彼得森经济研究所-促进中国参与解决发展中国家债务问题（英文）-2021.5-16页_379kb

21-10 Improving China's Participation in Resolving Developing-Country Debt Problems

Core Content

This document analyzes the challenges and opportunities for China to play a more coordinated and transparent role in resolving the external debt problems of developing countries, particularly in the context of the post-COVID-19 economic crisis. It emphasizes the need for improved debt restructuring mechanisms that include China as a key player, given its significant lending to emerging-market and developing economies (EMDEs).

Main Views

• China's Dominance in Lending to EMDEs: China is the largest bilateral creditor to many developing countries, with its lending under the Belt and Road Initiative (BRI) and other programs contributing significantly to the external debt burden. Official data on Chinese lending is limited, and independent sources are often necessary to assess the true scale of its commitments.

• Debt Distress and Coordination Challenges: Many EMDEs are facing severe debt distress due to the economic shock of the pandemic. China's absence from the Paris Club, which coordinates debt restructuring among official creditors, and the lack of coordination among its own creditors (both private and quasi-official) complicate the resolution of these issues.

• Debt Restructuring Patterns: China has historically used ad hoc approaches to restructure debt, often avoiding principal reductions and focusing on rescheduling. This has been influenced by its policy banks' need to maintain capital and avoid losses, which are critical for their domestic operations.

• DSSI and CF: G20 Initiatives with Limitations: The Debt Service Suspension Initiative (DSSI) and the Common Framework (CF) are two G20 mechanisms aimed at addressing debt distress. While DSSI has helped provide temporary relief, it excludes middle-income countries and lacks mechanisms for private creditors. The CF is more comprehensive but still faces challenges in ensuring participation and transparency from all creditors, including Chinese ones.

• Need for Creditor Committees: The authors propose the creation of creditor committees as a potential solution to coordinate debt relief with China. These committees would bring together official, private, and hybrid creditors to discuss debt sustainability, share information, and negotiate equitable terms. This approach could help address the lack of transparency and coordination issues.

Key Information

China's Lending to Developing Economies

• Amounts: China is the largest bilateral creditor to many developing countries, with its official lending rising from 38% of total bilateral debt to DSSI countries in 2013 to 57% by 2019, reaching about $112 billion.
• Terms: Chinese loans often include concessionary terms, such as low interest rates and long grace periods, especially for low-income countries. However, they are also frequently collateralized, with a focus on future revenue streams.
• Transparency Issues: Chinese lending is less transparent than that of other creditors, which complicates debt sustainability assessments and restructuring efforts.

Debt Restructuring by China

• Historical Approach: Before 2011, China focused on principal haircuts and interest cancellation. After that, it shifted to rescheduling, which involves extending maturities rather than reducing principal.
• Lending Entities: The China Development Bank (CDB) and the Export-Import Bank of China (ExIm Bank) are the main actors in Chinese lending, with both receiving implicit government guarantees and operating under different degrees of commercialization.
• Private and Hybrid Creditors: China's state-owned commercial banks also play a role in lending, often influenced by political objectives. Their participation in debt restructuring is not always coordinated, which poses challenges for effective relief.

DSSI and CF: G20 Initiatives

• DSSI: A temporary initiative that suspends debt service for low-income countries. China participates, but it excludes middle-income countries and lacks mechanisms for private creditors.
• CF: A more comprehensive framework that includes all G20 official creditors and requires non-G20 creditors to offer similar terms. It is seen as a step forward, but its effectiveness depends on the IMF's enforcement of transparency and participation rules.

Proposed Solutions

• Creditor Committees: These could be formed for individual debtor countries, involving both official and private creditors. China would benefit from such committees by gaining a more structured role in international debt governance and reducing the risks of prolonged debt difficulties.
• Paris Club Involvement: The Paris Club and IMF could work together to ensure consistency and transparency across creditor groups. China's participation in such frameworks could help it avoid being dominated by Western creditors and improve its international standing.
• Incentives for China: China has incentives to participate in creditor committees to enhance its influence in global debt governance, share the burden of debt relief with other creditors, and improve its reputation by demonstrating cooperation and transparency.

Conclusion

The document calls for a more coordinated and transparent approach to resolving the external debt problems of developing countries, with China playing a central role. Creditor committees, integrated into the CF or a broader initiative, could help achieve this goal. The G20 and international financial institutions like the IMF and World Bank must support these efforts to ensure that all creditors, including Chinese ones, participate effectively in debt restructuring. This would not only help EMDEs avoid prolonged debt distress but also allow China to assert its role as a global leader in debt management.