On Global South
What’s Going On?
The Global South—countries in Africa, Asia, Latin America, and Oceania—often has lower levels of economic development, and that’s made it a major area of interest for big global powers. China launched its Belt and Road Initiative (BRI) in 2013, a huge infrastructure push worth over $1 trillion. The goal is to connect parts of Asia, Africa, and Europe through railways, roads, ports, and more—mostly funded by loans from China.
By 2023, China had handed out around $330 billion in BRI loans—nearly as much as 80% of what the World Bank lent over the same period. These loans mainly go toward building infrastructure. On the flip side, Western institutions like the IMF and World Bank also lend money—but with strings attached. These usually include pushing countries to cut government spending or privatise state-run services, which many view as a way to steer the borrowing country’s economic policies.
China’s BRI: Helpful or Harmful?
Since launching in 2013, China’s BRI has become a big part of its global game plan. Most of China’s government loans go to countries that are already deep in debt. Critics—especially from the U.S.—call this “debt-trap diplomacy”. They claim China’s loans can bury countries in debt, letting China gain power over them. A famous case is Sri Lanka’s Hambantota Port. The country couldn’t pay back its loan, so it ended up leasing the port to China for 99 years. Zambia faced a similar issue—it owed China $6 billion and defaulted on its debt in 2020.
But not everyone agrees with this “debt trap” idea. A 2020 paper by Chatham House said there’s not much solid proof that China deliberately traps countries in debt. In fact, Chinese loans often come with fewer conditions than IMF loans, which can make them more appealing. China has also shown some willingness to adjust—like when it restructured $4.2 billion in Sri Lankan debt in 2023, and canceled $1.6 billion in Zambian loans in 2022.
However, BRI loans still come with risks. An AidData study found that over one-third of BRI projects had issues—ranging from corruption to environmental damage. So while not every loan becomes a trap, problems do exist.
China vs. the IMF: Competing for Influence
Beyond infrastructure, China is also stepping into the IMF’s turf by helping countries with emergency financial support. Since 2009, China has provided $170 billion in currency swap deals and another $70 billion to help countries manage short-term financial crises. Altogether, that’s about 20% of what the IMF has lent for the same purpose in the last 10 years.
A good example is Argentina. In 2023, the country tapped into a $19 billion currency swap deal with China, using $3 billion of it just to make payments to the IMF.
How Western Loans and Sanctions Work: Rules, Pressure, and Control
The IMF and World Bank, which are mainly run by Western countries—especially the U.S.—give out loans to struggling countries, but these come with a lot of strings attached. Borrowers often have to cut government spending, sell off public services, and open their economies to trade. These steps are meant to fix economic problems, but they can also hurt regular people.
For example, when Zambia took a $1.3 billion loan from the IMF in 2022, it had to stop giving subsidies for fuel and farming—making life harder for poorer communities. In Sri Lanka, a $2.9 billion loan in 2023 came with tax increases and more subsidy cuts. Critics say these measures hurt people’s basic rights.
Although Western sanctions aren’t directly linked to loans, they can still push countries into China’s arms. If a country goes against Western interests, it might lose access to markets or face restrictions—making Chinese loans seem like a better option. Also, when countries can’t pay their debts, the IMF and World Bank often make private lenders take a loss first (a “haircut”), while China is slower to do that, though it has sometimes shown flexibility.
Real-Life Examples: Zambia, Sri Lanka, and Argentina
Zambia is Caught in the Middle: By 2020, Zambia owed $17.3 billion to foreign lenders, and China was the biggest creditor with $6 billion. The country defaulted on its debt that year. To get help, Zambia took a $1.3 billion IMF loan—but had to cut subsidies, affecting social services. China later canceled $1.6 billion in loans that hadn’t been used yet and postponed $2 billion in payments. But there are still concerns, since Chinese loans often come with little transparency and few checks to see if the borrower can actually repay.
Sri Lanka is Struggling After Default: In 2022, Sri Lanka defaulted on its $42 billion foreign debt. It owed China about $7 billion. One of the most famous outcomes was the leasing of Hambantota Port to China after the country couldn’t repay its loans. Sri Lanka later restructured $4.2 billion of its Chinese debt, which opened the door to a $2.9 billion IMF bailout in 2023. But IMF demands—like higher taxes and cutting support for basic services—hurt the public. A 2024 study showed private bondholders were repaid much more (80 cents per dollar) compared to China (67 cents), showing unequal treatment of creditors.
Argentina is Walking a Tightrope: Argentina owed $44 billion to the IMF in 2022. To stay afloat, it leaned on currency swaps with China—borrowing up to $10 billion. In 2023, it even used $7.5 billion to repay the IMF. Under President Javier Milei, Argentina introduced reforms that the IMF liked and started talking about more loans. But Argentina has a long history of debt problems, so risks remain.
Which Approach Works Better?
China has provided over $330 billion in BRI loans and $170 billion in financial rescue support, mainly for infrastructure and emergency funding. These usually come with fewer conditions, but about 35% of projects have run into problems like corruption or environmental harm.
The IMF and World Bank, on the other hand, are more transparent but demand strict reforms that often lead to public backlash. They help stabilise economies but can weaken social support systems. Zambia and Sri Lanka show how both Western and Chinese loans can lead to deep debt trouble. Argentina is trying to balance both sides—using Chinese swaps and IMF funds—to keep its economy afloat.
Looking Ahead: What’s Coming and Who’s in Charge
China’s role as a major lender is expected to keep growing. It’ll likely keep expanding its Belt and Road Initiative (BRI) and offering emergency support—like the currency swaps it gave to Argentina. But there’s a catch: around 80% of countries that take China’s money are already dealing with debt problems, which raises questions about whether this model is sustainable in the long run.
The IMF and World Bank are trying to improve how they work, especially through global efforts like the G-20 debt relief frameworks, which aim to bring lenders together. Still, many countries see these institutions as biased toward Western interests, which could make them less attractive.
From a big-picture, geopolitical view, many countries in the Global South might start leaning more toward China, since its loans are more flexible and come with fewer strings. But in the long run, the real deciding factor will be which side can actually help countries grow in a way that’s fair, stable, and lasting. Control over influence—what some call “ownership”—will probably end up being shared between China and the West.
Wrapping Up
Both China’s cheque book and Western-controlled loans from the IMF and World Bank are shaping how developing countries manage their economies. As we’ve seen with Zambia, Sri Lanka, and Argentina, each approach has its ups and downs.
China offers more flexibility, but its loans can still lead to debt trouble. The IMF has clearer rules, but its conditions often come at a social cost—cutting subsidies, raising taxes, or selling off public services. Going forward, the key to gaining influence in the Global South will be sustainable and fair development. As of April 2025, both China and the West will need to adjust their strategies to keep up.
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Geopolits Research Desk