How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments

Delivering sustainable economic growth
Posted May 24, 2021 | Peterson Institute for International Economics, Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks et al

In this working paper of the Peterson Institute for International Economics, Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks et al analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them to those of other bilateral, multilateral, and commercial creditors. Three main insights emerge: Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt; Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring; and employ cancellation, acceleration, and stabilization clauses that potentially allow the lenders to influence debtors’ domestic and foreign policies. The authors find that the contracts use creative design, presenting China as a highly assertive and commercially sophisticated lender.


https://www.piie.com/sites/default/files/documents/wp21-7.pdf

 

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