Chinese Debt Relief: Fact and Fiction

In mid-April, the World Bank and IMF held their (virtual) annual spring meetings. The COVID-19 crisis has pushed over 90 countries to ask the IMF for help. In late March, the two Bretton Woods institutions called on all official bilateral creditors – such as China – to provide immediate debt relief to low-income borrowers.

What will China do for its debtors now facing economic collapse? Some fear that a malign China will leverage this crisis to seize strategic assets. Others report that a benign China has already “wiped clean” many nations’ debt slates. “Chinese debt can easily be renegotiated, restructured, or refinanced,” said a Zambian economist.

Our research suggests that both views are far from reality. To work with Beijing to ease the pain of the spiraling economic crisis, policymakers will need to sort out the facts and the fiction about how China manages debt in troubled times.

The majority of China’s low-income borrowers are in Africa, where China made its first loan to Guinea in 1960. Today, China accounts for about 17 percent of African debt, according to the World Bank.

China does not publish data on its overseas lending, but our China Africa Research Initiative team at Johns Hopkins University has tracked more than a thousand Chinese loans – worth $152 billion – extended to 49 African governments and their state-owned companies between 2000 and 2018.