China’s Debt Trap: The Dark Side of the Belt and Road Initiative

I sat across from a Sri Lankan port worker who said to me, “We built the port, but now we don’t own it.” That moment stayed with me. It perfectly summed up the disillusionment that many countries feel about China’s Belt and Road Initiative (BRI)—a program once hailed as the dawn of a new economic era. What began as a symbol of hope now stands accused of exporting debt, seizing assets, and shifting the balance of global influence—one infrastructure deal at a time.

A Vision That Captured the World’s Imagination

Launched in 2013 by President Xi Jinping, the Belt and Road Initiative promised to restore the ancient Silk Road and connect China to the world through a vast network of infrastructure projects. Ports, highways, rail lines, energy grids, and industrial parks would stretch from East Asia through Africa and Europe.

China marketed the BRI as a development partnership. For countries struggling with outdated infrastructure, poor connectivity, and lack of foreign investment, it sounded like a lifeline. Leaders in over 140 countries signed memoranda of understanding with Beijing, welcoming Chinese capital and expertise.

According to the China Global Investment Tracker by the American Enterprise Institute, Chinese companies invested or contracted over $1.2 trillion across BRI countries between 2013 and 2022. These figures surpassed anything offered by Western lenders. The promise was seductive: rapid infrastructure growth, job creation, improved logistics, and higher trade volumes.

But behind the curtain of development, a darker reality started to emerge.

Also Read: China’s Trillion Dollar Mistake: The BRI Disaster No One Talks About

The Financial Trap Behind the Infrastructure Boom

Most BRI projects weren’t financed through grants. They were structured as sovereign loans, often issued by Chinese policy banks like the Export-Import Bank of China or the China Development Bank. These loans carried commercial interest rates—between 2 to 5 percent—significantly higher than the concessional rates offered by institutions like the World Bank.

Unlike multilateral loans, which demand rigorous feasibility studies, environmental assessments, and public transparency, many BRI deals were shrouded in secrecy. Local parliaments had little input. In several cases, contracts included confidentiality clauses that prevented public disclosure.

The terms often favored Chinese companies, with project execution awarded directly to Chinese state-owned enterprises (SOEs). These SOEs imported labor, materials, and technology from China, leaving little benefit for local economies. Host nations bore the financial risk, while China maintained strategic and economic leverage.

Between 2013 and 2021, over 42 developing nations took on Chinese debt that now exceeds 10% of their GDP, according to a report by AidData. In some cases, the debt was as high as 20 to 30%, leaving countries in a financial chokehold.

Sri Lanka’s Port: The Turning Point

No case illustrates this shift better than Sri Lanka.

In 2007, Sri Lanka agreed to borrow $1.3 billion from China to build the Hambantota Port. The government believed the port would become a strategic trade hub along the Indian Ocean. But poor location planning and lack of commercial viability led to minimal revenue generation.

By 2017, unable to repay the debt, Sri Lanka handed over the port to China Merchant Port Holdings on a 99-year lease. This deal marked a turning point in global perception. It wasn’t just an economic loss; it was a sovereign compromise. Hambantota became the face of “debt-trap diplomacy”—a term now widely associated with China’s foreign policy strategy.

Pakistan: The Strained Dreams of CPEC

China’s most ambitious BRI investment lies in Pakistan, through the China-Pakistan Economic Corridor (CPEC). Valued at over $62 billion, CPEC was envisioned to transform Pakistan’s infrastructure and energy sectors, connecting the port of Gwadar to China’s Xinjiang province through highways, pipelines, and railways.

But the ground reality paints a troubled picture.

• Many power projects are over budget and delayed.
• The Gwadar port remains underdeveloped and underused.
• Local communities have protested against land acquisition, water shortages, and lack of local employment.
• Security threats in Balochistan have slowed progress and driven up costs.

Pakistan’s external debt to China has ballooned. According to the State Bank of Pakistan, liabilities to China stood at $27.4 billion by 2023. With falling foreign reserves and economic instability, Islamabad is struggling to repay interest, let alone principal amounts.

CPEC now represents not prosperity, but rising inflation, political instability, and waning public support.

Kenya: Rail Dreams Derailed

Kenya’s Standard Gauge Railway (SGR) project was funded with $4.7 billion in loans from China’s Exim Bank. It was billed as a modern railway linking Nairobi to Mombasa and, eventually, to Uganda and beyond.

But the line failed to generate expected revenues. In 2020, Kenya was forced to use tax funds to repay its debts. Investigations by Africa Uncensored and Reuters revealed that the Mombasa Port was used as collateral, putting it at risk of Chinese control in case of default.

The SGR’s operating costs far exceed its income, and questions linger over inflated construction prices and questionable procurement processes. Instead of economic uplift, the railway has become a symbol of lopsided contracts and financial risk.

Other Nations, Same Pattern

• Zambia owes over $6 billion to China and has faced energy shortages and stalled road projects.
• Laos borrowed over $5.9 billion for a high-speed rail line to China, locking itself into long-term repayments despite low projected returns.
• Montenegro, a small Balkan nation, borrowed $1 billion for a single stretch of highway that remains incomplete due to financial shortfalls.

In many of these cases, projects were over-engineered, misaligned with local needs, or plagued by corruption and poor planning.

The Global Pushback: A Shift in Strategy

Countries are no longer silent. Italy, the only G7 nation to join the BRI, officially exited the agreement in 2023, citing limited trade benefits and growing geopolitical pressure. Malaysia renegotiated the East Coast Rail Link, slashing project costs by nearly 30%.

Even China has started to recalibrate. According to the Boston University Global Development Policy Center, Chinese overseas lending peaked in 2016 and has declined sharply since. Several BRI projects have been quietly paused or restructured.

In response, the United States, Japan, and the EU are promoting alternative development models:

• Build Back Better World (B3W) by the G7
• Global Gateway by the EU
• Partnership for Global Infrastructure and Investment (PGII)

These programs offer transparent, accountable funding and emphasize labor rights, environmental standards, and local participation—areas where BRI often fell short.

What Lies Ahead for the Belt and Road?

The future of the BRI now hangs in balance. Some projects may still deliver benefits. Roads have been built. Ports have opened. Energy grids have improved. But the central question persists: Were these gains worth the financial, political, and strategic costs?

As countries reassess their involvement, trust in China’s model of development has eroded. What was once perceived as global cooperation now feels like structured dependency. The narrative has shifted—from one of growth to one of caution.

I’ve stood at construction sites built with BRI money, watched cranes move steel across foreign soil, and listened to locals question who truly owns the future. It’s no longer just a story about money. It’s about identity, power, and sovereignty.

Also Read: Tokyo Resilience Project Explained: $100 Billion Survival Plan

Final Thought

Was the Belt and Road Initiative ever about shared prosperity? Or was it always a well-calculated expansion of influence cloaked in concrete and steel?

You have to ask yourself: who benefits when the debts pile up, the ports change hands, and the promises fade?

The answer is no longer hidden behind glossy brochures or diplomatic speeches. It’s written in the contracts, felt in the streets, and now—finally—spoken aloud by those who once believed they were building the future.