In 2025, developing countries are confronting unprecedented financial pressure as debt repayments to China reach record levels. According to a detailed report by the Lowy Institute, these nations are expected to pay a total of USD 35 billion to China this year, with USD 22 billion of that sum owed by the world’s 75 poorest and most vulnerable countries.

This surge in repayments is primarily the result of loans extended under China’s Belt and Road Initiative (BRI) during the 2010s, a period when Chinese state-backed lending for infrastructure projects peaked.

China’s role in global development finance has shifted dramatically over the past decade. While China was the largest supplier of new bilateral credit to developing countries by the mid-2010s, its position has now changed to that of the world’s largest single destination for developing country debt service payments.

At the height of the BRI lending boom, new Chinese loans exceeded USD 50 billion annually, surpassing the combined lending of all Western creditors in some years. However, as grace periods on these loans expire, repayments have now overtaken new disbursements, marking a clear transition from net provider to net collector of capital.

The financial burden of these repayments is straining the budgets of developing countries, particularly the poorest. The Lowy Institute report warns that the high cost of servicing debt to China is crowding out essential spending on health, education, poverty reduction, and climate adaptation. In 54 developing nations, payments owed to China now surpass those owed to the Paris Club, a group of major Western bilateral lenders. This creates a situation where developing economies are forced to prioritize debt service over critical domestic needs, heightening their vulnerability and risking economic and political instability.

The report highlights that China’s shift to a debt collector role comes at a time when Western aid and multilateral support are also declining, compounding the difficulties faced by developing nations. There are concerns that China could leverage its position as a major creditor for geopolitical influence, especially as the United States and other Western countries reduce foreign aid commitments. 

Meanwhile, China’s new lending has slowed sharply since the late 2010s, with exceptions mainly in countries that have recently switched diplomatic recognition to Beijing or are rich in critical minerals needed for global supply chains.

Looking ahead, the Lowy Institute predicts that elevated debt service payments to China will persist for the rest of the decade, with the world’s poorest countries bearing the heaviest burden. The report suggests that without significant restructuring or relief, these financial pressures will continue to undermine development progress and exacerbate fiscal challenges in vulnerable economies.

Developing countries are now grappling with a "tidal wave" of debt repayments to China, a legacy of the BRI lending surge, which is reshaping global development finance and placing new strains on the world’s most vulnerable nations.

Based On ANI Report