Time for China’s belt and road partners to pony up as debt comes due, think tank finds
Last Updated on May 26, 2025 7:46 pm
By Kandy Wong
China has become the leading debt collector of developing countries, shifting from a net capital provider, “as bills coming due from its belt and road lending surge in the 2010s now far outstrip new loan disbursements”, according to new research.
In 2025, about 75 of the world’s poorest and most vulnerable countries will make “record high debt repayments” totalling US$22 billion to China, according to research released on Monday by an Australian think tank, the Lowy Institute, as a result of peaks in new loan commitments made from 2012 to 2018.
The author, Riley Duke, said China was grappling with a dilemma.
“It faces growing diplomatic pressure to restructure unsustainable debt, and mounting domestic pressure to recover outstanding debts, particularly from its quasi-commercial institutions,” his report said. “But a retrenchment in Western aid and trade is compounding difficulties for developing countries while squandering any geopolitical advantage for the West.”
Duke explained that the research was being published now because China’s belt and road lending spree peaked in the mid-2010s, and those grace periods began expiring in the early 2020s – a likely “crunch period” for developing-country repayments to China.
In 54 of 120 developing countries with available data, debt-service payments to China now exceed the combined repayments owed to the Paris Club – a bloc that includes all major Western bilateral lenders.
In 2024, the trade value between China and countries participating in the Belt and Road Initiative exceeded 50 per cent of China’s total foreign trade for the first time, according to figures from China’s customs.
As Beijing shifts into the role of debt collector, Duke added that Western governments remain “internally focused”, with aid declining and multilateral support waning.
“An increasingly isolationist United States and a distracted Europe are withdrawing or sharply cutting their aid support,” he noted. “Developing economies must also grapple with the impact of new trade war shocks and the spectre of punitive US tariffs being levelled against them.”
The US State Department issued a “stop-work” order in January for all existing foreign aid and paused new aid, after US President Donald Trump ordered a review of whether aid allocation aligned with his foreign policy.
“How China’s shift to chief debt collector will impact its reputation as a development partner and its broader messaging around South-South cooperation remains to be seen,” Duke added.
Citing data from the World Bank, the Lowy Institute said China was “the largest source” of bilateral debt service for developing countries, accounting for more than 30 per cent of all such payments in 2025.
China’s net lending position has shifted from being a net provider of financing – where it lent more than it received in repayments – to a net drain, with repayments now exceeding loan disbursements, the research noted, adding that China was a net drain on the finances of 60 developing countries by 2023, up from 18 in 2012.
The Belt and Road Initiative is an ongoing effort to link economies into a China-centred trade network, largely via Chinese-backed megaprojects abroad, and Beijing says that the initiative has entered a phase with “small but beautiful” additions.
Nevertheless, China continues to finance strategic and resource-critical partners.
The research showed that China remains the largest bilateral lender in seven of its nine land neighbours: Laos, Pakistan, Mongolia, Myanmar, Kazakhstan, Kyrgyzstan and Tajikistan.
“A majority have received new Chinese loan commitments since 2019 and together account for a quarter of all disbursements since China’s lending downturn began in 2018,” Duke added.
Other developing economies that are critical-mineral or battery-metal exporters, such as Argentina, Brazil, Indonesia and the Democratic Republic of Congo, received more than US$8 billion in disbursements, accounting for 36 per cent of China’s total loan outflows in 2023, according to the research.
Source : SCMP