Hidden Defaults

Sebastian Andreas Horn, Carmen Reinhart and Christoph Trebesch

No 9925, Policy Research Working Paper Series from The World Bank

Abstract: China’s lending boom to developing countries is morphing into defaults and debt distress. Given the secrecy surrounding China’s loans, also the associated defaults remain “hidden”, as missed payments and restructuring details are not disclosed. This paper constructs an encompassing dataset of sovereign debt restructurings with Chinese lenders and finds 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, multi-year debt workouts with serial restructurings lie in store.

Keywords: External Debt; Debt Relief and HIPC; Debt Markets; Financial Sector Policy (search for similar items in EconPapers)
Date: 2022-02-04
New Economics Papers: this item is included in nep-cna and nep-opm
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Journal Article: Hidden Defaults (2022)
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