1. Trapped in debt: China’s role in Laos’ economic crisis
- Author:
- Keith Barney, Roland Rajah, and Mariza Cooray
- Publication Date:
- 04-2025
- Content Type:
- Commentary and Analysis
- Institution:
- Lowy Institute for International Policy
- Abstract:
- Laos is trapped in a severe debt crisis with no resolution in sight, threatening a decade of economic and social malaise. Recent global shocks were key triggers. Yet a crisis was almost inevitable, driven by poor planning and over-investment in the domestic energy sector, financed mostly by Chinese loans and exacerbated by broader fiscal and governance problems. Exiting the crisis will require China to provide substantial debt relief. However, the politics appear unfavourable, as neither side wants to admit failure and accept the consequences. Whether by design or neglect, China has created a debt trap in Laos. The crisis illustrates some of the most troubling pathologies of Chinese lending under the Belt and Road Initiative, and its unwillingness to provide sufficient debt relief, despite the clear-cut need.
- Topic:
- Debt, Belt and Road Initiative (BRI), Economic Crisis, and Energy Sector
- Political Geography:
- China, Asia, and Laos