Hidden Defaults

Sebastian Horn, Carmen Reinhart and Christoph Trebesch

AEA Papers and Proceedings, 2022, vol. 112, 531-35

Abstract: China's lending boom to developing countries is morphing into defaults and debt distress. Given the secrecy surrounding China's loans, the associated defaults remain "hidden," as missed payments and restructuring details are not disclosed. We construct an encompassing dataset of sovereign debt restructurings with Chinese lenders and find that these credit events are surprisingly frequent, exceeding the number of sovereign bond or Paris Club restructurings. Chinese lenders follow a resolution approach reminiscent of 1980s Western lenders; they seldom provide deep debt relief with face value reduction. If history is any guide, multiyear debt workouts with serial restructurings lie in store.

JEL-codes: F34 H63 O16 P34 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Hidden Defaults (2022)
Working Paper: Hidden defaults (2022)
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DOI: 10.1257/pandp.20221002

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