Debtor nations in the developing world will fork out record amounts this year in a “tidal wave” of repayments and interest payments to China, according to a report published on Tuesday by Australia’s Lowy Institute.
The payments are for loans provided under China’s ‘Belt and Road Initiative,’ launched in 2013 to enhance its trade links globally and secure supply chains.
“The developing nations face a tidal wave of debt and interest payments to China,” researcher Riley Duken warns in the independent study commissioned by the Sydney-based institute.
Over the next decade, the study suggests, China will shift from being a “banker for developing countries” to a “debt collector,” receiving more in repayments than it lends.
The Lowy Institute analysed World Bank data to assess repayment obligations of developing countries, and found that the world’s 75 poorest nations will make “record debt repayments” totalling €19 billion to China in 2025.
The burden of Chinese state loans, along with increased repayments to various private international creditors, places substantial financial pressure on developing economies, the institute says. At the same time, Chinese lending is decreasing almost worldwide, according to the study.
Honduras and the Solomon Islands received Chinese loans after cutting diplomatic ties with Taiwan in 2023 and 2019, respectively.
Additionally, Indonesia and Brazil recently signed new loan agreements with China to secure supplies of metals and minerals.
Critics of the ‘Belt and Road Initiative’ warn that it risks trapping some participating countries in debt.
