China Emerges as Top Debt Collector for Developing Nations in 2025

Beijing, May 30, 2025 - China has transitioned from being the primary financier for developing nations to their largest debt collector, with a record $35 billion in repayments due in 2025, according to a recent report from Australia's Lowy Institute. This shift, driven by the expiration of grace periods on loans from the Belt and Road Initiative (BRI), places significant financial pressure on the world's 75 poorest and most vulnerable countries, which account for $22 billion of the total.

The change marks a pivotal moment in China's global economic strategy, raising concerns about the sustainability of debt for developing nations and the geopolitical leverage China gains through its lending practices.

Origins of the Belt and Road Initiative

Launched in 2013 by President Xi Jinping, the Belt and Road Initiative began with two ambitious proposals: the Silk Road Economic Belt, focusing on overland infrastructure connecting Asia and Europe, and the 21st Century Maritime Silk Road, emphasizing maritime routes linking Asia to East Africa. Officially rebranded in 2015, the BRI aimed to evoke the ancient Silk Road, a trade network from the Han Dynasty (206 BCE–220 CE), while serving modern strategic goals.

These include securing trade routes independent of US-controlled chokepoints like the Malacca Strait, fostering economic influence through infrastructure, and positioning China at the center of a global economic network. The initiative's lending peaked between 2012 and 2018, with many loans now entering repayment phases, transforming China's role in the developing world.

ALSO READ | U.S.-China Trade Truce Could Save Komatsu $140M in Tariff Costs, CEO Reveals

2025: A Critical Debt Repayment Year

The year 2025 represents a turning point, with developing nations facing a tidal wave of debt repayments totaling $35 billion to China. The Lowy Institute highlights that $22 billion of this comes from the 75 poorest countries, strained by expiring grace periods on BRI loans. This repayment surge risks crowding out essential spending on health, education, and climate adaptation in these nations.

Despite a general decline in Chinese lending, strategic partners like Honduras and the Solomon Islands, which recently shifted diplomatic recognition from Taiwan to China, continue to receive new loans. Resource-rich countries such as Indonesia and Brazil also secure financing, particularly for battery metals and critical minerals, signaling China's focus on geopolitical and resource security priorities.

Did You Know?
The term "Silk Road" was coined in 1877 by German geographer Ferdinand von Richthofen, long after the ancient trade routes it described had faded from prominence.

Geopolitical Leverage Through Strategic Lending

China's lending practices have evolved into a tool for geopolitical influence, particularly in resource-rich and strategically located nations. The concept of debt-trap diplomacy, first articulated by Indian academic Brahma Chellaney in 2017, describes how China extends loans with stringent terms to gain political concessions when borrowers default.

While China has shown flexibility with African nations of limited strategic value, it enforces stricter terms in South Asia and Indian Ocean countries, leveraging their geographic importance. Through Resource Guarantee Infrastructure Financing, China secures assets like copper from Zambia, gold from Tanzania, and oil from Sudan as collateral for loan defaults.

Recent data indicates China is recalibrating its approach, with new loans increasingly tied to projects that enhance its access to critical minerals, vital for technologies like electric vehicle batteries. Western nations, particularly the United States, are urged to counter this influence by offering competitive, high-quality infrastructure projects and loans to developing countries.