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  5. Borrowing from China and Sovereign Credit Risk

AEA Papers and Proceedings

ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)

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Borrowing from China and Sovereign Credit Risk

  • Illenin Kondo
  • Astghik Mkhitaryan
  • César Sosa-Padilla
AEA Papers and Proceedings
vol. 114, May 2024
(pp. 148–52)
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Abstract

China's lending to developing nations has surged since the mid–2000s, making it these nations' largest official creditor. Contracts frequently feature unique terms, indicating China's substantial privileges as a lender. However, other lenders are also involved. We examine how these lending relationships with China affect access to credit from international bondholders. Combining data on external marketable debt and prices with Chinese lending data, we find that Chinese funding events decrease marketable debt issuance and sovereign yields. Conversely, debt restructuring with China leads to higher spreads. These findings underscore the impact of China's lending on international credit access.

Citation

Kondo, Illenin, Astghik Mkhitaryan, and César Sosa-Padilla. 2024. "Borrowing from China and Sovereign Credit Risk." AEA Papers and Proceedings, 114: 148–52. DOI: 10.1257/pandp.20241068

Additional Materials

JEL Classification

  • F34 International Lending and Debt Problems
  • O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
  • P34 Socialist Institutions and Their Transitions: Financial Economics