Abstract Until recently, developing countries were supposedly enjoying an unprecedented ‘age of choice’ when borrowing. Many observers were arguing then that geopolitical competition between lenders allowed them to extract better terms. Today, many face a looming debt crisis: financing options have shrivelled and restructuring talks are painfully slow, compounding debtors' misery. This is frequently attributed to creditors' geopolitical rivalry, reflecting China's rise as a sovereign lender. But why should competition between providers, once supposedly a boon for borrowers, now be a bane? This article explains this, by switching an inadequate geopolitics lens for a political economy analysis. The earlier expansion in lending was primarily driven not by geopolitical contestation but by prevailing politico-economic conditions within China and on international financial markets amid US-led quantitative easing, and was, furthermore, facilitated by China's fragmented internal governance. As economic conditions changed, financing dried up and creditors scrambled to secure returns. China's current chief competitors are not western states, but rival lenders: commercial bondholders and multilateral development banks. Given China's fragmented governance, lenders' commercial motives to recoup their loans primarily drive Chinese behaviour, not geopolitical objectives. This limits China's hegemonic potential and suggests developing countries may benefit less from the ‘second Cold War’ than some imagine.

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