Working Paper: NBER ID: w26050
Authors: Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch
Abstract: Compared with China’s pre-eminent status in world trade, its role in global finance is poorly understood. This paper studies the size, characteristics, and determinants of China’s capital exports building a new database of 5000 loans and grants to 152 countries, 1949-2017. We find that 50% of China’s lending to developing countries is not reported to the IMF or World Bank. These “hidden debts” distort policy surveillance, risk pricing, and debt sustainability analyses. Since China’s overseas lending is almost entirely official (state-controlled), the standard “push” and “pull” drivers of private cross-border flows do not apply in the same way.
Keywords: China; Overseas Lending; Debt Sustainability; International Finance
JEL Codes: F21; F34; F42; F6; G15; H63; N25; O10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of transparency in China's lending (F65) | challenges for debt sustainability analyses (F34) |
| hidden debts (F34) | miscalculations in assessing economic health of recipient countries (F35) |
| opacity of China's lending practices (F34) | inability to monitor debt levels accurately (F34) |
| China's lending practices (F34) | rising debt burdens in recipient countries (F34) |
| China's lending practices (F34) | severe financial crises (G01) |