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This paper shows that China's lending boom to developing country sovereigns has largely ended and that debt distress and defaults are increasingly common. Chinese lenders react to this challenge through two main coping strategies: first, bilateral sovereign debt restructurings—typically with maturity extensions but no face value cuts—and, second, rescue loans that allow debtors to avoid or delay default. Low-income countries tend to receive debt restructurings, whereas emerging market countries are more likely to receive rescue loans. We speculate that the differential crisis response is due to the different exposure levels of Chinese state banks.


Horn, Sebastian, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch. "Debt Distress on China's Belt and Road." AEA Papers and Proceedings 113 (May 2023): 131-34.