(TibetanReview.net, May27’25) – The most vulnerable nations on Earth are facing a “tidal wave” of debt repayments from this year as a Chinese lending boom starts to be called in, reported theguardian.com May 27, citing a new report published May 27 by Australian foreign policy thinktank the Lowy Institute. China has long been accused of debt trapping poor nations with loans for highly questionable projects on terms that lack transparency, often signed with corrupt leaders.
China will now be more of a debt collector than banker to the poorest 75 countries of the world as they collectively owe some $22 bn to it this year alone for loans taken mostly under President Xi Jinping’s Belt and Road Initiative (BRI) infrastructure projects, the report said.
These nations’ debts are stated to form the bulk of the total of $35bn calculated by Lowy for 2025.
“Now, and for the rest of this decade, China will be more debt collector than banker to the developing world,” the Lowy Institute report has said.
And the pressure to repay is seen to put strain on local funding for health and education as well as climate change mitigation.
“China’s lending has collapsed exactly when it is needed most, instead creating large net financial outflows when countries are already under intense economic pressure,” the institute has said.
The loans were stated to have been largely issued under President Xi’s signature BRI, a state-backed global infrastructure investment programme which has underwritten national projects from schools, bridges and hospitals to major roads and shipping and air ports.
The report has noted that China’s lending spree turned it into the largest supplier of bilateral loans, peaking with a total of more than $50bn in 2016 – more than all western creditors combined.
But not only has China denied accusations that it deliberately creates debt traps, but the recipient nations have also pushed back, saying China was a more reliable partner and offered crucial loans when others refused.
But that is not the only issue. Lowy report has said the record high debt now due to China could be used for “political leverage”, noting that it has come amid huge cuts to foreign aid by the Trump administration.
Meanwhile, China has given new large-scale loans to Honduras, Nicaragua, Solomon Islands, Burkina Faso and the Dominican Republic, all within 18 months of them switching diplomatic recognition from Taiwan to Beijing.
This has occurred despite the fact that China now finds itself in a bind, pulled between diplomatic pressure to restructure unsustainable debt in vulnerable nations and domestic pressure to recall loans amid China’s own economic downturn.
China publishes little data on its BRI scheme, and the Lowy Institute has said its estimates – based on World Bank data – likely underestimated the full scale of China’s lending. In 2021 AidData (an Aid Transparency, Information Technology, and Geocoding institute based in Williamsburg, Virginia) estimated China was owed a “hidden debt” of about $385bn, the report said.