China’s debt leniency claim for developing nation ‘restructurings’ undercut by transparency issues

Ministry of Foreign Affairs said that China has outperformed other G20 members in helping the world’s poorer nations deal with the impact of the coronavirus

Restructurings, including cancelling debt, have taken place, but a lack of transparency has made it difficult to assess the level of support

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Around half of Loas’ debt is owed to China on loans for projects, including the China-Laos railway. Photo: Xinhua

Published: 10:00pm, 27 Sep 2022Updated: 12:50am, 28 Sep 2022

China’s claim that it outranks the world’s other major economies by the amount of debt it has deferred collecting from developing countries is hard to prove, economists said, due to a lack of hard data.

Ministry of Foreign Affairs spokesman Wang Wenbin said last week that China has outperformed other Group of 20 (G20) members in the Debt Service Suspension Initiative, which started in May 2020 aimed at helping the world’s 73 poorer nations deal with the impact of the coronavirus.

China’s loans have supported infrastructure projects across Africa and Southeast Asia for a decade or more, including via its Belt and Road Initiative, although recent loan issues in Laos and Sri Lanka have added suspicion about Chinese debt.

“Restructurings”, including cancelling debt and changing repayment terms, have already taken place, said James McCormack, managing director and global head of sovereign and supranational ratings, at Fitch Ratings.

The biggest criticism levelled at China by the international financial community is that the debt restructurings are not sufficiently transparent

James McCormack

“The biggest criticism levelled at China by the international financial community is that the debt restructurings are not sufficiently transparent, making it more difficult for other creditors to assess what level of support they may need to provide to ensure the debtor country’s external debt position is sustainable,” he said.