Some countries heavily indebted to China face economic instability and a possible collapse due to their inability to repay loans. These countries are quickly draining up their foreign currency reserve to pay the interest and allocating more budget to repay the loans than other critical infrastructure. Not only is China unwilling to forgive the debts, but the method and terms it provides the loans are also classified. China even asked lenders to deposit the money in a hidden third-party account that allows China to obtain the money before other lenders. Debtor countries had defaulted on debt, laid off workers, and suffered hyperinflation. If China is reluctant to soften its stance on loan repayment, large waves of defaults and political turmoils could fuel long-term geopolitical instability.

Zambia's Case

• Although the Chinese loans boosted Zambia's economy, they raised foreign interest payments, so the government could not spare cash for social welfare.
• Western lenders (the U.S., Japan, and France) have multilateral debt-forgiving mechanisms that minimize each others' loss. However, China is unwilling to join the talks and prefers to deal with Zambia alone, banned Zambia from disclosing the loans' terms to non-Chinese lenders, and coerced Zambia into prioritizing loan repayment to China.
• Due to the lack of transparency, non-Chinese lenders refused Zambia's plead to suspend interest repayment, which further drained Zambia's foreign reserves and eventually defaulted.
• Consequently, Zambia experienced hyperinflation, high unemployment, currency devaluation, and a food security crisis.
• Researchers uncovered Zambia's owed Chinese state-owned banks double what they predicted and around one-third of the country's total debt.

Same story in other countries

• Many countries struggled to repay Chinese loans and had stunted economic growth due to China's unwillingness to take heavy losses.
• Foreign reserves in these countries are draining fast to pay for essential goods and may deplete soon.
• When these countries deplete their foreign reserves, their economy contracts, high inflation occurs, and daily goods become unaffordable. It may force people into poverty.
• Pakistan had to buy discounted Russian oil to keep the electricity running, and Sri Lanka had riots due to the economic turmoil.