cross-posted from: https://lemmy.sdf.org/post/45540940
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China’s ambitious Belt and Road Initiative (BRI) is now mired in a mounting debt crisis, threatening the foundations of Beijing’s flagship global strategy. Infrastructure projects across Southeast Asia and Africa, financed by Chinese capital, are struggling even to meet interest payments, pushing China’s outstanding overseas debt past $1 trillion. Experts warn that if China’s loan-based diplomacy falters alongside the United States’ retreat from international aid, the global development finance system could face systemic disruption.
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Launched in 2013 under President Xi Jinping, the Belt and Road Initiative sought to build a “New Silk Road” through highways, railways, ports, dams, and power plants across the developing world. More than 140 countries across Asia, Europe, and Africa have joined. In its early phase, China—through institutions like the CDB—was seen as a generous financier, offering loans without stringent conditions on governance or human rights. Yet uncontrolled lending has since fueled debt explosions in many nations, reviving allegations of Beijing’s “debt-trap diplomacy.”
Developing nations now owe China at least $1.1 trillion in outstanding obligations. Sri Lanka’s Hambantota Port and Kenya’s Standard Gauge Railway have become symbols of unsustainable debt and opaque lease agreements, while Zambia and Ghana both defaulted in 2020. Twelve African nations, including Kenya, are currently facing similar debt distress. Kenya’s so-called “Railway to Nowhere”—abandoned mid-construction in a cornfield after Chinese funding dried up—has come to epitomize the perils of overreliance on Beijing’s credit.
China’s own financial vulnerabilities are deepening. According to the International Monetary Fund (IMF), the country’s total social financing reached 309% of GDP in the first half of this year, a 6-point jump in just six months. The IMF noted that over half of the global debt-to-GDP increase since 2008 originated from China. Meanwhile, Beijing’s strategic alliances are weakening: Russia, a key BRI partner, has seen its national capacity eroded by the prolonged war in Ukraine. Chinese Foreign Minister Wang Yi recently acknowledged that “a Russian defeat would shift America’s strategic focus directly onto China,” underscoring Beijing’s growing diplomatic and security dilemma.
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