China’s Shift from Lender to Debt Collector: A Developing World Dilemma

China has shifted from a net capital provider to the leading debt collector for developing nations, driven by Belt and Road Initiative (BRI) loans maturing from the 2010s. In 2025, 75 low-income countries will repay $22 billion, highlighting repayment pressures. The Lowy Institute’s research underscores China’s dual challenge: recovering debts while facing calls for restructuring. As Western aid retracts, Beijing’s strategic lending persists, especially to resource-rich nations. The shift raises questions about China’s global role and its impact on developing economies.

China has transitioned from being a net capital provider to the leading debt collector for developing nations, according to groundbreaking research by the Australian think tank, the Lowy Institute. This shift reflects the maturation of loans issued during the Belt and Road Initiative (BRI) surge in the 2010s, with repayments now far outpacing new disbursements. The findings shed light on the growing financial pressures faced by developing countries and Beijing’s evolving role in global economics.

Record Debt Repayments in 2025

The research highlights that in 2025, about 75 of the world’s poorest and most vulnerable nations will make record-high debt repayments to China, amounting to USD 22 billion. This is the result of loan commitments made between 2012 and 2018 reaching their repayment peaks. Riley Duke, the author of the report, noted that this repayment crunch period stems from the expiry of loan grace periods that began in the early 2020s.

In 54 out of 120 developing nations with available data, debt-service payments to China now exceed the combined repayments owed to the Paris Club, a bloc of Western bilateral lenders. This underscores the significant influence China has over global financial flows for developing economies.

The Diplomatic and Domestic Dilemma

Duke’s analysis reveals the complex challenges China faces as it balances competing pressures. Domestically, Beijing is under increased strain to recover outstanding debts, particularly from quasi-commercial institutions. Internationally, it faces mounting calls to restructure unsustainable debt, a move that could alleviate financial stress for debtor nations.

“Western aid and trade retrenchment is compounding the difficulties for developing countries while squandering any geopolitical advantage for the West,” Duke explained. The research also pointed to declining multilateral support as Western governments, including the United States and Europe, turn inward. For instance, the U.S. State Department, following orders from the Trump administration, paused foreign aid programs in January to align with a “foreign policy-first” agenda.

Shifts in Global Trade and Lending Dynamics

The Belt and Road Initiative, which aimed to integrate global economies into a China-centric trade network through large-scale infrastructure projects, has entered a new phase. China now describes its projects as “small but beautiful,” while continuing to prioritize strategic and resource-critical partners. Trade data from 2024 shows that BRI participant nations accounted for over 50% of China’s total foreign trade for the first time.

Despite the downturn in lending, China remains the largest bilateral lender for seven of its nine land neighbors, including Laos, Pakistan, and Mongolia. These nations have continued to receive new loans even after China’s broader lending slowdown began in 2018.

Meanwhile, developing countries rich in critical minerals and metals, such as Argentina, Brazil, and Indonesia, have received significant financial support. In 2023 alone, these nations accounted for USD 8 billion, or 36% of China’s total loan disbursements, reflecting Beijing’s strategic focus on securing resources vital for modern technologies like batteries.

The Broader Implications

The report raises important questions about the long-term impact of China’s shift to a debt collector role. How this transition will influence Beijing’s reputation as a development partner and its broader messaging around South-South cooperation remains uncertain.

China’s lending practices have also changed the balance of global financial power. According to World Bank data cited by the Lowy Institute, China accounts for over 30% of all bilateral debt-service payments by developing countries in 2025. In addition, China has transitioned from being a net lender to a net drain on the finances of 60 developing nations by 2023, a sharp rise from just 18 in 2012.

The Lowy Institute’s research paints a complex picture of China’s evolving role in global finance. As Beijing grapples with the challenges of debt collection, its decisions will have profound implications for developing countries, global trade, and international diplomacy. The next few years will determine whether China can balance its domestic and international pressures while maintaining its position as a key global economic player.