China has shifted from being one of the biggest lenders to the developing world to becoming its largest debt collector, according to a new report by Australia’s Lowy Institute. The Belt and Road Initiative, which includes funding for railways, ports, and roads, began winding down before the COVID-19 pandemic, leading to a significant decrease in Chinese lending.
However, this shift has resulted in China now collecting over 25% of the external debt in developing countries, with nations expected to pay at least $35 billion to Beijing this year alone. The report notes that while some countries have been exempt from this trend, others are struggling to repay their debts, leading to a “crowding out” effect on development spending.
Deborah Brautigam, director of the China-Africa Research Initiative, suggests that Chinese lenders are learning from past mistakes and becoming more cautious about debt sustainability. The report highlights the importance of coordinated relief and fresh concessional financing to mitigate the impact of expiring grace periods for loans.
The consequences of this shift have been evident in countries such as Kenya, where Chinese debt has contributed to corruption and political instability. Sri Lanka’s default on its external debt in 2022 further underscores the challenges posed by foreign debt. As China continues to collect debts, it is essential to address the underlying issues driving these trends to prevent potential destabilization and deepen development setbacks.
Source: https://www.npr.org/2025/05/28/nx-s1-5413239/china-loans-developing-world-belt-road