Briefing Paper 9 and Policy Brief 64 - Integrating China into Multilateral Debt Relief: Progress and Problems in the G20 DSSI

April 3, 2023

Deborah Brautigam and Yufan Huang provide the first in-depth evaluation of China’s participation in a major multilateral experiment in sovereign debt management: the G20’s COVID-19 Debt Service Suspension Initiative (DSSI). Through analysis of available data, more than 100 interviews, and fieldwork in Angola, Kenya, and Zambia, we argue, with some caveats, that the DSSI was a success. First, it succeeded in providing a pathway for China, the world’s largest bilateral creditor, to negotiate debt treatments together with the Paris Club in the Common Framework. Second, China fulfilled its role fairly well as a responsible G20 stakeholder. In the 46 countries that participated in the DSSI, Chinese creditors accounted for 30 percent of all claims, and contributed 63 percent of debt service suspensions. Finally, the DSSI pushed the Chinese government to align interests among fragmented banks and bureaucracies with conflicting goals. This process, still underway, is a necessary step toward full acceptance of the necessity for debt restructuring in the post-pandemic era.

Working Paper 53 and Policy Brief 63 - From Contractors to Investors? Evolving Engagement of Chinese State Capital in Global Infrastructure Development and the Case of Lekki Port in Nigeria

February 14, 2023

Will China continue to finance global infrastructure development in the same way it used to? As the world, and especially China itself, re-emerges from the COVID-19 pandemic, the answer to this question will shape the global political economy of development in the years to come. In January 2023, Nigeria inaugurated Lekki Port, the country’s first deep seaport as well as the first port project executed through “integrated investment, construction, and operation” (IICO) by a Chinese company in Africa. Using the Lekki Port case, Hong Zhang argues that the Chinese financing model is likely to change as required by the evolving needs of China’s infrastructure industry, specifically their desire to move up the value chain. However, Chinese state-owned enterprises (SOEs) and financial institutions face a steep learning curve in their attempt to upgrade. Collaboration with international actors from advanced economies is one way forward.

Briefing Paper 8 - Evolution of Chinese Lending to Sri Lanka Since the mid-2000s: Separating Myth from Reality

November 29, 2022

Sri Lanka’s April 2022 default has brought renewed attention to Chinese lending on the troubled island. Umesh Moramudali and Thilina Panduwawala’s new briefing paper, based on their Freedom of Information requests, shows that loans from Chinese banks now constitute 19.6 percent of public debt, much higher than the often quoted 10 to 15 percent. All this debt was duly reported to the World Bank’s International Debt Statistics. Interest rates on Chinese loans averaged 3.2 percent – higher than Japanese, World Bank, and ADB loans, but significantly lower than Eurobonds (6.9 percent). While much commentary has charged China with “asset seizure” in the case of the lease of Hambantota Port, debt service for the Port came to only 2.4 percent of Sri Lanka’s total payments in 2017, the year the port was leased. There was no default on the port loans in 2017. Loan contracts obtained by the authors show no evidence of the port serving as collateral for the Chinese loans (see the special appendix here).

Working Paper 52 and Policy Brief 62 - How Africa Borrows From China: And Why Mombasa Port is Not Collateral for Kenya's Standard Gauge

April 14, 2022

In December 2018, a leaked letter from Kenya's Auditor General warned that the Kenya Ports Authority's assets - of which Mombasa Port is the most valuable - risked being taken over by China Eximbank if Kenya defaulted on the Standard Gauge Railway loans. The rumor that Kenya had used Mombasa Port as collateral for the railway became widely accepted globally as another example of "Chinese debt-trap diplomacy." In Working Paper 52 and Policy Brief 62, Deborah Brautigam, Vijay Bhalaki, Laure Deron, and Yinxuan Wang unpack this case using tools of international contract law and commercial project finance. Their detailed forensic analysis shows why the rumor is wrong. Rather than a deliberate debt trap, the railway project was carefully and creatively designed to reduce the risks of sovereign default and enhance the bankability of an infrastructure project with high costs but significant long-term benefits for Kenya and the region.

Briefing Paper 7 – Montenegro, China, and the Media: A Highway to Disinformation?

December 8, 2021

On June 21, 2021, the French public television channel France 2 aired a report in which it was stated that Montenegro, a heavily indebted nation, was at risk of “having to cede some of its land to China” as a result of its inability to pay back a loan for the construction of a highway. According to reporters, Montenegro’s Port of Bar could be annexed by China “completely legally,” thanks to an “extraordinary contract” that had been “never seen before in Europe (...).” In reality, reporters erroneously presented a standard sovereign immunity waiver as evidence that China is entitled to seize land in Montenegro in the case of a payment default, reflecting their lack of understanding of normal international legal practice. Laure Deron, Thierry Pairault, and Paola Pasquali argue that criticism of problematic Chinese lending practices must be based on facts, not unfair and misguided denunciation.

Chinese Lending to Sri Lanka: A Factual cum “Reality” Check

March 2, 2023

This guest blog post by Dr Muttukrishna Sarvananthan is a response to CARI briefing paper 08/2022: Evolution of Chinese Lending to Sri Lanka Since the mid-2000s: Separating Myth from Reality by Umesh Moramudali and Thilina Panduwawala

The purpose of this response is, firstly, to pinpoint the factual errors (both quantitative and qualitative) in Moramudali and Panduwawala (2022), and, secondly, to contest the “reality” the authors are attempting to illustrate with such studious endeavour.    

However, more than the factual errors (both quantitative and qualitative), our main concern here is the interpretation of the facts and the conclusions drawn therefrom by Moramudali and Panduwawala (2022). Moreover, we will be pointing out certain instances where Moramudali and Panduwawala (2022) contradict themselves by demolishing and also affirming the so-called “myths” (“hidden debt”, for instance) in different places in the same Briefing Paper. The peer reviewer/s (if there were any) seem to have not noted these contradictions or anomalies.

Read more on CARI’s blog.

Interactive Database – Chinese Loans Commitments to Africa

The Chinese Loans to Africa (CLA) Database is an interactive data project started by SAIS-CARI in 2020.

Since 2007, SAIS-CARI researchers have collected, cleaned and analyzed publicly-available data to create a database on Chinese lending to Africa. The data sources include official government documents, contractor websites, fieldwork, interviews, and media sources.

Between 2000 and 2019, SAIS-CARI estimated Chinese financiers signed 1,141 loan commitments worth US$153 billion with African governments and their state owned enterprises. The figures are not equivalent to African government debt, as the database does not track disbursement or repayment.

As of March 29, 2021, the Chinese Loans to Africa Database is managed by the Boston University Global Development Policy Center.