Veiled futures? Debt burdens, the Belt Road Initiative, and official Chinese lending after coronavirus

Abstract

This article examines China's role in the emerging markets debt crisis as a result of the explosion of its lending followed by the 2020 coronavirus pandemic. Specifically, we focus on China's official lending to countries that have signed on as partners of China's Belt Road Initiative (BRI) given the high likelihood, in light of the pandemic, of a repeat of the global debt crisis of the 1980s. By putting the current crisis into historical perspective, we compare the present sovereign debt crisis to previous crises that have occurred at major geopolitical inflection points in order to more precisely articulate China's role as a player in the contemporary global financial regime. At the heart of this study is the paradox that, on the one hand, both China and BRI-participant countries may be politically motivated to emphasize the positive and constructive nature of bilateral Chinese official lending, but on the other hand, certain actors within many of these countries are struggling with the idea of how such official debt influences these countries’ ability to deploy and shape their own national development and the territorial sovereignty they believe it requires. Our exploration of this paradox employs empirical evidence in order to analyze the BRI debtor problem in a more geographically disaggregated way than is typical in much of the current literature.