As cranes dotted skylines across Nairobi, Colombo, and Karachi in 2013, China’s vast Belt and Road Initiative (BRI) had sprung into full velocity. Pouring over $1 trillion into developing countries symbolized their promise to rewrite the global economic map. However, today, those exact cranes remain inactive. The dozens of lower-middle-income nations that had once received the steady flow of Chinese money have reversed their role, as repayments now outpace new loans.
Rather than stand as the epicenter of developmental finance, China has metamorphosed into the most influential debt collector. In 2024 alone, the developing nations that China previously financed paid $3.9 billion more than they borrowed, marking the first time in two decades that Beijing’s financial footprint turned negative. This transition signals China’s recent shortcomings and internal struggles, as well as the reshaping of “revitalizing” debt markets and geopolitical order within the Global South.
Credit to Collection
In previous years, China was unrivaled in its role as a banker to the developing world. At the BRI’s height, Beijing disbursed over $90 billion annually in infrastructure financing. Projects resulting from this tremendous inflow of money to countries included seaports in Kenya, highways in Laos, and power grids in Nigeria. However, this initial growth momentum has slowed as repayment now looms over many of these countries. Developing countries now owe China $35 billion in annual debt service, and the poorest 75 nations account for nearly two-thirds of that burden. With the majority of these borrower countries already undergoing their own fiscal concerns (e.g., Zambia, Ethiopia, and Sri Lanka), they have either defaulted or sought restructuring of these deals.
Regardless of action, however, China collects the benefits of extended interest rates and increased dependence. Additionally, because of these relationship shifts, China’s internal banks have switched toward more restrictive lending policies, seeking repayment rather than risk. China is now faltering in its former role as the world’s credit giant.
A key reason for this pullback is due to China’s internal slowdown. Although prior years were built upon double-digit growth in gross domestic product (GDP), the growth rates now fall below 5 percent. With its real estate sector collapsing and government debt reaching a staggering $13 trillion, Beijing has lost its incentive and ability to push for external loans. With 80 percent of Chinese overseas lending going toward financially distressed countries, the new large-scale projects they previously envisioned are simply politically and economically unfeasible. The partnerships that were once displayed between places like Cambodia and Pakistan have seemingly disappeared, with China’s banks opting for internal recovery. Therefore, to address their internal financial needs, Chinese banks have increasingly prioritized repayment and restructuring over new disbursements.
Chinese President Xi Jinping and Kazakhstan’s President Kassym-Jomart Tokayev shake hands during a signing ceremony, ahead of the China-Central Asia Summit in Xian, Shaanxi province | Image Source: Kusak ve Yol
The Fragmentation of Global Finance
The dramatic shift goes beyond weakening China’s leverage; It impacts the global finance ecosystem as a whole. Institutions, including the International Monetary Fund (IMF) and the World Bank, are pressured to fill the finance gap, supporting developing countries where China has pulled back. However, their funding capacity pales in comparison to China’s.
Since 2020, the debt of developing nations has doubled, reaching $70 billion in 2025. The result is an increase in private creditor ownership, with nearly 40 percent of low-income countries’ external debt claimed by them. Compared to China’s 13 percent, this growing cataclysm has established a fragmented creditor landscape, with increased difficulty in coordination efforts, higher interest rates, and the pressurized negotiations with dozens of competing lenders rather than a single dominant patron.
Between Independence and Instability
This shift represents a double-edged sword for the borrowing nations. Due to the decreased lending from China, they gain a greater degree of independence. The lack of Beijing’s financial pull means smaller economies like Ghana and Laos have an increased capacity to diversify their partnerships through alternative financiers like India, Japan, or the Gulf states. Conversely, there exists a greater threat to immediate development. The previous infrastructure projects that relied heavily upon China’s credit remain stagnant as the budget gap continues to widen. For example, in 2025, Ethiopia’s debt repayments to China exceeded its health and education spending combined. While countries need to increasingly allocate their budget toward climate adaptation, healthcare, and digital infrastructure, the reversal nullifies this opportunity.
China’s Pivot to Soft Power and Strategic Assets
The costs of China’s pivot are equally high. By binding dozens of countries in infrastructure and financial deals, the BRI was the cornerstone of Beijing’s soft power. The goodwill risk, however, is being eroded from the shift from lender to collector. The defaults from Sri Lanka and Zambia have underscored the fragility of China’s lending model, stirring local resentment over alleged “debt-trap” diplomacy. As the non-performing foreign loans strain state-owned banks, Beijing faces the political difficulty of balancing repayment enforcement with international image.
People’s Bank of China struggling to move to a new policy benchmark interest rate replacing the old lending cap | Image Source: South China Morning Post
Ergo, instead of large sovereign loans, China has turned toward equity investments, trade-linked financing, and digital infrastructure partnerships. By building influence through telecommunications, cloud computing, and RMB-denominated trade settlements, Beijing is betting that shaping platforms, standards, and currencies would allow for future long-term growth. Regardless, as China invests in soft power, it risks losing the hard leverage that once made it indispensable to developing nations.
New Contenders in Global Finance
The ramifications of China’s decisions also transform the financial market. At an unprecedented rate, sovereign funds in Africa and the Middle East are emerging as alternatives. In Southeast Asia, Japan, and India, the expansion of infrastructure partnerships is being trialed. Within Latin America, the local banks are stepping up to bridge this gap. Ergo, with so many factors in play, an emerging multipolar finance system will lead to a more competitive and democratic, albeit fragmented, ecosystem. Notably, for the first time in two decades, developing nations are not constrained to a single creditor but are navigating among many.
Yet despite the diversification of credit institutions, the risks of instability associated with this Global Credit Shock remain prevalent. With the billions in Chinese debt continuing to mature, the developing countries that have fragile economies may face cascading defaults. The tightened global environment, paired with the elevated interest rates, could exacerbate fiscal positions. China’s continued insistence on bilateral negotiations may very well determine the next line of global financial stress.
Beyond the Belt and Road
The decline in China’s net lending represents a geopolitical rebalance. The stories of Chinese megaprojects, from the railways across Africa to the power plants in Pakistan, are now facing heavy setbacks. Yet despite these shortcomings, there remain positive outlooks. The developing nations that were once confined to China’s credit systems now have the opportunity to redefine their agency in a more plural global order. This will redefine the very essence of global trade and politics and lead to a less Chinese-dominated credit ecosystem.
The answer to whether this moment will further fragmentation or offer an avenue of freedom is directly dependent on the adaptability and speed of the world’s financial institutions within this post-China model. Though cranes remain stagnant in previously bustling construction sites, a new financial framework is being constructed, shaped by the collective emergence of developing nations themselves.
Featured Image Source: Kusak ve Yol
