PENCE

'Beware China's debt diplomacy'

US Vice-President Mike Pence has warned countries in the Indo-Pacific region not to compromise their sovereignty for cash in a thinly veiled attack on China's trillion-dollar Belt and Road Initiative (BRI), and encouraged them to choose "the better option" of American development financing instead.

In a speech highlighting the deepening competition between the two superpowers for regional influence, but without mentioning China, he said: "We don't drown our partners in a sea of debt. We don't coerce or compromise your independence... We do not offer a constricting belt or a one-way road."

As part of the BRI launched in 2013, China has underwritten billions of dollars worth of infrastructure building in countries along the old Silk Road linking it to Europe. Critics have said the project has led to recipient nations becoming indebted to Beijing.

Speaking at the Asia-Pacific Economic Cooperation (Apec) summit on a cruise ship moored off Port Moresby, Mr Pence said the United States had a "principled approach" to financing infrastructure projects in the region, in stark contrast to the predatory behaviour of some other unnamed nations.

"Some are offering infrastructure loans to governments across the Indo-Pacific and the wider world, yet the terms of those loans are often opaque at best. The projects they support are often unsustainable and poor quality. Too often, they come with strings attached and lead to staggering debt," said Mr Pence, who spoke after Chinese President Xi Jinping.

Mr Pence added: "Let me say with great respect to all the nations across this wider region and the world: Do not accept foreign debt that could compromise your sovereignty. Protect your interest. Preserve your independence. And just like America, always put your country first."

WE DON'T COERCE

We don't drown our partners in a sea of debt. We don't coerce or compromise your independence. The United States deals openly and fairly - and we don't offer a constricting belt or a one-way road.

US VICE-PRESIDENT MIKE PENCE

Mr Pence, who was at the summit in President Donald Trump's stead, signalled that America would continue taking part in freedom of navigation operations in the South China Sea. China, which claims the disputed waters, has called for a stop to these naval operations.

"The US will continue to uphold the freedom of the seas and the skies, which are so essential to our prosperity. We will continue to fly and sail wherever international law allows, and our national interests demand. Harassment will only strengthen our resolve," he said.

He also announced that the US would partner Papua New Guinea and Australia in their joint initiative to upgrade the Lombrum naval base on Papua New Guinea's Manus Island. The US would also work to promote civil society, the rule of law, and transparent and accountable government, he said as he announced a US$400 million (S$548 million) Indo-Pacific transparency initiative to "empower citizens to combat corruption and strengthen sovereignty".

The US has stepped up its development financing programmes so as to counter China's influence, and doubled its financing capacity to nearly US$60 billion to drive private sector investment in the region. But Asean is concerned that the growing US-China competition in its backyard will hurt the region economically and that developments in the South China Sea would increase military tensions - fears which Mr Pence sought to allay in his speech.

He said: "The United States seeks a better relationship with China, based on fairness, reciprocity and respect for sovereignty... We want to strengthen the relationship between our two countries and improve the lives of our citizens."

He added: "China has an honoured place in our vision of a free and open Indo-Pacific, if it chooses to respect its neighbours' sovereignty, embrace free, fair and reciprocal trade, and uphold human rights and freedom."

A version of this article appeared in the print edition of The Sunday Times on November 18, 2018, with the headline ''Beware China's debt diplomacy''. Print Edition | Subscribe