China's overseas lending

Sebastian Horn, Carmen Reinhart and Christoph Trebesch

No 2132, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Compared with China's dominance in world trade, its expanding role in global finance is poorly documented and understood. Over the past decades, China has exported record amounts of capital to the rest of the world. Many of these financial flows are not reported to the IMF, the BIS or the World Bank. "Hidden debts" to China are especially significant for about three dozen developing countries, and distort the risk assessment in both policy surveillance and the market pricing of sovereign debt. We establish the size, destination, and characteristics of China's overseas lending. We identify three key distinguishing features.First, almost all of China's lending and investment abroad is official. As a result, the standard "push" and "pull" drivers of private cross-border flows do not play the same role in this case. Second, the documentation of China's capital exports is (at best) opaque. China does not report on its official lending and there is no comprehensive standardized data on Chinese overseas debt stocks and flows. Third, the type of flows is tailored by recipient. Advanced and higher middle-income countries tend to receive portfolio debt flows, via sovereign bond purchases of the People's Bank of China. Lower income developing economies mostly receive direct loans from China's state-owned banks, often at market rates and backed by collateral such as oil. Our new dataset covers a total of 1,974 Chinese loans and 2,947 Chinese grants to 152 countries from 1949 to 2017. We find that about one half of China's overseas loans to the developing world are "hidden".

Keywords: China; international capital flows; official finance; hidden debts; sovereign risk; Belt and Road initiative (search for similar items in EconPapers)
JEL-codes: F21 F34 F42 F65 G15 H63 N25 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-his and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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https://www.econstor.eu/bitstream/10419/200198/1/1668908891.pdf (application/pdf)

Related works:
Journal Article: China's overseas lending (2021)
Working Paper: China’s Overseas Lending (2020)
Working Paper: China's Overseas Lending (2019)
Working Paper: China’s Overseas Lending (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2132

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