From Pakistan Rs 2.1 lakh Cr To Sri Lanka Rs 74k Cr: Top 10 Countries In Debt To China

China has experienced remarkable economic growth in the past twenty years, with its annual gross national income rising by an average of over 13%. This growth has positioned China in a unique position concerning international debt. On one hand, it stands as the largest lender to Low and Middle-Income Countries (LMICs), yet on the other hand, it is also the biggest borrower within the same group.

From 2012 to 2022, China received around 40% of the total net financial inflows to LMICs, as reported in Yahoo Finance. During this period, external creditors pumped a total of $4 trillion into China, with 32% of this amount contributing to debt, and the remaining 68% coming in as equity inflows, including portfolio equity and foreign direct investment.

Conversely, China emerged as the primary creditor to LMICs, with the collective external debt owed to China by these countries reaching $180 billion in 2022. A significant portion of this debt financed large-scale infrastructure projects and extractive industries in African nations, which accounted for 44% of the total LMIC debt to China.

Additionally, in South Asia, the debt owed to China surged nearly sevenfold from $6.4 billion in 2012 to $42.9 billion in 2022, with Pakistan alone responsible for two-thirds of this increase. According to reports, China predominantly directs its lending towards three key areas: oil-producing nations, mineral-rich countries in Sub-Saharan Africa, and neighbouring countries participating in China's Belt and Road Initiative.

China Currency | Photo: Reuters

In the world of global economics, debt plays a significant role in shaping the financial landscape between countries. One major player in this dynamic is China, a country known for its strategic investments and lending practices across the globe. As of 2022, several nations find themselves indebted to China, with significant sums owed in external debt. Let's take a closer look at the top 10 countries with the highest debt to China, based on data from the World Bank via Yahoo Finance.

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Pakistan:

At the top of the list is Pakistan, which owes a massive $26.6 billion (Over Rs 2.1 lakh Crore) to China. Over the years, China has invested heavily in Pakistan's infrastructure, including the development of ports, roads, and energy projects. These investments aim to strengthen economic ties between the two nations and boost Pakistan's development efforts.

Angola:

Following closely behind is Angola, with a debt of $21.0 billion (Approx Rs 2.1 lakh crore) owed to China. Angola, rich in natural resources like oil and diamonds, has relied on Chinese loans to fund its infrastructure projects, such as roads, railways, and housing developments. However, the country's economy has faced challenges due to fluctuations in commodity prices and high debt levels.

Sri Lanka:

With a debt of $8.9 billion (Approx Rs 74,000 crore), Sri Lanka has borrowed significantly from China for various infrastructure projects, including the construction of ports, airports, and highways. These investments are part of China's Belt and Road Initiative, aimed at enhancing connectivity and promoting economic development across Asia and beyond.

Ethiopia:

Ethiopia's debt to China stands at $6.8 billion (Approx Rs 56,000 crore), mainly for financing projects in transportation, telecommunications, and industrial development. According to reports, China invested $13.7 billion in Ethiopia to help improve infrastructure and create employment opportunities, but concerns have been raised about debt sustainability and transparency in project implementation.

Kenya:

Kenya owes China $6.7 billion (Approx Rs 55,000 crore), primarily for financing projects in transportation, energy, and manufacturing. Chinese-funded initiatives such as the Standard Gauge Railway have played a crucial role in enhancing Kenya's infrastructure and connectivity within East Africa. However, the country faces challenges in managing its debt levels and ensuring the sustainability of Chinese loans.

Bangladesh and Zambia:

Both Bangladesh and Zambia have borrowed $6.1 billion (Approx Rs 50,000 crore) each from China for infrastructure projects, including roads, bridges, and power plants. These investments aim to address critical development needs and stimulate economic growth. However, concerns have been raised about debt sustainability and the terms of Chinese loans in these countries.

Laos:

Laos has accumulated a debt of $5.3 billion (Approx Rs 44,000 crore) to China for investments in hydropower projects, transportation infrastructure, and special economic zones. These projects play a vital role in supporting Laos' economic development and integration into regional markets. However, there are concerns about environmental impacts and debt sustainability associated with Chinese-funded projects.

Egypt:

Egypt's debt to China amounts to $5.2 billion (Approx Rs 43,000 crore), primarily for investments in energy, transportation, and telecommunications infrastructure. These projects aim to modernize Egypt's infrastructure and promote economic growth. However, challenges remain in managing Egypt's debt levels and ensuring the effective implementation of Chinese-funded initiatives.

Nigeria:

Nigeria owes China $4.3 billion (Approx Rs 35,000 crore) for investments in railways, roads, and airports to improve transportation infrastructure and stimulate economic development. Chinese-funded projects such as the Lagos-Ibadan railway have contributed to Nigeria's infrastructure development goals. However, concerns exist about debt sustainability and the impact of Chinese loans on Nigeria's economy.

Ecuador:

Lastly, Ecuador has borrowed $4.1 billion (Approx Rs 34,000 crore) from China for projects ranging from energy infrastructure to transportation. These investments aim to support Ecuador's economic development and enhance its connectivity with neighboring countries. However, challenges persist in managing debt levels and ensuring the effective implementation of Chinese-funded projects.

While Chinese investments have the potential to drive economic growth and infrastructure development in recipient countries, it is essential for these nations to carefully manage their debt levels and ensure transparency and accountability in project implementation to safeguard long-term financial stability and sustainable development.

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