5 countries that have more Chinese debt

The Top 5 Debtors: Unpacking China's Loan Landscape

China has emerged as a major creditor to countries across the globe. This has led to a complex web of financial relationships, with some nations holding significantly higher debt to China than others. Here's a look at the top 5 countries with the most Chinese debt, exploring the reasons behind the borrowing, potential challenges, and recent developments:

Pakistan: Clocking in at the top with an estimated $27.4 billion in external debt to China, Pakistan has a long history of economic cooperation with its neighbor. Much of this debt is linked to the China-Pakistan Economic Corridor (CPEC), a massive infrastructure development project under China's Belt and Road Initiative (BRI). While CPEC promises economic growth and regional connectivity, concerns exist regarding Pakistan's ability to manage the debt burden. In February 2024, China extended the maturity of a $2 billion loan, providing some breathing room [1].

Angola: Coming in second with roughly $22 billion in Chinese debt, Angola's story is one of resource-backed lending. China has provided loans to Angola in exchange for access to its vast oil reserves. This can provide a steady stream of revenue for China but raises concerns about Angola's long-term economic diversification. In March 2024, Angola negotiated a lower monthly debt payment with its biggest Chinese creditor, highlighting ongoing discussions about managing the debt [1].

Ethiopia: Ethiopia, with approximately $7.4 billion owed to China, exemplifies China's focus on infrastructure development in Africa. Loans have been used to finance projects like the Addis Ababa-Djibouti Railway, a crucial trade artery for Ethiopia. However, concerns remain about the project's profitability and Ethiopia's capacity to repay the debt.

Kenya: Similar to Ethiopia, Kenya holds around $7.4 billion in Chinese debt, primarily used for infrastructure projects like the standard gauge railway connecting Mombasa to Nairobi. While these projects aim to boost trade and economic activity, questions linger about the long-term sustainability of the debt and potential for corruption within these large-scale endeavors.

Sri Lanka: Rounding out the top 5 is Sri Lanka, with an estimated $7.2 billion debt to China. A significant portion of this debt is linked to the Hambantota port development project. However, the project's profitability has fallen short of expectations, leading to Sri Lanka struggling to repay its debts. In recent years, Sri Lanka has engaged in debt restructuring talks with China, highlighting the complexities of managing these large loans [2].

Beyond the Numbers: Debt-to-GDP Ratio and "Debt-Trap Diplomacy"

While the raw dollar figures paint a picture, a more nuanced analysis considers the debt-to-GDP ratio. This metric shows the debt as a percentage of a country's total economic output. Countries with high debt-to-GDP ratios are more vulnerable to economic shocks and may struggle to repay their loans.

Djibouti and Laos, for example, may not have the highest raw debt figures, but their debt-to-GDP ratios are concerningly high. Djibouti owes over 80% of its GDP to China, raising concerns about potential "debt-trap diplomacy," a term used to describe a situation where a country becomes overly reliant on a creditor and may be forced to cede political or economic leverage in exchange for debt relief.

Looking Ahead: Debt Management and Geopolitical Implications

The issue of Chinese debt is complex and multifaceted. While loans can finance much-needed infrastructure and development, concerns exist regarding debt sustainability, potential for corruption, and the influence China may wield as a creditor.

Several trends are worth noting:

Debt Restructuring: Several countries are already engaged in discussions with China to restructure their debt or extend repayment periods. This highlights the need for flexible arrangements and ongoing communication.

Transparency and Accountability: Concerns about opaque loan terms and potential for corruption necessitate greater transparency in loan agreements and project development.

Economic Diversification: Borrowing countries need to focus on diversifying their economies to reduce dependence on specific sectors or resources to generate income for debt repayment.

The issue of Chinese debt is not merely an economic one. It has geopolitical implications as well. As China's economic influence grows, its relationship with debtor countries will be closely watched. Striking a balance between promoting development and ensuring responsible lending practices will be crucial as this financial landscape continues to evolve.

Note: It's important to acknowledge that data on Chinese debt can be challenging to obtain. Some lending arrangements may not be publicly disclosed, making a complete picture difficult to achieve.