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New US ambassador to Australia warns of China's 'payday loan diplomacy'

March 13, 2019

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“The money looks attractive and easy upfront, but you better read the fine print,” says the envoy.— AP/File
“The money looks attractive and easy upfront, but you better read the fine print,” says the envoy.— AP/File

The new United States ambassador to Australia said on Wednesday that he's concerned about the way China lends money to developing Pacific nations in what he describes as “payday loan diplomacy.”

Arthur Culvahouse Jr. told reporters in Canberra that it was up to the US allies and Western liberal democracies to educate people about the dangers of such loans.

US Vice President Mike Pence previously warned of China deploying “debt traps” against developing Pacific nations.

Also read: Sri Lanka seeks $1 billion loan from China amid debt woes

“I would use stronger language. I would use payday loan diplomacy,” Culvahouse said. He said, “The money looks attractive and easy upfront, but you better read the fine print.”

China categorically rejects accusations that it uses loans, grants and other financial inducements to extend its diplomatic and political reach, saying it is merely acting in the best interests of both sides in such transactions.

It is especially sensitive to “debt trap” claims where they concern projects included under its gargantuan “belt and road” infrastructure initiative.

Yet, it has largely ignored criticism of its dealings with Sri Lanka, where that country was forced to hand over a port, airport and land for development after it was unable to repay billions of dollars in Chinese loans, and has sought to blunt criticism from Malaysia and others over the terms of projects backed by Chinese loans.

The US and Australia have their own infrastructure investment projects in the region. Last July, the US Overseas Private Investment Corp., the Japan Bank for Investment Cooperation and the Australian government announced a partnership to invest in Asia-Pacific infrastructure.

The partners said in a joint statement at the time that good investments stem from transparency, open competition, sustainability, adhering to robust global standards, employing the local workforce, and avoiding unsustainable debt burdens.

In November, Australia announced a 2 billion Australian dollar ($1.4 billion) Australian Infrastructure Financing Facility for the Pacific region to provide grants and long-term loans for investments in telecommunications, energy, transport and water infrastructure.

China protested in January last year when then Australian minister for international development and the Pacific Concetta Fierravanti-Wells said Chinese aid programmes in poor Pacific island countries were creating “white elephants” that threatened economic stability without delivering benefits.

Culvahouse dampened expectations that President Donald Trump might visit Australia any time soon, saying he'd talked to the White House before he'd left and while a presidential visit remained a possibility, Trump had “a busy schedule.”

“I do expect a number of very senior administration officials with whom I met to visit Australia this year,” he added. Long affiliated with Republican officeholders, Culvahouse oversaw the vetting process for US President Trump's running mate in 2016.

A Republican from Tennessee, Culvahouse is the former chairman of O'Melveny and Myers, an international law firm. He assisted the late Sen. John McCain to vet vice presidential candidates in 2008 and served as counsel to then US president Ronald Reagan from 1987 to 1989.

Before Culvahouse presented his credentials on Wednesday, the ambassador post had been vacant since October 2016.