The role of China in the finance of developing countries has gone from the debt capital supplier as a “tidal wave” of reimbursements due to Beijing loans extended under its belt and the road initiative exceeds new disbursements, a new report by an Australian reflection group has shown.
As part of the Belt and Road (BRI) initiative, Beijing has disbursed more than $ 1 billion in loans to more than 150 countries to build a network of roads, airports, railways, telecommunications networks and sea ports to connect China to the rest of the world. Critics have accused China of setting up debt traps and developing geopolitical and economic influence through BRI.
According to the Lowy Institute report, developing countries owe a record of $ 35 billion in debt repayment to China in 2025, with service fees on projects funded by BRI – which Chinese president XI Jinping launched with a big fanfare in 2013 – which remains to be up for the rest of the decade.
About $ 22 billion, about two -thirds of the total of $ 35 billion in debt repayment due in 2025, will be carried out by 75 of the poorest and most vulnerable countries in the world, threatening critical health, education, poverty reduction and climate adaptation efforts.
“The role of China as a lender has exceeded a watershed,” wrote Riley Duke, the author of the report entitled “Papie replacement: the global Ladends of China”.
“The nation, which was once the largest source of funding in the development world has now completely increased to the world's largest destination for the development of payments from country debt,” added Duke, a researcher on the Lowy Institute Pacific Aid card.
New Chinese loan commitments have also remained around $ 7 billion a year since 2023, going from a net funding supplier – where he has lent more than he received in reimbursements – a “net drain”, as reimbursements are now exceeding loan disbursements, according to the report.
In 2012, China was a net drain on finance of only 18 developing countries; By 2023, this number has more than tripled to 60.
“China is struggling with a dilemma of its own manufacture: it faces increasing diplomatic pressures to restructure unsustainable debt, and the assembly of internal pressures to recover the debts in progress, in particular its almost sales representatives,” wrote Duke.
Geopolitical lever effect
Despite the broader drop in world loans, China continues to finance strategic or “politically important” borrowers and remains the largest bilateral lender of seven of its nine land neighbors. These include Laos, Myanmar, Pakistan, Mongolia, Kazakhstan, Kyrgyzstan and Tajikistan.
The report indicates that new loans also appeared as a diplomatic tool of transmission, in particular to bring to other countries to adopt the “One China” policy of Beijing, which stipulates that the People's Republic of China is the only legitimate government in China, including the Taiwan Auto-String in the context of its territory.
For example, China has announced new funding for several countries, including Honduras, Nicaragua and the Salomon Islands, just a few months after having officially declared that “Taiwan is an inalienable part of Chinese territory” and changed the diplomatic recognition of Taipei in Beijing.
In June 2023, Honduras became the last country in Central America to join BRI, reducing the Taiwan diplomatic allies in the region to two – Guatemala and Belize – in the midst of the growing economic influence of China thanks to investments, loans and trade.
New loan agreements have also been resilient for developing countries which are exporters of critical mineral resources or metal, such as Indonesia, Argentina, Brazil and the Democratic Republic of Congo, receiving more than $ 8 billion in disbursements in 2023, or more than a third of total loan outings for this year, indicates the report.
“The increase in debt service costs raises questions about the question of whether China could use reimbursements for the geopolitical lever effect,” wrote Duke. “Some people argue that the Boom of China loans in the 2010s reflected an intentional effort to” debt diplomacy “aimed at pushing countries to debt problems so that geopolitical concessions can later be extracted,” he added.
On Tuesday, in response to a question on the main conclusions of the Lowy Institute report, the Chinese government spokesman Mao Ning told journalists that China cooperation on investment and funding with developing countries follows international practice, market principles and the principle of debt sustainability.
“A handful of countries broadcast the story that China is responsible for the debt of these countries,” said Mao. “They are unaware of the fact that multilateral financial institutions and commercial creditors of developed countries are the main creditors of developing countries and the main source of pressure repayment pressure. Lies cannot cover the truth and people can tell the good of evil, ”she added.
Impact of the debt burden
Today, China is the largest source of bilateral debt services for developing countries, representing more than 30% of all these payments in 2025, according to data reported by the governments of debtors at the World Bank.
In 2023, some 3.3 billion people live in countries that spend more in payments of interest than for health or education, depending on the report.
“The high debt burden faced by developing countries, will hinder poverty reduction and the slowdown in development progress while beating risks of economic and political instability,” Duke wrote in the report.
In 54 of the 120 developing countries with available data, the payments of the debt service to China exceed combined payments due to the Paris club – a block which includes all the main Western bilateral lenders, according to the report.
The Chinese debt service is particularly dominant in Africa, but is also equal or exceeded who owes members of the Paris club by the majority of the countries of South America, the Pacific Islands, South Asia, Central Asia and Southeast Asia, according to the report.
“While Beijing moves into the role of the debt collector, Western governments remain concentrated internally, with downward aid and multilateral support.
Edited by Mat Pennington.