China's Debt Grip Tightens on Developing Nations Amid Record Repayments

China is intensifying financial pressure on developing countries as these nations face record debt repayments. By 2025, an estimated USD 35 billion will be due to China, with USD 22 billion coming from the world's 75 poorest and most vulnerable nations, primarily for loans taken under China's Belt and Road Initiative during the 2010s, according to a report by the Sydney-based Lowy Institute.

The report highlights that the financial strain from Chinese state lending, combined with repayments to various international private creditors, is exacerbating debt vulnerabilities, diverting resources away from crucial sectors such as health, education, poverty reduction, and climate adaptation. This development marks a significant shift from the early 2000s when China was a minor lender to becoming the primary source of bilateral credit to developing countries by the mid-2010s.

At the peak of China's Belt and Road Initiative in 2016, the country provided over USD 50 billion in new loans, surpassing the collective lending of all Western creditors in that period. However, by 2019, Chinese lending saw a significant decline, exacerbated by the Covid pandemic, with new loans dropping to USD 18 billion. Despite this downturn, China remains the largest recipient of debt service payments from developing nations, marking its transition from a major financial provider to a dominant debt collector.

(With inputs from agencies.)