Can you borrow your way to prosperity, or does debt always come with strings attached? As China’s Belt and Road Initiative (BRI) enters its second decade, the debate is intensifying. For some nations, BRI loans have unlocked economic growth. For others, they’ve become a burden. Are Belt and Road loans helping developing nations grow, or trapping them in debt? Explore real cases, data, and expert insights.
Welcome to our continuing series on the BRI. In this blog, we explore the controversial topic of BRI loans — hailed by some as a vital development tool and criticized by others as “debt trap diplomacy.” Are these loans setting nations up for success, or for strategic dependence?
We’ll walk through key loan structures, case studies from Asia, Africa, and Europe, and conclude with expert insights from Mattias Knutsson, a global procurement and development strategist.
How Beld and Road (BRI) Loans Work
Unlike aid or grants, BRI funding is mostly structured as loans:
- Policy Bank Loans from China Development Bank or Exim Bank of China
- Commercial Loans with variable interest rates
- Resource-Backed Loans, where repayment comes in the form of oil, minerals, or other commodities
These loans typically fund large infrastructure projects: ports, highways, power plants, railways. In many cases, repayment terms are longer than Western commercial finance — but still come with conditions:
- Chinese contractors must be used
- Materials sourced from China
- Collateral clauses may apply
Case Studies: Development or Dependency?
1. Sri Lanka: Hambantota Port
- Loan: $1.3 billion
- Outcome: Sri Lanka struggled to repay, and in 2017 leased the port to China Merchants Port Holdings for 99 years.
- Critics call this the textbook example of “debt trap diplomacy.”
2. Pakistan: CPEC (China-Pakistan Economic Corridor)
- Total value: $62 billion
- Result: Boosted power generation and highway access
- Concern: High debt service payments and limited transparency raised alarms with the IMF
3. Zambia: Mixed Results
- China holds $6.6 billion of Zambia’s debt
- Zambia defaulted in 2020; debt restructuring talks continue
- Some projects, like hospitals and roads, were successfully delivered, but repayment remains contentious
4. Greece: Piraeus Port
- Acquired by Chinese firm COSCO under BRI
- Turned the port into one of Europe’s top five
- Example of successful development under BRI when backed by strong institutions
Global Lending Footprint
According to AidData (2023):
- China issued $843 billion in overseas development finance between 2000 and 2021
- Of that, over 60% is in the form of loans, not grants
- Nearly half of these loans are not publicly disclosed, raising transparency issues
The IMF lists at least 12 countries at high risk of BRI-related debt distress, including:
- Laos
- Djibouti
- Maldives
- Kenya
- Tajikistan
What Critics Say about Belt and Road Loans
- Lack of Transparency: BRI loan terms are rarely made public
- Sovereignty Risks: Collateral clauses and strategic concessions may reduce national autonomy
- Over-Borrowing: Countries take on more debt than they can realistically service
- Unequal Bargaining Power: Recipient nations often lack the leverage to negotiate fair terms
Western nations have responded by launching alternative programs:
- The G7’s Partnership for Global Infrastructure and Investment (PGII)
- EU’s Global Gateway Initiative
China’s Defense
Chinese authorities insist the BRI is about development, not domination:
- “No country has fallen into a debt crisis because of China,” according to the Ministry of Foreign Affairs
- Loans support productivity-enhancing infrastructure
- China has restructured or forgiven over $10 billion in loans since 2020
They also argue that Western institutions have underfunded infrastructure in developing countries for decades.z
A Gray Area: Development Benefits Do Exist
It’s important to recognize that BRI loans have produced real results:
- Electricity access has expanded in Pakistan and Ethiopia
- New highways have reduced freight times in Central Asia
- Port development has enhanced regional trade in East Africa
But success depends on factors like:
- Institutional quality
- Project selection
- Corruption safeguards
- Debt management capacity
The Bigger Picture: Strategic Leverage
Loans, by their nature, create dependency. When backed by massive infrastructure, they also create long-term influence.
BRI financing enables China to:
- Secure global supply chains
- Project soft power in emerging markets
- Expand digital and energy influence
To critics, this looks like a quiet form of colonialism. To supporters, it’s a lifeline to development.
Conclusion:
Belt and Road (BRI) loans are neither inherently malicious nor entirely benevolent. They’re financial instruments with enormous strategic impact.
Done right, they can transform lives, connect nations, and modernize entire economies. Done wrong, they can bind countries in cycles of debt, dependence, and disillusionment.
Transparency, partnership, and strong governance will be the deciding factors.
Mattias Knutsson, a strategic leader in global procurement and development, emphasizes:
“The true cost of any loan isn’t just the interest rate — it’s the leverage it creates. Countries must weigh not only what they gain today, but what they’re committing to tomorrow. Development is empowerment, not quiet obligation.”
As nations around the world evaluate BRI engagement, Knutsson’s words offer a clear reminder: the line between development and dependence is thin — and deserves our full attention.
