China’s transformation from the world’s leading bilateral lender to its foremost debt collector marks a turning point in its engagement with developing countries, the Lowy Institute (LI) reports. Once the primary provider of capital across much of the world, Beijing now finds itself at the receiving end of record repayments, particularly from some of the world’s poorest and most vulnerable countries.

In 2025 according to the report, developing countries are expected to repay around $35bn to China, with $22bn of this total coming from 75 of the poorest nations – many in East and Central Asia. This marks the highest debt servicing total to China on record, as legacy loans under the Belt and Road Initiative (BRI) are due.

According to recent data cited by LI, Chinese disbursements have dwindled significantly of late, while repayment obligations have soared, in the process transforming Beijing from capital provider to a singular net financial drain on developing country budgets as loan disbursements are now being outstripped by repayments.

Despite the general pullback in lending, though, China continues to finance a number of select and highly strategic partners. These include neighbours such as Pakistan, Kazakhstan and Mongolia in addition to further off resource-rich countries including Argentina, Brazil, the Democratic Republic of Congo in Africa and Indonesia; all key allies in terms of mineral supply seen as essential for battery production.

Financial burden

For many developing nations, these rising debt repayments to China are exerting considerable strain on public finances. The costs, analysts warn, are crowding out essential investments in health, education and climate resilience.

But as China’s influence as a creditor surged rapidly over the last two decades – in 2005, it held less than 5% of the external debt in low-income countries compared to over 40% by 2015 – it has hit a lending peak in excess of $50bn in 2016, lending has in recent year steadily declined, with just $18bn in new loans agreed in 2019 and a continued fall during the pandemic years.

By 2023, China held a dominant position: 26% of external bilateral debt in developing countries and more than half of such debt in the poorest and most vulnerable economies.

The report states that in 54 of 120 countries with available data, debt repayments to China now exceed those owed to the entire Paris Club of Western creditors.

Net lender no more

As a result, the contraction in new Chinese lending has reshaped its role in the global financial stratosphere. Loan commitments have stabilised at around $7bn annually since 2023, back down to levels last seen in the late 2000s. Meanwhile, repayments continue to surge.

While Western lenders provided countercyclical support during the pandemic, China’s lending patterns have been “sharply procyclical” – receding precisely when many countries needed assistance most.

The terms of many Chinese loans, which is typically a three to five year period of grace followed by 15 to 20 year maturities, has seen repayments begin to mount since the early 2020s.

China’s participation in the G20’s Debt Service Suspension Initiative (DSSI) during 2020-21 though did provide temporary relief at the time COVID was spreading, in the process postponing $4.2bn in repayments.

However, this effect was short-lived and these payments are now coming in.

Select lending continues

Not all Chinese lending has ground to a halt though. Strategic and diplomatic considerations still drive new loans, especially in areas linked to the Belt and Road Initiative (BRI) or in regions Taiwan is active as China works to buy its way into the good books of diplomatic allies of Taipei in exchange for infrastructure investments. This has been demonstrated most clearly in loans to Honduras, Nicaragua, the Solomon Islands, Burkina Faso and the Dominican Republic since 2018 when an independence minded government came to power in Taipei.

At present, China also remains the largest bilateral lender to seven of its nine land neighbours for which data is available. These include Laos and Myanmar in Southeast Asia and Kyrgyzstan to the west.

Mineral-rich countries have also continued to attract funds. In 2023 alone, they accounted for 36% of China’s total disbursements over $8bn.

End result

The financial burden on many is becoming increasingly unsustainable, however, as more than half of the world’s poorest countries are now classified by the International Monetary Fund as either in debt distress or at high risk of it.

At the same time, Western powers are retreating from the global aid stage as an increasingly inward-looking United States and preoccupied Europe put the blinkers on.

To this end, while some analysts in Asia in particular have characterised earlier Chinese lending as a form of “debt-trap diplomacy”, evidence remains limited even with clearly defined debt crises in several countries, including Sri Lanka, Laos, DR Congo and Zambia.

In addition, China’s hesitance to embrace debt forgiveness reflects a broader institutional culture according to LI. Those perhaps more aware of Chinese culture on lending to any degree will have attributed this lack of sympathy for debtors as culturally ingrained rather than part of a bigger scheme.

As such, with repayment volumes now eclipsing new lending, China has effectively become the world’s largest bilateral debt collector. The Belt and Road Initiative reached its apex in the mid-2010s and its financial reckoning is being felt now – in the mid-2020s.