Over the past few years, the US has accused China of using “debt diplomacy” to make developing nations across the world more dependent on Beijing.

Yet the cases of Sri Lanka and Pakistan – both friends of China facing dire financial situations as inflation soars – show that President Xi Jinping’s government is becoming more reluctant to pull out the cheque book. China still hasn’t made good on a pledge to re-issue loans, totalling $4 billion, which Pakistan repaid in late March, and it hasn’t responded to Sri Lanka’s pleas for $2.5 billion in credit support. 

While China has pledged to help both countries, the more cautious approach reflects both a refining of Mr Jinping’s signature Belt and Road Initiative as well as a hesitancy to be seen as interfering in messy domestic political situations. Pakistan got a new prime minister on Monday after parliament booted out former cricket star Imran Khan, and Sri Lanka’s leader is facing pressure from protesters to step down.

“Beijing has for the past couple of years been rethinking its external lending because their banks realised they were carrying a lot of debt with countries whose prospects of paying back were quite limited,” said Raffaello Pantucci, a senior fellow at the S Rajaratnam School of International Studies at Nanyang Technological University. “This came on top of a tightening economic situation at home which also required a lot of spending, so that there was less appetite to just throw money around wantonly.”

China is currently facing its own economic troubles, with lockdowns to contain the country’s worst COVID outbreak since early 2020 shutting down the technology and financial hubs of Shanghai and Shenzhen. Premier Li Keqiang on Monday told local authorities that they should “add a sense of urgency” when implementing policies as analysts warn that the official growth target of a 5.5 per cent was now in jeopardy.