Debt-trap diplomacy

Debt-trap diplomacy is a term to describe an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially, or solely, to increase the lender's political leverage. The creditor country is said to extend excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations. The conditions of the loans are often not publicized.^[1] The borrowed money commonly pays for contractors and materials sourced from the creditor country.

A neologism, the term was first coined by Indian academic Brahma Chellaney in 2017 to contend that the Chinese government lends and then leverages the debt burden of smaller countries for geopolitical ends.^[2]^[3] The term "debt-trap diplomacy" has entered the official lexicon of the United States, with two successive administrations employing that term. However, many academics, professionals, and think tanks have stated that China's lending practices are not behind the debt troubles faced by borrowing nations, and that Chinese banks have never seized an asset from any nation, and are willing to restructure the terms of existing loans.^[4]^[5]^[6]^[7]^[8] As of 2024, the idea of Chinese debt-trap diplomacy is a minority view.

^ Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch (26 February 2020). "How much money does the world owe China?". Harvard Business Review.
^ Heather Zeiger (13 November 2020), "China and Africa: Debt-Trap Diplomacy?", Mind Matters
^ Brahma Chellaney (23 January 2017). "China's Debt-Trap Diplomacy". Project Syndicate.
^ "The Chinese 'Debt Trap' is a Myth". The Atlantic. 6 February 2021.
^ Cite error: The named reference Hameiri 2020 was invoked but never defined (see the help page).
^ Cite error: The named reference Bloomberg News 2022 was invoked but never defined (see the help page).
^ Cite error: The named reference The Diplomat was invoked but never defined (see the help page).
^ "China 'not to blame' for African debt crisis, it's the West: study". South China Morning Post. 27 July 2022. Archived from the original on 27 July 2022. Retrieved 27 July 2022.

[1] Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch (26 February 2020). "How much money does the world owe China?". Harvard Business Review.

[2] Heather Zeiger (13 November 2020), "China and Africa: Debt-Trap Diplomacy?", Mind Matters

[3] Brahma Chellaney (23 January 2017). "China's Debt-Trap Diplomacy". Project Syndicate.

[4] "The Chinese 'Debt Trap' is a Myth". The Atlantic. 6 February 2021.

[Hameiri_2020-5] Cite error: The named reference Hameiri 2020 was invoked but never defined (see the help page).

[Bloomberg_News_2022-6] Cite error: The named reference Bloomberg News 2022 was invoked but never defined (see the help page).

[The_Diplomat-7] Cite error: The named reference The Diplomat was invoked but never defined (see the help page).

[8] "China 'not to blame' for African debt crisis, it's the West: study". South China Morning Post. 27 July 2022. Archived from the original on 27 July 2022. Retrieved 27 July 2022.

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