The world’s most vulnerable economies are facing a mounting financial crisis, with debt repayments to China reaching record highs in 2025, according to new research by the Lowy Institute.
The Australian thinktank’s report warns that 75 of the poorest nations are collectively due to repay $22 billion to Beijing this year—more than two-thirds of the total $35 billion owed to China globally.
“Now, and for the rest of this decade, China will be more debt collector than banker to the developing world,” the report said.
The report describes the situation as a “tidal wave” of repayments that is likely to strain national budgets already under pressure from slow economic growth, rising inflation, and climate-related costs.
These repayments, many of which stem from infrastructure loans issued under China’s Belt and Road Initiative (BRI), are now threatening public spending in critical sectors like health and education, the report said.
Belt and Road Initiative legacy under scrutiny
China’s Belt and Road Initiative, launched under President Xi Jinping, was intended to expand Beijing’s global influence by investing in roads, railways, ports, and energy projects, especially across the Global South.
Between 2013 and 2016, China became the world’s largest bilateral lender, with its annual overseas lending peaking at more than $50 billion.
The initiative helped fund national development projects in countries often excluded from Western financing, but many of these loans are now maturing.
The Lowy report notes that as repayments increase and fresh Chinese lending dwindles, developing nations are left in a tight fiscal bind.
“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,” the report said.
Is Beijing trapping countries in debt?
Beijing has repeatedly denied using debt for political gain, but the Lowy Institute says the current repayment cycle offers China significant leverage, particularly as Western donors scale back foreign aid.
The report highlights that some nations—including Honduras, Nicaragua, and the Solomon Islands—secured large Chinese loans soon after switching diplomatic recognition from Taiwan to China.
Other countries continue to receive support due to their geopolitical importance or mineral resources.
These include Pakistan, Laos, Kazakhstan, and mineral-rich states like Argentina, Brazil, and Indonesia.
The scale and pattern of lending, combined with Beijing’s opaque financial practices, have prompted warnings from analysts about the potential for subtle political influence.
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.
Debt burden complicates China’s own challenges
China’s position as a creditor is further complicated by its own economic headwinds.
With domestic growth slowing and its financial sector under stress, Beijing is under pressure to recover funds from overseas while managing its international reputation.
The report suggests this could lead to inconsistent approaches to debt restructuring, leaving debtor nations in uncertainty.
Moreover, the lack of transparency around Chinese lending remains a persistent issue.
The Lowy Institute’s estimates are based on World Bank data but are likely conservative.
AidData’s 2021 report claimed that China’s “hidden debt” could be as high as $385 billion, given the number of off-book and opaque financial agreements made with developing countries.
Risk of a deepening crisis
As the repayment deadlines approach, many countries face difficult trade-offs between servicing debt and funding basic development needs.
Budget cuts in health, education, and climate mitigation risk undoing years of progress.
With limited options for new borrowing, nations may increasingly seek debt relief or restructuring—but that too depends on Beijing’s willingness to engage.
In the absence of coordinated international support, experts warn that the debt pressures building across the developing world could deepen inequality and spark social unrest, with implications that go far beyond fiscal spreadsheets.
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