AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Debt Distress on China's Belt and Road
AEA Papers and Proceedings
vol. 113,
May 2023
(pp. 131–34)
Abstract
This paper shows that China's lending boom to developing country sovereigns has largely ended and that debt distress and defaults are increasingly common. Chinese lenders react to this challenge through two main coping strategies: first, bilateral sovereign debt restructurings—typically with maturity extensions but no face value cuts—and, second, rescue loans that allow debtors to avoid or delay default. Low-income countries tend to receive debt restructurings, whereas emerging market countries are more likely to receive rescue loans. We speculate that the differential crisis response is due to the different exposure levels of Chinese state banks.Citation
Horn, Sebastian, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch. 2023. "Debt Distress on China's Belt and Road." AEA Papers and Proceedings, 113: 131–34. DOI: 10.1257/pandp.20231004Additional Materials
JEL Classification
- F34 International Lending and Debt Problems
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- H81 Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- L32 Public Enterprises; Public-Private Enterprises
- O19 International Linkages to Development; Role of International Organizations
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
- P34 Socialist Institutions and Their Transitions: Financial Economics