Chinese Debt-Trap Diplomacy

The People’s Republic of China (PRC) has been widely regarded as the world’s largest official creditor nation. In 2015, the volume of external Chinese loans exceeded that of international public loans from organisations such as the International Monetary Fund (IMF) and the World Bank (Toussaint, 2024), particularly to countries in the Global South, such as Sri Lanka, Pakistan, and Zambia. This study investigates a period marked by an increase in Chinese involvement in Sri Lanka from 2005 to 2017. This study examines whether Chinese external lending practices culminated in a loss of Sri Lankan foreign policy autonomy or whether the domestic political decisions played a more important role. This study will utilise data from academic literature, Sri Lanka’s UN voting patterns, and data on Chinese loan concessionality compared with public financial institutions. Key developmental projects, such as the 2017 Hambantota lease, are also evaluated in relation to Chinese lending practices in Sri Lanka. This paper concludes that Chinese lending practices have forced Sri Lanka to make foreign policy concessions and created fiscal dependencies that have limited the country’s foreign policy autonomy.

Keywords: Sri Lanka, China, debt-trap diplomacy, foreign policy, and loan concessionality