China’s rise as a global lender – notably through its Belt and Road Initiative (BRI) – has sparked debate over China’s debt-trap diplomacy. Proponents of the theory argue that Beijing uses oversized loans to coerce host countries into ceding strategic assets or influence. Critics counter that such claims are exaggerated and that China is often a necessary financier when Western funds are unavailable. In reality, Chinese lending (which the U.S. Council on Foreign Relations notes was launched by President Xi Jinping in 2013) spans diverse projects – from ports and railways in Asia and Africa to private investments in developed economies.
This article examines key cases – Sri Lanka’s Hambantota Port, major African infrastructure schemes, and a surprising recent Chinese-led development in Osaka’s Nishinari Ward – to assess how Chinese loans and investments affect recipient sovereignty, economies, and control over infrastructure. We draw on recent analyses and data to gauge whether these examples fit a “debt trap” pattern and how they reflect China’s shifting global strategy.
Hambantota Port, Sri Lanka – Cautionary Tale or Misleading Myth?
The port of Hambantota is often cited as the quintessential “debt-trap” example. In the 2000s, Sri Lanka borrowed roughly $1.4 billion from China’s Exim Bank to build Hambantota Port in an effort to transform a small southern town into a logistics hub. The project faltered; by 2016 the port handled virtually no traffic, and Sri Lanka struggled to repay the Chinese loans. In 2017 Colombo agreed to lease the port to a Chinese state-owned company for 99 years in exchange for relief from the debt. Media and officials (e.g. U.S. politicians) quickly dubbed this a “Chinese takeover.”
However, a closer look suggests a more nuanced picture. Chinese authorities emphasize that no Chinese debt was forgiven and that a SOE simply leased (not bought) the port, providing Sri Lanka with needed foreign exchange. Independent analysts note that Hambantota’s Chinese loans were only a small fraction of Sri Lanka’s total debt – servicing them cost only about 3–5% of Sri Lanka’s annual debt payments. A Chatham House study found it “absurd to claim” Hambantota or Chinese lending caused Sri Lanka’s fiscal crisis, pointing out that Sri Lankan policy decisions and an IMF bailout (which demanded closing loss-making state ventures) were key factors in the port’s fate.
The strategic impact, however, cannot be ignored. Local and regional observers worry that Chinese control of Hambantota (on vital East-West shipping lanes) could have military implications, and protests erupted in Sri Lanka over perceived loss of sovereignty. Sri Lankan leaders insist they won’t allow military use of the port, but the episode has made many developing countries wary of large Chinese infrastructure deals. In sum, Hambantota illustrates both sides: it is a case of a heavy Chinese-funded project going sour and ending up under Chinese operation, yet it also demonstrates that the “trap” narrative may oversimplify complex local politics and economics.
African Infrastructure Projects
China has been Africa’s largest bilateral lender for infrastructure over the past two decades. Between 2000 and 2022, Chinese banks extended roughly $170 billion in loans to African governments for roads, ports, railways, dams and power plants. These projects – from Kenya’s Standard Gauge Railway (linking Mombasa port to Nairobi, built with over $3.6 billion in Chinese loans) to Ethiopia’s Addis Ababa–Djibouti rail line – were often welcomed because Western investors were scarce. China’s Exim and Development Banks financed projects that Western donors or the IMF would not.
Yet the growth in Chinese debt has raised concern about debt sustainability and sovereignty in Africa. For instance, Zambia (once a major Chinese borrower backed by copper revenues) became the first African country to default in 2020, in part due to Chinese loans. Kenya’s new railway has saddled the country with large repayments, making China now Kenya’s biggest bilateral lender. Several other governments (Ghana, Ethiopia, Djibouti, etc.) are also grappling with high repayment burdens. A 2025 Lowy Institute report cited by Al Jazeera predicts that 75 of the poorest countries will need to repay a record $22 billion to China in 2025, endangering education and health budgets.
However, many analysts caution that Africa’s debt woes have multiple causes. African officials often argue China provided loans when others would not. Indeed, studies find that China has sometimes written off or restructured African debt: one survey notes $3.4 billion of African debt cancelled and $15 billion refinanced between 2000–2019, with no reported asset seizures. The debt narrative also ignores the fact that many African nations owe much more to private bondholders or Western banks (often at higher rates) than to China. As one expert points out, even without Chinese creditors, “lots of poor countries would still be in debt distress”.
Today, China is even shifting from lender to debt-collector. Chinese loans to Africa have plunged to near 20-year lows – under $1 billion in 2022 – as Beijing focuses on domestic needs. The trend now is fewer mega-loans and more insistence on repayments, even as China faces economic headwinds at home. Officially, China denies seeking to trap countries, claiming its BRI financing is on market terms and commercially driven. Indeed, Chinese lending often carries longer maturities and lower rates than private debt. Still, the legacy of debt and the perception of dependency linger: critics caution that even if China did not plot a trap, over-reliance on Chinese funding can give Beijing outsized influence over infrastructure and policy.
Nishinari Ward (Osaka) – A New Front?
A striking recent example comes not from the developing world but from urban Japan’s poorest district. Nishinari Ward in Osaka has seen a wave of Chinese private investment that some compare loosely to “Chinese expansion” abroad. Over the last decade Chinese entrepreneurs have poured into Nishinari (long known as a day-laborer and welfare neighborhood) converting old shops into karaoke bars and guesthouses. In 2017, around 40 Chinese business owners announced a plan to turn part of Nishinari into an “Osaka Chinatown”, complete with a Chinese-style gate. Locals fiercely resisted, and the scheme stalled – but Chinese-backed redevelopment continued.
Most recently, through Osaka’s special economic zones, Chinese nationals have been acquiring and renovating entire buildings as short-term rental apartments. A 2025 investigation found that 2,305 of 5,587 city-licensed minpaku (home-sharing) units in Nishinari – about 41% – are operated by Chinese investors. This surge was fueled by a relatively easy “¥5 million investor visa,” enabling many Chinese to live and work there. Longtime residents say the influx has caused noise, waste and congestion problems.
While alarming to Nishinari locals, this case bears little resemblance to traditional debt diplomacy. There were no Chinese state loans or sovereignty transfers: these are private real estate deals. Nonetheless, Nishinari illustrates how Chinese capital and influence now operate globally through diaspora networks and tourism, not just state-to-state loans. It suggests China’s strategy is evolving: in addition to funding foreign governments, Chinese investors are seeking opportunities in developed markets (e.g. Osaka ahead of Expo 2025) and in local neighborhoods abroad. In short, Nishinari shows influence can come through everyday business, creating economic and social dependencies that some commentators liken to a different kind of “soft” expansion.
China’s Debt Trap Diplomacy Strategic Implications: Sovereignty, Economics and Control
These cases highlight recurring themes in China’s overseas engagement. Chinese infrastructure finance typically:
- Builds influence while advancing domestic industry. Loans often require using Chinese contractors and equipment, expanding China’s export industries. In Sri Lanka and Africa alike, many projects were executed by Chinese firms and workers.
- Shifts debt burdens and uses renegotiation leverage. When borrowers struggle, China has sometimes extended new loans or restructured old ones to avoid outright default. Analysts note that “loan extensions, cheaper financing and debt forgiveness” were common in debt renegotiations. In Hambantota’s case, for instance, experts emphasize that Sri Lanka pursued a lease arrangement to manage broader debt, and China did not seize the port out of hand.
- Raises governance questions in recipient countries. Many studies stress that the outcomes of Chinese lending hinge on the decisions of local governments. Poor project appraisal or over-ambitious planning (as in Hambantota) often backfires. Critics argue that some African loans, for example, were “white elephants” financed without clear demand or contingency planning (the Chatham House case studies on Angola and Congo highlight this risk).
- Affects sovereignty and access. The fear of ceding control is real: leasing Hambantota and co-financing ports or bases (e.g. Djibouti hosts a Chinese naval base) feed the narrative of strategic intent. Governments sometimes face domestic backlash over perceived loss of sovereignty (e.g. opposition to Hambantota deals and Nishinari’s Chinatown plan). Even when Chinese intentions are primarily economic, the end effect can tilt the balance of influence in Beijing’s favor.
At the same time, there are positive aspects. Many recipient countries got infrastructure they otherwise could not afford, potentially spurring growth. Chinese officials argue their loans are no more risky than market financing, and often more patient. Observers like Boston University’s Kevin Gallagher note that Chinese debt tends to be “long-term and growth-enhancing,” whereas Western private lenders demand quick returns.
In analyzing China’s evolving strategy, it’s important to recognize nuance. The idea of a deliberate “debt trap diplomacy” remains debated. Al Jazeera reports that studies (e.g. by Rhodium Group) found many Chinese loan restructurings actually benefited borrowers, and no outright asset-grabs occurred. Asian and African officials themselves often contest the “trap” label, noting that China sometimes pressured borrowers to join initiatives like the G20 debt suspension scheme.
Yet strategic patterns are emerging. As China’s state-backed lending wanes and global expansion falters, Beijing appears to leverage existing influence (collected debts, infrastructure control) while cultivating new fronts (diaspora investment, supply-chain deals for minerals). The Nishinari case hints at this diversification. For poorer nations, the lesson is to guard fiscal sustainability and negotiate safeguards. For China, the combined feedback from cases like Hambantota, African debt crises, and even urban developments in Japan suggests an ongoing recalibration: more scrutiny, more emphasis on “quality” projects, and perhaps a shift to being a creditor who enforces repayment rather than only a lender.
Conclusion
China’s global lending and investment footprint has left a complex legacy. Large-scale projects have built vital infrastructure in Asia and Africa, but also saddled some countries with heavy debt and raised questions about control and sovereignty. The Hambantota port epitomizes the risks – it serves as both a warning and a caution against simplistic narratives.
In Africa, the dramatic rise (and recent fall) of Chinese lending underscores that Chinese finance now dominates many developing economies, for better or worse. Meanwhile, the Nishinari episode in Japan shows that Chinese capital and influence also operate through private channels in unexpected places.
Overall, these cases suggest that while debt diplomacy may not be a monolithic strategy of China’s, there is undeniable strategic intent behind much of its overseas finance. Whether Beijing’s actions are characterized as predatory or opportunistic, recipient countries must now navigate a landscape in which China is more often a debt collector than a giver of free aid.
The global community – from multilateral institutions to individual governments – will need to work toward greater transparency and balance in development finance. In the end, China’s global strategy appears to be evolving from simply extending credit to actively managing its financial and economic ties worldwide. This shift will continue to reshape the sovereignty and economic policies of both developing and developed nations in the years ahead.