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

For instance, 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 checkbook.

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It is reported that China still has not made good on a pledge to re-issue loans totaling $4 billion that Pakistan repaid in late March, and it has not 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 Xi’s signature Belt and Road Initiative as well as a hesitancy to be seen interfering in messy domestic political situations.

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On Monday, Pakistan got a new prime minister 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 realized 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.

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Presently, China is 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 they should “add a sense of urgency” when implementing policies as analysts warn the official growth target of a 5.5% is now in jeopardy. 

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China has become the world’s largest government creditor over the past decade, with its state-owned policy banks lending more to developing countries than the International Monetary Fund or the World Bank in some recent years.

The opacity around the terms and scale of some of that lending has been criticized, especially as the pandemic exacerbates debt problems in poorer countries.

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Sri Lanka was downgraded deeper into junk by Fitch Ratings, which said on Wednesday the nation’s decision to suspend payments on its foreign debt has kicked off a sovereign default process.

Sri Lanka’s top diplomat in Beijing this week said he was “very confident” that China will come through with credit support, including $1 billion for the country to repay existing Chinese loans due in July.

Still, China’s role in helping to resolve ongoing crises in South Asia may be limited despite its status as a major creditor.