Debt-trap diplomacy

Debt-trap diplomacy is a term to describe an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially, or solely, to increase the lender's political leverage. The creditor country is said to extend excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations. The conditions of the loans are often not publicized. The borrowed money commonly pays for contractors and materials sourced from the creditor country.

A neologism, the term was first coined by Indian academic Brahma Chellaney in 2017 to contend that the Chinese government lends and then leverages the debt burden of smaller countries for geopolitical ends. The term "debt-trap diplomacy" has entered the official lexicon of the United States, with two successive administrations employing that term. However, many professionals and think tanks have stated that China's lending practices are not behind the debt troubles faced by borrowing nations, and that Chinese banks have never seized an asset from any nation, and are willing to restructure the terms of existing loans.