Thread by @RudyakMarina

"#China grabbed Hambantota port because Sri Lanka was unable to service the debt."
This is still circulating, even among China and development experts, although it has long been debunked, including by Sri Lankan economists.A🧵w/t relevant research - and why it matters.

China is the world's largest bilateral creditor and many of its borrowers face the risk of excess debt. It matters to get things right in the analysis of their lender-borrower relations, b/c misrepresentations divert from the real and complex problems, the borrowers are facing.

Sri Lankan economists @UmeshMoramudali and @ThilinaKalhara recently published a piece on Panda Paw Dragon Claw about China’s role in Sri Lanka’s debt situation. SL is experiencing its first foreign currency sovereign debt default since independence: pandapawdragonclaw.blog/2022/06/13/fro…

China is Sri Lanka’s largest bi-lateral creditor and responsible for 26% of the foreign debt to be restructure. But with 20% it is not the biggest source of SL debt, it is the Eurobonds.

Contrary to many public representations, Hambantota was not a debt-for-equity swap, as @UmeshMoramudali wrote in The Diplomat in a piece about the "myths and realities" of the Hambantota port deal already in 2020.
thediplomat.com/2020/01/the-ha…

The loans were not defaulted and the loan agreements remain unchanged. A 70 percent stake of the port was leased to China Merchants Port for 99 years for $1.12 billion was used to service international sovereign bonds maturing in early 2019.
thediplomat.com/2019/05/is-sri…

This allowed Sri Lanka to avoid borrowing from multilaterals or the IMF which would have come with policy or reform conditionality. Budgetary financing from China allowed Sri Lanka to muddle through its fiscal and external deficits during COVID without an IMF program.

So, China was possibly instrumental in delaying necessary reforms - but it did not lure Sri Lanka into a "debt trap", as the myth goes. @DrLeeJones and @ShaharHameiri trace how Sri Lanka shaped the case in their 2020 paper and debunk the popular myth: chathamhouse.org/2020/08/debunk…

How the myth of Sri Lanka being the showcase of "China's debt trap diplomacy" came about in the first place, has been traced and deconstructed by @D_Brautigam in her 2019 paper "A critical look at Chinese ‘debt-trap diplomacy’: the rise of a meme". tandfonline.com/doi/full/10.10…

"In 2017, a meme was born in a think tank in northern India: Chinese ‘debt-trap diplomacy’. This meme quickly spread through the media, intelligence circles and Western governments. Within 12 months it...was beginning to solidify into a deep historical truth."

The first story always stays. In that, the "debt-trap diplomacy" meme is similar to "social credit". And in a similar was as @ChinaLawTransl8 explains for social credit in the attached thread, getting things right and being precise matters.

https://twitter.com/ChinaLawTransl8/status/1536720793035481090?s=20&t=WuHOmT7dp2ShjaRY3K83bg

Myths are sexy. And nevertheless, it is only by focusing on the proper ills, and identifying them clearly, (maybe) something can be done about them.