across the Indian Ocean and the Pacific, encircling India and Australia as well as helping to consolidate its position in the South China Sea, the report said.
Last month, Australian Prime Minister Malcolm Turnbull said he viewed "with great concern" any foreign military bases being built in the South Pacific, following reports Beijing was in talks with Vanuatu to host Chinese forces.
According to the report, there are a number of ways in which Beijing and state-owned enterprises leverage debt to help China's strategic aims.
In one case, infrastructure built with Chinese loans has then been leased back to Chinese interests to pay off the original debt.
In 2017, an unprofitable Sri Lankan port built with billion-dollar loans from Beijing was leased to Chinese state-owned firms for 99 years to help repay the country's debts.
The report's co-author Sam Parker said there were concerns these ports could be used by Chinese naval vessels once they were under state control. "There's definitely the potential where they can have it go from commercial, to occasional visit, to logistics, to humanitarian and then maybe finally a military base," he said.
In the Pacific, nations such as Vanuatu, Papua New Guinea, and Tonga all owe the Chinese government billions of dollars in loans, encircling US allies Australia and New Zealand.