By Abhay Ray 
Introduction
China has dramatically curtailed its lending in recent years. Now, it’s emerging as the largest debt collector for many of the world’s poorest nations a shift that threatens to undermine poverty reduction efforts and fuel instability, according to a new report.
Lending for China’s Belt and Road Initiative which includes funding for a massive series of new railways, ports and roads in the developing world began winding down before the COVID-19 pandemic, according to Peak repayment: China’s global lending, released this month by Australia’s Lowy Institute, a foreign policy think tank. The report points to diplomatic pressure within China to restructure unsustainable debt and to recover outstanding debts from abroad for the change.
China’s Expanding Global Influence through BRI
China’s Belt and Road Initiative (BRI) is a massive global infrastructure project connecting over 150 countries, accounting for 40% of the world’s GDP. Launched in 2013, it aims to boost trade and economic integration through investments in railways, ports, roads, and energy. This expansive network enhances China’s geopolitical influence by deepening economic ties with Asia, Africa, Europe, and Latin America. However, many participating countries face mounting debt, with 42 nations owing China more than 10% of their GDP, raising concerns about financial dependency. Despite criticism of “debt trap diplomacy,” China continues to prioritize strategic partnerships through BRI, positioning itself as a dominant global lender and shaping the economic landscape of developing nations.
The Debt Trap Allegations
China’s Belt and Road Initiative has faced criticism for allegedly creating a “debt trap” for borrowing countries. Critics argue that China extends large loans with high interest rates to developing nations, many of which struggle to repay them. This can lead to financial dependence and loss of sovereignty when countries are forced to hand over key assets or make political concessions. Notable examples include Sri Lanka’s Hambantota Port, leased to China for 99 years after debt default. However, some experts believe China’s lending is driven more by commercial interests than political leverage, and that Beijing is learning to manage debt sustainability better. Nonetheless, the growing debt burdens in many countries raise serious concerns about the long-term economic and political impacts of China’s global lending.
Countries Most Affected
Several countries have been significantly impacted by China’s lending practices under the Belt and Road Initiative. Nations like Pakistan, Kenya, Sri Lanka, Zambia, Laos, and Mongolia face high debt servicing costs that consume critical government revenues, affecting essential public services such as education, healthcare, and infrastructure. Sri Lanka’s 2022 default on its $4.2 billion debt to China highlighted the risks, forcing debt restructuring and economic instability. Kenya’s debt, which includes financing for the Nairobi-Mombasa rail line, has also sparked political backlash and concerns over corruption and underperformance. Many of these countries owe more than 10% of their GDP to China, making debt repayment a significant strain on their economies and development efforts.
China’s Biggest Debtor
Pakistan stands out as China’s biggest debtor under the Belt and Road Initiative. With massive investments in infrastructure projects like the China-Pakistan Economic Corridor (CPEC), Pakistan owes billions to Chinese lenders. These loans have significantly increased Pakistan’s external debt, putting immense pressure on its economy. The high repayment obligations have strained Pakistan’s budget, limiting funds for social and development programs. Pakistan’s debt situation exemplifies concerns about the sustainability of China’s lending model, as the country grapples with balancing economic growth and managing its growing financial liabilities to China.
Global Repercussions and Risks
China’s aggressive lending through the Belt and Road Initiative (BRI) has triggered global concerns about rising debt burdens in developing countries. As nations like Sri Lanka, Pakistan, and Kenya struggle to repay Chinese loans, essential public spending is being diverted to service debt, increasing poverty and economic instability. Defaults or restructuring have already impacted credit ratings and investor confidence. Politically, anti-China sentiment is rising in debtor countries, influencing elections and foreign policy. The lack of transparency in Chinese loan agreements further complicates international debt relief efforts. Additionally, strategic asset seizures—like ports or mining rights—have raised fears of sovereignty loss. These risks not only affect individual countries but also threaten regional stability and global economic balance.
Conclusion
China’s Belt and Road Initiative has reshaped global infrastructure and trade, but it comes with mounting economic and geopolitical concerns. While it has provided vital development funding, the growing debt burdens in many countries have exposed vulnerabilities, deepened financial crises, and triggered political instability. As repayment pressures rise and grace periods expire, nations are increasingly questioning the sustainability of Chinese loans. The global community is responding with calls for greater transparency, coordinated debt relief, and alternative financing models. Unless lending practices evolve and borrowers strengthen fiscal management, the BRI could shift from a development promise to a long-term liability—making it a critical issue for global policymakers and financial institutions alike.
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