The most vulnerable nations on Earth are facing a “tidal wave” of debt repayments as a Chinese lending boom starts to be called in, a new report has warned.
The analysis, published on Tuesday by Australian foreign policy thinktank the Lowy Institute, said that in 2025 the poorest 75 countries were on the hook for record high debt repayments US$22bn to China. The 75 nations’ debt formed the bulk of the total $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 report said.
The pressure to repay was putting 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,” it said.
The loans were largely issued under President Xi Jinping’s signature belt and road initiative (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 lending spree turned China into the largest supplier of bilateral loans, peaking with a total of more than $50bn in 2016 – more than all western creditors combined.
The BRI focused primarily in developing nations, where governments struggled to access private or other state-backed investment. But the practice has raised concerns about Chinese influence and control and drawn accusations that Beijing was seeking to entrap recipient nations with unserviceable debt. Last month another analysis by the Lowy Institute found that Laos was now trapped in a severe debt crisis, in part because of over-investment in the domestic energy sector, mostly financed by China.
China’s government denies accusations it deliberately creates debt traps, and recipient nations have also pushed back, saying China was a more reliable partner and offered crucial loans when others refused.
But the Lowy report said the record high debt now due to China could be used for “political leverage”, noting that it comes amid huge cuts to foreign aid by the Trump administration.
The report also highlighted new large-scale loans given to Honduras, Nicaragua, Solomon Islands, Burkina Faso and the Dominican Republic, all within 18 months of those countries switching diplomatic recognition from Taiwan to Beijing.
China also continues to finance some strategic partners, including Pakistan, Kazakhstan, Laos and Mongolia, as well as countries that produce critical minerals and metals, such as Argentina, Brazil and Indonesia.
But the situation also put China 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 said its estimates – based on World Bank data – likely underestimated the full scale of China’s lending. In 2021 AidData estimated China was owed a “hidden debt” of about $385bn.
