Many countries owed debts to Chinese

CHINA DEBT COLLECTION - COVID-19 is wreaking economic havoc, and its most severe consequences are likely to be felt in the developing world. Recession, depressed commodity prices, collapsing cross-border trade, and a flight to safety in financial markets have set the stage for a replay of the 1930s and 1980s debt crises. Any effort to provide meaningful debt relief to the most vulnerable countries must encompass the debts owed.

While China’s dominant role in global trade is well-understood (e.g. Autor et al. 2016, Acemoglu et al. 2014), its growing influence in international finance has remained relatively obscure, mostly due to lack of transparency and data.  

The chronic problem of lack of transparency has assumed a more urgent role since the COVID-19 pandemic has all but paralyzed the global economy. Many developing countries now face deep financial strain and have approached the IMF for emergency lending in record numbers. In mid-April, the G20 agreed to a temporary debt moratorium on bilateral (government to government) debt, calling on private investors to follow suit. However, there is considerable uncertainty about the magnitude, timing, and modalities of China’s intended debt relief, as China remains reluctant to join the Paris Club of official creditors.

While China’s dominant role in global trade is well-understood (e.g. Autor et al. 2016, Acemoglu et al. 2014), its growing influence in international finance has remained relatively obscure, mostly due to lack of transparency and data.  

The chronic problem of lack of transparency has assumed a more urgent role since the COVID-19 pandemic has all but paralyzed the global economy. Many developing countries now face deep financial strain and have approached the IMF for emergency lending in record numbers. In mid-April, the G20 agreed to a temporary debt moratorium on bilateral (government to government) debt, calling on private investors to follow suit. However, there is considerable uncertainty about the magnitude, timing, and modalities of China’s intended debt relief, as China remains reluctant to join the Paris Club of official creditors.