Developing countries in Global South indebted to China will repay record amounts this year
Developing countries indebted to China will pay record amounts of money to Beijing this year, a study by Australia’s Lowy Institute published Tuesday showed, describing it as a financial “tsunami” of loan repayments and interest payments.
These loans are part of the global infrastructure development initiative known as the “New Silk Roads,” a massive initiative launched by China in 2013 to expand its trade ties with the rest of the world and secure its supplies.
In a study conducted by the Lowy Institute, an independent research center based in Sydney, “Developing countries are facing a massive wave of debt repayments and debt service to China”.
According to the study, over the next ten years, China will no longer be the developing countries’ bank, but rather a loan collector, meaning that borrowers will repay it more than they borrow from it.
The institute conducted its study based on World Bank data to calculate the repayment obligations of developing countries.
The world’s 75 poorest countries are expected to pay record debts to China in 2025, totaling an estimated €19 billion.
While Chinese lending is declining almost everywhere in the world, the report notes that there are two areas that appear to be bucking this trend.
Honduras and the Solomon Islands received loans from China after the two countries severed diplomatic relations with Taiwan in 2023 and 2019, respectively.
In recent years, Indonesia and Brazil have also signed new loan agreements with China, which is seeking to secure its supplies of minerals and metals.
Critics of the Belt and Road Initiative warn of the risk of some member states falling into a Chinese debt trap.
In response to a question on the matter during a regular press conference on Tuesday, Chinese Foreign Ministry spokeswoman Mao Ning said, “I don’t know the basis for this report”.
She stressed that cooperation between China and developing countries in the field of investment and finance is conducted in accordance with international practices, market rules, and debt sustainability principles.
She added, “Some countries like to promote the theory that China is responsible for this debt, while being careful not to emphasize the role of multilateral financial institutions and commercial creditors from developed countries, which are in fact the primary creditors to developing countries and the main source of the repayment pressures they face”.
