Gallagher and Ray on Why China Should Revive Lending to the Developing World
In a recent op-ed for The Wire titled ‘Why China Should Boost its Lending To Developing Countries,’ Pardee Professor and Global Development Policy (GDP) Center Director, Kevin P. Gallagher, and Rebecca Ray, Senior Academic Researcher at the GDP, argue that China’s retreat from overseas development lending has come at a critical moment for the global economy. For two decades, Chinese development finance helped fill major infrastructure and energy gaps across the Global South, supporting growth where Western private finance and multilateral institutions often fell short. As the authors write, “China’s retreat from lending to developing countries has come at precisely the wrong time for the global economy,” particularly as both Chinese and Western financing have declined amid rising debt distress.
Drawing on data from the GDP, Gallagher and Ray underscore the scale of China’s past role. Since 2008, China’s two overseas development banks have provided nearly $500 billion in financing to developing countries—roughly 70 percent of World Bank lending over the same period. Today, however, many low-income countries are sending more money out in debt repayments than they are receiving in new disbursements, a reversal that risks constraining development and dampening global growth just as climate pressures and economic uncertainty intensify.
Rather than simply resuming large-scale lending, the authors propose alternative pathways for renewed Chinese engagement, with refinancing existing debt as a key option. Issuing longer-term, lower-interest RMB-denominated loans could ease fiscal pressure on borrowing countries while also benefiting Chinese banks. They point to Kenya’s recent refinancing deal as a promising example, while noting that refinancing must be paired with expanded trade and investment to generate sustained growth and ensure repayment capacity.
Ultimately, Gallagher and Ray argue that reviving development finance aligns with China’s own strategic interests as it faces growing decoupling from Western markets. “As the country faces decoupling from Western markets, it is in China’s interest to revive financing to the developing world to help create new market opportunities,” they write. In an increasingly fragmented global economy, the authors conclude, reimagined Chinese development finance could help restart productive investment in the world’s poorest countries while strengthening China’s long-term economic and geopolitical partnerships.
The full op-ed can be read here.
Kevin P. Gallagher is a professor of Global Development Policy at the Frederick S. Pardee School of Global Studies at Boston University and the director of the Boston University Global Development Policy Center (GDP Center). He serves as the lead expert on Multilateral Development Bank Reform to the Brazilian Presidency of the G20. Additionally, he is a member of the Task Force on Climate, Development and the International Monetary Fund and a co-chair of the Debt Relief for a Green and Inclusive Recovery Project. Gallagher is the author or co-author of eight books, including China and the Global Economic Order (Cambridge University Press, 2025), The Case for a New Bretton Woods (Wiley, 2021), and The China Triangle: Latin America’s China Boom and the Fate of the Washington Consensus (Oxford University Press, 2016). To know more about his scholarly work and achievements, visit his faculty profile.