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Qatar Tribune
a day ago
- Business
- Qatar Tribune
Developing nations face ‘tidal wave' of China debt: Report
Agencies The world's poorest nations face a 'tidal wave of debt' as repayments to China hit record highs in 2025, an Australian think-tank warned in a new report Tuesday. China's Belt and Road Initiative lending spree of the 2010s has paid for shipping ports, railways, roads and more from the deserts of Africa to the tropical South Pacific. But new lending is drying up, according to Australia's Lowy Institute, and is now outweighed by the debts that developing countries must pay back. 'Developing countries are grappling with a tidal wave of debt repayments and interest costs to China,' researcher Riley Duke said. 'Now, and for the rest of this decade, China will be more debt collector than banker to the developing world.' Beijing's foreign ministry said it was 'not aware of the specifics' of the report but that 'China's investment and financing cooperation with developing countries abides by international conventions'. Ministry spokeswoman Mao Ning said 'a small number of countries' sought to blame Beijing for miring developing nations in debt but that 'falsehoods cannot cover up the truth'. The Lowy Institute sifted through World Bank data to calculate developing nations' repayment obligations. It found that the poorest 75 countries were set to make 'record high debt repayments' to China in 2025 of a combined US$22 billion. 'As a result, China's net lending position has shifted rapidly,' Duke said. 'Moving from being a net provider of financing—where it lent more than it received in repayments—to a net drain, with repayments now exceeding loan disbursements.' Paying off debts was starting to jeopardize spending on hospitals, schools, and climate change, the Lowy report found. 'Pressure from Chinese state lending, along with surging repayments to a range of international private creditors, is putting enormous financial strain on developing economies.' The report also raised questions about whether China could seek to parlay these debts for 'geopolitical leverage', especially after the United States slashed foreign aid. While Chinese lending was falling almost across the board, the report said there were two areas that seemed to be bucking the trend. The first was in nations such as Honduras and Solomon Islands, which received massive new loans after switching diplomatic recognition from Taiwan to China. The other was in countries such as Indonesia or Brazil, where China has signed new loan deals to secure battery metals or other critical minerals.
Kuwait Times
3 days ago
- Business
- Kuwait Times
Developing nations face ‘tidal wave' of China debt: Report
QINGZHOU: An employee works on a tractor assembly line at a factory in Qingzhou, in eastern China's Shandong province on May 27, 2025. – AFP SYDNEY: The world's poorest nations face a 'tidal wave of debt' as repayments to China hit record highs in 2025, an Australian think-tank warned in a new report Tuesday. China's Belt and Road Initiative lending spree of the 2010s has paid for shipping ports, railways, roads and more from the deserts of Africa to the tropical South Pacific. But new lending is drying up, according to Australia's Lowy Institute, and is now outweighed by the debts that developing countries must pay back. 'Developing countries are grappling with a tidal wave of debt repayments and interest costs to China,' researcher Riley Duke said. 'Now, and for the rest of this decade, China will be more debt collector than banker to the developing world.' Beijing's foreign ministry said it was 'not aware of the specifics' of the report but that 'China's investment and financing cooperation with developing countries abides by international conventions'. Ministry spokeswoman Mao Ning said 'a small number of countries' sought to blame Beijing for miring developing nations in debt but that 'falsehoods cannot cover up the truth'. The Lowy Institute sifted through World Bank data to calculate developing nations' repayment obligations. It found that the poorest 75 countries were set to make 'record high debt repayments' to China in 2025 of a combined US$22 billion. 'As a result, China's net lending position has shifted rapidly,' Duke said. 'Moving from being a net provider of financing—where it lent more than it received in repayments—to a net drain, with repayments now exceeding loan disbursements.' Paying off debts was starting to jeopardize spending on hospitals, schools, and climate change, the Lowy report found. 'Pressure from Chinese state lending, along with surging repayments to a range of international private creditors, is putting enormous financial strain on developing economies.' The report also raised questions about whether China could seek to parlay these debts for 'geopolitical leverage', especially after the United States slashed foreign aid. While Chinese lending was falling almost across the board, the report said there were two areas that seemed to be bucking the trend. The first was in nations such as Honduras and Solomon Islands, which received massive new loans after switching diplomatic recognition from Taiwan to China. The other was in countries such as Indonesia or Brazil, where China has signed new loan deals to secure battery metals or other critical minerals. - AFP
Al Jazeera
3 days ago
- Business
- Al Jazeera
‘Tidal wave': How 75 nations face Chinese debt crisis in 2025
Many of the world's poorest countries are due to make record debt repayments to China in 2025 on loans extended a decade ago, at the peak of Beijing's Belt and Road Initiative, a report by the Sydney-based Lowy Institute think tank has found. Under the Belt and Road Initiative (BRI), a state-backed infrastructure investment programme launched in 2013, Beijing lent billions of dollars to build ports, highways and railroads to connect Asia, Africa and the Americas. But new lending is drying up. In 2025, debt repayments owed to China by developing countries will amount to $35bn. Of that, $22bn is set to be paid by 75 of the world's poorest countries, putting health and education spending at risk, Lowy concluded. 'For the rest of this decade, China will be more debt collector than banker to the developing world,' said Riley Duke, the report's author. 'Developing countries are grappling with a tidal wave of debt repayments and interest costs to China,' Duke said. China's BRI, the biggest multilateral development programme ever undertaken by a single country, is one of President Xi Jinping's hallmark foreign policy initiatives. It focuses primarily on developing country infrastructure projects like power plants, roads and ports, which struggle to receive financial backing from Western financial institutions. The BRI has turned China into the largest global supplier of bilateral loans, peaking at about $50bn in 2016 – more than all Western creditors combined. According to the Lowy report, however, paying off these debts is now jeopardising public spending. 'Pressure from Chinese state lending, along with surging repayments to a range of international private creditors, is putting enormous financial strain on developing economies.' High debt servicing costs can suffocate spending on public services like education and healthcare, and limit their ability to respond to economic and climate shocks. The 46 least developed countries (LDCs) spent a significant share – about 20 percent – of their tax revenues on external public debt in 2023. Lowy's report implies this will increase even more this year. For context, Germany used 8.4 percent of its budget to repay debt in 2023. Lowy also raised questions about whether China will use these debts for 'geopolitical leverage' in the Global South, especially with Washington slashing foreign aid under President Donald Trump. 'As Beijing shifts into the role of debt collector, Western governments remain internally focused, with aid declining and multilateral support waning,' the report said. While Chinese lending is also beginning to slow down across the developing world, the report said there were two areas that seemed to be bucking the trend. The first was in nations such as Honduras, Burkina Faso and Solomon Islands, which received massive new loans after switching diplomatic recognition from Taiwan to China. The other was in countries such as Indonesia and Brazil, where China has signed new loan deals to secure critical minerals and metals for electric batteries. Beijing's Ministry of Foreign Affairs said it was 'not aware of the specifics' of the report but that 'China's investment and financing cooperation with developing countries abides by international conventions'. Ministry spokesperson Mao Ning said 'a small number of countries' sought to blame Beijing for miring developing nations in debt but that 'falsehoods cannot cover up the truth'. For years, the BRI has been criticised by Western commentators as a way for Beijing to entrap countries with unserviceable debt. An often-cited example is the Hambantota port – located along vital east-west international shipping routes – in southern Sri Lanka. Unable to repay a $1.4bn loan for the port's construction, Colombo was forced to lease the facility to a Chinese firm for 99 years in 2017. China's government has denied accusations it deliberately creates debt traps, and recipient nations have also pushed back, saying China was often a more reliable partner than the West and offered crucial loans when others refused. Still, China publishes little data on its BRI scheme, and the Lowy Institute said its estimates, based on World Bank data, may underestimate the full scale of China's lending. In 2021, AidData – a US-based international development research lab – estimated that China was owed a 'hidden debt' of about $385bn. Challenging the 'debt-trap' narrative, the Rhodium consulting group looked at 38 Chinese debt renegotiations with 24 developing countries in 2019 and concluded that Beijing's leverage was limited, with many of the renegotiations resolved in favour of the borrower. According to Rhodium, developing countries had restructured roughly $50bn of Chinese loans in the decade before its 2019 study was published, with loan extensions, cheaper financing and debt forgiveness the most frequent outcomes. Elsewhere, a 2020 study by the China Africa Research Initiative at Johns Hopkins University found that, between 2000 and 2019, China cancelled $3.4bn of debt in Africa and a further $15bn was refinanced. No assets were seized. Meanwhile, many developing countries remain in hock to Western institutions. In 2022, the Debt Justice Group estimated that African governments owed three times more to private financial groups than to China, charging double the interest in the process. 'Developing country debt to China is less than what is owed to both private bondholders and multilateral development banks (MDBs),' says Kevin Gallagher, director of the Boston University Global Development Policy Center. 'So, Lowy's focus on China lacks context. The truth is, even if you remove China from the creditor picture, lots of poor countries would still be in debt distress,' Gallagher told Al Jazeera. Following the COVID-19 pandemic and Russia's invasion of Ukraine, inflation prompted the United States Federal Reserve, as well as other leading central banks, to hike interest rates. Attracted to higher yields in the US, investors withdrew their funds from developing country financial assets, raising yield costs and depreciating currencies. Debt repayment costs soared. Global interest rates have since come down slightly. But according to the UN, developing country borrowing costs are, on average, two to four times higher than in the US and six to 12 times higher than in Germany. 'A crucial aspect about Chinese lending,' said Gallagher, 'is that it tends to be long-term and growth enhancing. That's precisely why a lot of it is focused on infrastructure investment. Western lenders tend to get in and out faster and charge higher rates.'
RNZ News
3 days ago
- Business
- RNZ News
Lowy report finds Pacific nations 'grappling with a tidal wave of debt repayments' to China
By foreign affairs reporter Stephen Dziedzic , ABC China has lent money to Vanuatu financing new roads for its outer islands. Photo: Facebook / China Civil Engineering Construction Corporation In short: What's next? New research shows that China has emerged as the world's largest creditor for developing nations, which are due to pay back at least $54 billion to Beijing this year. Australian foreign policy think tank the Lowy Institute has crunched data from the World Bank and found some of the world's poorest countries are now facing "record high debt payments" to China . China rapidly boosted investments in infrastructure last decade, funding railways, ports and roads across the developing world under its sprawling Belt and Road Initiative - projects which have often been welcomed by governments across Latin America, Africa, Central Asia and South-East Asia. But the lending has also placed pressure on government balance sheets around the world. Beijing has sharply pulled back lending in the last five to 10 years, but the Lowy Institute's Riley Duke said bills from earlier loans were now starting to land. "China's earlier lending boom, combined with the structure of its loans, made a surge in debt servicing costs inevitable," 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." The problem has been exacerbated by China's move to defer debt repayments during the Covid-19 pandemic, a move which was "helpful at the time" but is now "heightening…the current repayment spike". The picture painted by the report is incomplete, because China typically does not provide data for its loans, and information isn't available for many developed nations. But Duke said it was obvious that developing countries - including in the Pacific - were now "grappling with a tidal wave of debt repayments and interest costs". "Now, and for the rest of this decade, China will be more debt collector than banker to the developing world," he said. "The high debt burden facing developing countries will hamper poverty reduction and slow development progress while stoking economic and political instability risks." Six people were killed and much of the central business district of Tonga's capital Nukuʻalofa was destroyed in the 2006 riots. Photo: ABC / Supplied Pacific nations like Tonga, Samoa and Vanuatu are already grappling with high levels of Chinese debt, and have been pushing Beijing for extensions on their loans . For example, Tonga borrowed heavily from China to rebuild in the wake of the devastating 2006 riots in Nuku'alofa . It has now started gradually repaying loans worth around $190 million - a sum which Lowy says is roughly equivalent to a quarter of its GDP. But those repayments - along with recent natural disasters - have placed significant strain on Tonga's budget, as well as stoking political controversy in the Pacific Island nation. Australia has stepped in with significant financial support to help Tonga balance its books, including an $85m budget support package unveiled earlier this year . The report says that while Chinese institutions are at times willing to push back repayment demands , they've typically been unwilling to forgive debts - which means Beijing often faces a difficult diplomatic balancing act. "Beijing faces a dilemma: pushing too hard for repayment could damage bilateral ties and undermine its diplomatic goals," Duke said. "At the same time, China's lending arms, particularly its quasi-commercial institutions, face mounting pressure to recover outstanding debts." The report said Beijing's preference to kick the can down the road could create new financial dynamics in a host of developing countries. "As a result, China's approach to debt distress increasingly echoes the 'extend and pretend' practices of Western lenders during the 1980s Lost Decade - a period that left many low-income countries deeply indebted and ultimately required sweeping restructurings and write-downs in the 1990s." China's foreign ministry denied Beijing was responsible for developing debt. "China's cooperation on investment and financing with developing countries follows international practice, market principles, and the principle of debt sustainability," spokesperson Mao Ning told reporters on Tuesday, local time. "A handful of countries are spreading the narrative that China is responsible for these countries' debt. "However, they ignore the fact that multilateral financial institutions and commercial creditors from developed countries are the main creditors of developing countries, and the primary source of debt repayment pressure. Lies cannot cover truth and people can tell right from wrong." - ABC
Malay Mail
3 days ago
- Business
- Malay Mail
From lender to collector, China's US$22b Belt and Road loans are coming home to roost
SYDNEY, May 28 — The world's poorest nations face a 'tidal wave of debt' as repayments to China hit record highs in 2025, an Australian think tank warned yesterday in a new report. China's Belt and Road Initiative lending spree of the 2010s has paid for shipping ports, railways, roads and more from the deserts of Africa to the tropical South Pacific. But new lending is drying up, according to Australia's Lowy Institute, and is now outweighed by the debts that developing countries must pay back. 'Developing countries are grappling with a tidal wave of debt repayments and interest costs to China,' researcher Riley Duke said. 'Now, and for the rest of this decade, China will be more debt collector than banker to the developing world.' The Lowy Institute sifted through World Bank data to calculate developing nations' repayment obligations. It found that the poorest 75 countries were set to make 'record high debt repayments' to China in 2025 of a combined US$22 billion (RM92.5 billion). 'As a result, China's net lending position has shifted rapidly,' Duke said. 'Moving from being a net provider of financing — where it lent more than it received in repayments — to a net drain, with repayments now exceeding loan disbursements.' Paying off debts was starting to jeopardise spending on hospitals, schools, and climate change, the Lowy report found. 'Pressure from Chinese state lending, along with surging repayments to a range of international private creditors, is putting enormous financial strain on developing economies.' The report also raised questions about whether China could seek to parlay these debts for 'geopolitical leverage', especially after the United States slashed foreign aid. While Chinese lending was falling almost across the board, the report said there were two areas that seemed to be bucking the trend. The first was in nations such as Honduras and Solomon Islands, which received massive new loans after switching diplomatic recognition from Taiwan to China. The other was in countries such as Indonesia or Brazil, where China has signed new loan deals to secure battery metals or other critical minerals. — AFP
