Washington, March 21 (IANS) Alarmed by China’s expanding financial footprint in South Asia, US lawmakers have pointed to mounting debt in countries like Pakistan and Sri Lanka as they pushed to strengthen American tools to compete with Beijing’s global lending.

During a congressional hearing this week on the Export-Import Bank of the United States (EXIM), influential American lawmakers from both parties warned that China’s state-backed financing is reshaping economic and strategic alignments in regions central to global competition.

“This is not developmental finance; this is debt trap diplomacy,” Representative Zach Nunn said, citing figures that showed Pakistan owing $77 billion and Sri Lanka $11 billion to Chinese state lenders.

Committee Chairman Warren Davidson said the challenge posed by China has intensified, noting that the People’s Republic of China “is the world's largest provider of export credit” and operates outside established international frameworks.

Lawmakers said China extended more than $23 billion in medium- and long-term export credit in 2024, far outpacing the United States.

Jovan Jovanovic, president and chairman of EXIM, told lawmakers that American companies are increasingly competing in markets shaped by heavy state support and subsidies.

“Today, American companies compete in markets where competitors deploy massive state financing, subsidies, and industrial policy to capture strategic industries,” he said.

He warned that such competition has contributed to weakened economic security and job losses in the United States, adding that the country “cannot afford to sit on the sidelines.”

At the centre of Washington’s response is the China and Transformational Exports Program (CTEP), designed to help American exporters compete in sectors where China has established dominance.

Jovanovic said “one out of every four transactions we do at the bank looks to the CTEP program,” describing it as “mission critical” to ensuring that the United States remains competitive in global markets.

Lawmakers argued that China’s lending practices — particularly in infrastructure and resource sectors — have left several developing countries vulnerable to financial stress, raising questions about long-term sustainability.

Nunn said such arrangements “trap developing nations in debt,” undercutting both local economies and US strategic interests.

Jovanovic said the United States must respond by offering a different model built on transparency and market-driven partnerships.

“We can't compromise our values,” he said, adding that the US must “think creatively, proactively and aggressively” to advance its economic interests.

A key initiative discussed during the hearing was “Project Vault,” a proposed $10 billion public-private partnership to build a strategic reserve of critical minerals in the United States.

The project is intended to reduce reliance on foreign supply chains — particularly those linked to China — and provide a buffer against disruptions affecting American manufacturers.

Jovanovic said the initiative would help “de-risk these supply chains” by combining government financing with private capital while allowing market demand to guide decisions.

Representative Joyce Beatty said the bank enables US companies to “go head to head with foreign rivals,” adding that 90 per cent of its authorisations benefit small businesses.

The hearing comes as Congress prepares to reauthorise EXIM later this year, with lawmakers emphasising the need to sharpen its tools to compete with China’s expanding global footprint.

--IANS

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