From critic to client: How US became China’s biggest borrower while warning the world about a 'debt trap'

The contradiction in America’s China narrative

The traditional argument from the US has been that China’s loans burden poorer nations with unsustainable debt, forcing them to surrender assets or political influence. Ports in Sri Lanka, railways in Africa and energy projects across Asia were often cited as examples.

But while this debate played out in public, American companies and institutions quietly accepted Chinese-backed credit for domestic projects. According to the AidData report, this funding supported infrastructure, technology and commercial developments in the US, including data centres, airport terminals and industrial projects.

As one analysis noted, the situation is deeply ironic. “The irony is staggering. Washington condemned Chinese loans as sovereignty risks whilst American companies tapped Chinese-backed credit pools,” the report observed.

What the money was used for

Chinese financing in the US has flowed into areas considered strategic. These include logistics hubs, energy infrastructure and technology linked to advanced manufacturing. The lending was structured through state-owned Chinese banks and investment entities, often routed via joint ventures and subsidiaries.

Much of this lending targeted sectors that align with China’s global economic goals, such as access to high-value assets, supply chains and technological capacity. This makes the situation more complex than a simple borrower-lender relationship.

Treasury bonds and deeper financial ties

Another layer to this relationship lies in China’s role as a holder of US government debt. For years, China was one of the largest foreign holders of US Treasury bonds. Although Beijing has reduced its holdings in recent years, it still owns hundreds of billions of dollars in American debt.

This reality underlines a deeper truth. The financial systems of the world’s two largest economies are tightly interconnected. Even as political rhetoric grows harsher, the flow of capital continues in both directions.

China’s changing lending strategy

China’s overseas lending has also evolved. In its early years, large portions of funding went to low-income nations through the Belt and Road Initiative. Today, a growing share is directed at middle-income and high-income countries.

AidData researchers noted that most recent Chinese lending now targets wealthier nations, including the United States. This shift reflects Beijing’s strategic recalibration towards stable returns and long-term influence instead of risky development loans alone.

A senior economist at a European policy institute explained that China is unlikely to destabilise US markets by suddenly pulling back investments. He said, “Such a sale would run counter to the Chinese doctrine of financial stability.”

How this weakens America’s moral stance

The revelation that the US is China’s biggest borrower weakens Washington’s credibility when warning other nations about Chinese loans. For smaller economies, the message now appears inconsistent. If Chinese credit is so dangerous, why is the world’s most powerful economy accepting it at scale?

This has led to growing scepticism among policymakers in Africa, Asia and Latin America, where US advice has often urged caution or outright rejection of Chinese financing.

“The irony is rich,” one international analysis noted, suggesting that the US message now risks sounding more like political posturing than genuine concern.

What this means for global power politics

This borrowing dynamic complicates global power equations. China is no longer just a lender to developing nations. It is also a financial actor within advanced economies, providing capital that supports infrastructure and corporate growth.

At the same time, Washington continues to frame this relationship through a security lens, warning that Chinese influence could undermine national interests. The contradiction lies in the fact that capital inflows from China are still welcomed when they serve business needs.

A more complex reality than the “debt trap” label

Experts now argue that the term “debt trap” oversimplifies the picture. Chinese lending does sometimes create dependency, but it also reflects mutual economic interests and strategic positioning. For the US, accepting Chinese capital while criticising others for doing the same undermines its policy coherence.

As the AidData report concluded, “Much of the lending to wealthy countries is focused on critical infrastructure, critical minerals and the acquisition of high-tech assets like semiconductor companies.”