China comes calling in debts of developing nations

West Australian

26-05-2025

Developing nations, including those in the Pacific, will pay China $A34 billion this year as Beijing comes calling for repayments on project funding.
China is now "the world's largest single destination for developing country debt payments" and outstripping the whole of the West, says a new report shows from Australian think tank The Lowy Institute.
Under its Belt and Road Initiative, China has rapidly increased investments in infrastructure since 2013, partnering with dozens of nations primarily in the developed world.
In more recent years Beijing has changed tack, providing a heavier portion of grants - which do not need to be repaid - into its mix of development assistance.
However, with standard lending terms including the delay of payments for several years before a maturation of loans at 15-20 years, it appears crunch time has arrived for repayments.
"China's earlier lending boom, combined with the structure of its loans, made a surge in debt servicing costs inevitable," report author Riley Duke said.
"Because China's Belt and Road lending spree peaked in the mid-2010s, those grace periods began expiring in the early 2020s. It was always likely to be a crunch period for developing country repayments to China."
Mr Duke says some of the world's poorest people are likely to bear the brunt.
"The high debt burden facing developing countries will hamper poverty reduction and slow development progress while stoking economic and political instability risks," he said.
The analysis is incomplete, given data is only available for 54 of 120 developing countries and China does not routinely disclose funding.
Mr Duke says this means his figure of $US22 billion ($A34 billion) to be repaid in 2025 to China and its many state-controlled lending arms is likely an understatement.
It is also unclear whether China would defer debt repayments as it did during the COVID-19 pandemic, when it joined with G20 nations to provide relief.
That move was helpful at the time, according to Mr Duke, but the effect was to mount costs into a heightening of the current repayment spike.
Several countries across the Pacific, which have benefited from Chinese investment in infrastructure, are likely to be among the countries affected.
The report comes ahead of a significant summit between China and the Pacific in Xiamen, beginning on Wednesday when Foreign Minister Wang Yi hosts representatives of 11 nations.
Kiribati Prime Minister Taneti Maamau and Niue Premier Dalton Tagelagi will join with the foreign ministers of Tonga, Nauru, Micronesia, Solomon Islands, Vanuatu, Papua New Guinea and Cook Islands, and representatives from Fiji and Samoa for the two-day meeting.
"There will be an in-depth exchange of views on interactions and cooperation between China and Pacific island countries (PICs) in all aspects and international and regional issues of mutual interest," China foreign ministry spokesperson Mao Ning said.
"China highly values its ties with PICs and hopes that this meeting will help drive the implementation of the important common understandings reached between leaders of the two sides, enhance solidarity and coordination, unite efforts for development and prosperity, and galvanize an even closer community with a shared future."
The 11 nations attending the summit make up the entire Pacific Islands Forum membership, excepting the three countries with diplomatic ties to Taiwan, the two France-aligned nations, Australia and New Zealand.