The “Belt and Road” infrastructure projects of the Chinese Communist Party have led many countries into a debt trap, and negative news continues to emerge due to substandard projects. The giant hydroelectric plant Coca Codo Sinclair in Ecuador, South America, has been found to have major structural defects, and the Chinese state-owned enterprise responsible for the construction is required to pay $400 million in compensation to Ecuador. Experts point out that affected countries are beginning to seek compensation from China, which carries significant implications.
Ecuador’s Minister of Economy and Finance Sariha Moya recently revealed in an interview with local Radio Centro that the Ecuadorian government has achieved significant results in negotiations with China. The Chinese state-owned company China Three Gorges Corporation will compensate the Ecuadorian government $400 million.
Moya stated that the Coca Codo Sinclair hydroelectric plant, constructed by a Chinese company, not only caused losses at the corporate level but also led to revenue loss for the country’s finances. Ecuador refused to accept mere guarantees as compensation and demanded direct financial compensation from the Chinese company.
The Coca Codo Sinclair hydroelectric plant, located between the provinces of Napo and Sucumbíos in Ecuador, had a construction cost of nearly $3 billion and was initiated in 2009 during the presidency of Rafael Correa. The construction was carried out by a subsidiary of China Three Gorges Corporation, Sinohydro.
Since its commissioning in 2016, the hydroelectric plant has been plagued by controversies, including issues related to site selection, engineering quality, corruption, inability to repay loans, etc. The plant was found to have structural faults, thousands of cracks in machinery equipment, affecting power generation safety and efficiency. Even after repairs, some equipment continued to leak. Investigations showed that Sinohydro had concealed information about structural faults for several years and still delivered the project despite being aware of the defects.
In 2021, the Ecuadorian government filed an arbitration claim of $580 million, and the Chinese company counter-sued in 2024, accusing Ecuador of contract violations. The compensation agreement reached now marks a preliminary conclusion to this long-standing engineering dispute.
In addition to structural issues, the hydroelectric plant has also caused severe ecological impacts. Experts warn that this plant, which was supposed to have a service life of 50 years, may actually only last 15 years, posing a threat not only to the country’s energy system but also potentially causing long-term irreversible damage to the Amazon ecosystem.
Ecuador has been a frontline for China’s infrastructure projects in Latin America. The inauguration of the Coca Codo Sinclair hydroelectric plant on November 18, 2016, was attended by Chinese leader Xi Jinping during his visit to Ecuador. However, following the resignation of President Correa on May 24, 2017, amid allegations of corruption, Correa soon fled to Belgium in Europe. On April 7, 2020, Ecuador’s National Court sentenced former President Correa to 8 years in prison on charges of corruption and bribery, with the Coca Codo Sinclair project being implicated in the case.
In fact, China has provided Ecuador with approximately $19 billion in loans, not only for the Coca Codo Sinclair project but also for the construction of bridges, highways, irrigation, schools, health clinics, and six other dams.
Ecuadorian parliamentarians, former government ministers, and anti-corruption activists have pointed out the lack of transparency in these loans, where contracts were awarded to related companies without open bidding, resulting in poor construction quality, high costs, and corruption.
In December 2018, Ecuador’s then Minister of Energy Carlos Perez stated, “China is taking advantage of Ecuador,” and “China’s strategy is clear. They want to control other countries’ economies,” adding, “We will not pay.”
Chinese-Canadian writer and senior commentator Sheng Xue told Epoch Times that Ecuador’s demand for a $400 million settlement from a Chinese company marks a crisis point for China’s “Belt and Road” initiative. In the past, many countries, even though aware of China’s corrupt contracts and substandard projects, did not dare take real action. However, Ecuador has set a precedent, inspiring other countries to likely follow suit in seeking compensation. The “Belt and Road” initiative is shifting from being China’s diplomatic tool to becoming a global case file for compensation claims.
Sheng Xue mentioned that at its core, the “Belt and Road” initiative is about using “money + projects” to influence politicians. When these politicians step down or political situations change, new governments often seek to clean up previous corruption ties with China. China can no longer win hearts through projects but instead must continuously foot the bill for corruption and shoddy quality scandals, dealing a severe blow to its finances and international image.
China’s accumulated debt issues in the “Belt and Road” initiative are akin to setting a “time bomb.”
Nepal’s Bhairahawa International Airport, funded by a $216 million loan from the China Export-Import Bank and constructed by China CAMC Engineering, has failed to live up to expectations. This once promising new international airport now sees few regular international flights.
In a report released by Nepal’s Public Accounts Committee (PAC) on April 17, 2025, it was pointed out that the airport fundamentally fails to meet international civil aviation organization (ICAO) standards, including radar systems, navigation equipment, communication facilities, etc. The issues included the use of substandard construction materials and problems related to corruption and lack of supervision.
By 2026, the grace period for China’s loan to Nepal will end, and the Nepalese Prime Minister requested during a visit to China last year that the loan be turned into a grant, effectively cancelling the debt. It remains unclear how China will handle this situation.
Sheng Xue stated that Nepal’s request for a loan-to-grant conversion, even adopting a default stance, puts China in a tough spot. China seems to take a tough stance, but in reality, it is very constrained. If it aggressively pressures Nepal for debt repayment, Nepal may tilt completely toward India and the West, causing China to lose a strategic buffer zone rapidly. If China compromises and cancels the debt, a domino effect may occur, inspiring other debtor nations to demand debt reductions or cancellations. “China is almost without a solution to this problem. Nepal’s tough stance puts China in a difficult position.”
Furthermore, the renovation project for Serbia’s Novi Sad train station experienced a roof collapse last year, causing 16 deaths and triggering the largest anti-government protests in Serbia in decades. On August 1, 2025, Serbia arrested several individuals, including a former Infrastructure Minister, on suspicion of inflating invoices causing a $115.6 million loss to the nation and allowing the Chinese company involved to make an “illegal profit” of $18.8 million.
Sheng Xue mentioned that corruption in Chinese projects has transformed from being solely an economic risk to potentially evolving directly into a political crisis. China’s domestic economy continues to deteriorate, and it can no longer afford to spend lavishly as before. In the future, the “Belt and Road” initiative will likely rely on old debts to sustain itself, while these old debts are continuously being held accountable. China’s former strategy of buying influence in smaller countries is collapsing: from a “century project” to a “century burden,” it may ultimately lead to diplomatic isolation and a tangled mess of debt.