China dismisses debt trap narrative after $66m Solomon Islands investment

China dismisses debt trap narrative after $66m Solomon Islands investment

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The Chinese embassy in the Solomon Islands has dismissed claims about a ‘debt trap’ after reports emerged of its investment in the Pacific country.

It was announced last week that Huawei would build 161 mobile towers in the Solomon Islands after it received a loan of US$66 million from China.

Several reports have emerged in recent days accusing the country of trapping the Solomon Islands into something resembling a debt trap, but this is something China strenuously denies.

The Chinese dept trap is a narrative where China gives loans to underdeveloped or developing countries in order for them to develop their infrastructure. If a country cannot pay back those loans, China takes control of its trade routes.

However, a spokesperson for the Chinese embassy in the Solomon Islands retorted the claims. A statement said: "People in Solomon Islands have an urgent need to improve mobile communication services and to provide service guarantee for the 2023 Pacific Games [to be held in Solomon Islands].

“We respect the relevant cooperation between the local government and Chinese companies and financial institutions which is on the basis of equality and mutual benefits in accordance with commercial principles.”

The move was celebrated by the Solomon Islands government as a “historical financial partnership”. The loan will come from the Exim Bank of China which has offered an interest rate of 1%.

Solomon Islands has less than 30% internet penetration and the government said it plans to increase this number moving forward in order to serve public service institutions, schools and clinics around the country.

The two countries signed a controversial security deal last year after the Solomon Islands switched allegiance from Taiwan to China in 2019.

In 2018, the Solomon Islands awarded Huawei a contract to build a subsea cable network, however, the Australian government intervened in these plans, offering to fund the construction of the cable.

Huawei is banned from securing government contracts in Australia, with the country citing security concerns as the reason for this.

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