Sovereign Debt Restructuring in Zambia: A Chinese Approach

The dynamics of China’s role as a global creditor are a central theme of my recent book chapter, Sovereign Debt Restructuring in Zambia: A Chinese Approach, published in A Casebook on Chinese Outbound Investment: Law, Policy, and Business (Cambridge University Press, 2025), edited by Matthew S Erie. This chapter examines how China, now one of the largest sovereign creditors worldwide, has managed its engagement with Zambia, the first African country to default on its Eurobonds during the COVID-19 pandemic. The analysis highlights the bilateral nature of China’s debt restructuring practices, the complexity of Zambia’s financial crisis, and the broader implications for sovereign debt governance across the Global South.

Zambia’s economic crisis is a story of structural weaknesses compounded by external shocks. Since 2011, heavy borrowing under the Patriotic Front government, especially from Chinese institutions, has financed large infrastructure projects but also left Zambia highly exposed to debt distress. By 2022, more than half of the country’s tax income was devoted to debt repayment, creating a budget deficit of 9.5 per cent of GDP and depriving the state of the foreign currency reserves needed to pay creditors and import essentials. In November 2020, Zambia defaulted, making it a test case for how China would respond as a leading sovereign creditor.

China is estimated to hold about 30 per cent of Zambia’s external debt, with figures ranging from US$3.3 billion in official Zambian reports to US$6.6 billion in independent research. This lack of transparency illustrates one of the central challenges in assessing Chinese lending. Unlike traditional creditors, China often operates with confidentiality clauses that prevent disclosure of loan terms and sometimes even the existence of the loans themselves. Such practices have fuelled concerns about ‘debt-trap diplomacy’, the idea that China deliberately creates unsustainable debt to secure political leverage. While widely circulated in policy debates, the empirical support for this claim remains contested, and my chapter stresses the importance of examining evidence rather than rhetoric.

What distinguishes China’s approach is its bilateral and often fragmented negotiation style, which contrasts with the coordinated, rules-based framework of the Paris Club. In Zambia’s case, this divergence became apparent as the country sought relief under the G20 Debt Service Suspension Initiative and later the Common Framework. Under the latter, China agreed to co-chair Zambia’s creditor committee with France, marking a significant shift towards cooperation with traditional creditors. The restructuring agreement of June 2023, which covered US$6.3 billion of Zambia’s official debt, including China’s share, shows that Beijing is prepared to work within multilateral processes when necessary, though it continues to avoid permanent Paris Club membership.

China’s lending practices in Africa, often linked to the Belt and Road Initiative, have been both attractive and controversial. Concessional loans with low interest rates and long maturities have enabled many African states to access finance otherwise unavailable from commercial lenders. Yet these loans are frequently tied to Chinese contractors, contain unusual legal clauses, and are negotiated under strict confidentiality. In Zambia, this has raised fears of resource-backed repayment or the transfer of strategic assets, though evidence for such outcomes remains mixed. At the same time, China has provided debt relief, including the cancellation of twenty-three interest-free loans across seventeen African countries, although most of Zambia’s borrowing has been interest-bearing and therefore subject to tougher negotiations.

The case of Zambia demonstrates the risks and opportunities of China’s creditor role. On one hand, bilateral restructuring without full transparency may limit debtor states’ room for manoeuvre and complicate international coordination. On the other, China’s willingness to co-chair Zambia’s restructuring committee signals recognition of the systemic risks posed by sovereign defaults and a pragmatic interest in stabilising debtor economies. For Zambia, the outcome of this process will shape its economic recovery, future access to international markets, and capacity to pursue development. For other African states, Zambia serves as a precedent in navigating debt negotiations with China.

The broader implications extend beyond Zambia. China’s growing role in sovereign debt governance raises questions about the adequacy of existing frameworks, which were designed around Paris Club norms. As a major lender to countries in the Global South, China’s approach will influence the evolution of international financial law and the management of sovereign debt crises. My chapter concludes that the Zambian experience highlights the urgent need for greater transparency, consistency, and coordination in debt restructuring processes. Without such reforms, debtor countries risk being caught between competing creditor systems, undermining the long-term sustainability of their finances.

The Zambian case shows that China’s role as a sovereign creditor is both transformative and contested. Whether China chooses to integrate more fully into multilateral frameworks or continue its preference for bilateral negotiations will have lasting consequences for the stability of the global sovereign debt system.

The full chapter can be accessed here.

Charles Ho Wang Mak is a  Lecturer in Law at the University of Bristol Law School.