Borrowing from China and Sovereign Credit Risk

Illenin Kondo, Astghik Mkhitaryan and Cesar Sosa-Padilla

AEA Papers and Proceedings, 2024, vol. 114, 148-52

Abstract: China's lending to developing nations has surged since the mid–2000s, making it these nations' largest official creditor. Contracts frequently feature unique terms, indicating China's substantial privileges as a lender. However, other lenders are also involved. We examine how these lending relationships with China affect access to credit from international bondholders. Combining data on external marketable debt and prices with Chinese lending data, we find that Chinese funding events decrease marketable debt issuance and sovereign yields. Conversely, debt restructuring with China leads to higher spreads. These findings underscore the impact of China's lending on international credit access.

JEL-codes: F34 O16 P33 P34 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/pandp.20241068

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