China Has a Debt Problem—Other People’s Debt

China Has a Debt Problem—Other People’s Debt

China has become the world’s largest government creditor to the developing world. Now it’s facing the prospect of having to restructure debt to multiple countries at the same time. That will be high on the agenda of the International Monetary Fund and the World Bank’s annual meetings later this month.

Beijing is joining with creditors from the “Paris Club” of major lenders for the first time to offer relief in Zambia, a model that will extend to other low-income countries. But China’s domestic politics, including competing ministries and powerful banks, as well as its tense relations with the West, have caused some delay in debt relief.

For example, financial officials in Beijing are eager not to be accused of wasting public money, but China’s foreign ministry—worried about the country’s overseas image—is more inclined to restructure debt.

The Zambia case arguably shows that a lack of coordination was baked into the country’s “belt and road” overseas infrastructure initiative from the start. Deborah Brautigam of Johns Hopkins University found 18 different Chinese banks and companies providing credits for projects in Zambia. Those banks and companies appear not to have communicated much about their lending, and no one in Beijing seemed to be coordinating what they