China’s Strategic Lending Policy: Implications for Latin America

Abstract

China is quickly becoming the largest official lender in the world. For Latin America, China is overtaking multilateral lenders such as the World Bank as the biggest holder of debt in the region. When this is added to the trade relationship with Latin America that has grown rapidly in the twenty first century, initially driven by China’s demand for commodities, the linkage between the two now goes even deeper. It further means that a potential stop to Chinese funding due to a domestic financial crisis would have an even more widespread impact on Latin America. This paper analyses China’s overseas lending strategy and how it has deepened the relationship with Latin America. It then turns to the potential of a Chinese financial crisis and the significant implications for the Latin American region. The article concludes with policy recommendations.