POTENTIAL BACKLASH
Chinese investment projects in South Asian countries have met with some resistance , reflecting a rising trend of internal disagreements among China and its BRI partners . High interest rates , strict commercial conditions , and lack of transparency are some of the biggest drawbacks of Chinese financing . In addition , typical conditions attached to Chinese loans - such as those extended by stateowned Exim Bank - stipulate that project contracts be given to Chinese companies and at least 50 % of material , equipment , technology , or services to be sourced from China .
In Pakistan , BRI and CPEC face growing criticism . The CPEC projects have remained under the control of Chinese companies and banks , and the project bidding , contracting , and financing processes lack transparency . In addition , the financing of these projects is done through market-rate loans and equities . Pakistan ' s government has given the sovereign guarantee of 17-34 percent returns on Chinese equities in projects . Chinese banks have charged an 8 percent interest rate on loans to Pakistan for projects under CPEC , whereas international interest rates for energy projects are only about 1.6 percent . Pakistan is expected to start repayment in 2020 ; however , its fiscal deficit continues to increase and the balance of payment situation remains critical . In the Gwadar Port Project , a revenue-sharing agreement dictates that 91 percent of the revenue generated goes to China for the next 40 years . Recently , Pakistan canceled the $ 14 billion Diamer-Bhasha Dam project because of China ’ s tough financing terms . In Nepal , the $ 2.5 billion contract for construction of Budhi Gandaki hydro-electricity project met the same fate , with the Nepalese government accusing the Chinese company of financial irregularities and lack of transparency .
The Trump administration ’ s opposition to the JCPOA and recent U . S . sanctions on Iran create value opportunities for China . Some believe the new sanctions will worsen Iran-U . S . relations and prevent future economic cooperation between Iran and the West , further establishing China as Iran ’ s only reliable economic partner . As Western firms stall , China ’ s CITIC Trust has pushed a $ 10 billion credit line to support projects in Iran ; China Development Bank is considering a further $ 15 billion .
SPOTLIGHT ON IRAN
Jockeying with China for geopolitical influence is India . India ’ s investment interest in Iran has focused on the expansion of Chabahar Port . By funding the Port in Iran , India expects to establish a secure transit route to markets in Iran , Afghanistan , Central Asia and the Gulf region . For India , easy access to Chabahar would connect the country to Afghanistan and the energy-rich Central Asia through the Jawaharlal Nehru and Kandla ports . Additionally , the port will promote Indian strategic interests in the Persian Gulf and Strait of Hormuz .
China ’ s alleged predatory behavior has created another type of risk to its investments and their host countries : civil unrest . China ’ s leasing in Hambantota has sparked violent protests and drawn a backlash from parliament , amid fears that Beijing seeks to establish what is effectively a Chinese colony in another sovereign state . Although the Sri Lankan government has worked out a compromise to decrease the Chinese share from 85 percent to 65 percent over a decade , it does not limit China ’ s 99-year lease on the land or preclude a future security or military role for Beijing .
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