China’s debt relief actions overseas: Patterns, interactions with other creditors and macroeconomic implications

This paper explores a novel database of 140 Chinese debt restructurings overseas between 2000 and 2019. It uncovers a number of salient features of the restructuring terms that China has offered in the past and the ways in which China has interacted with other types of creditor and the International Monetary Fund (IMF). The majority of debt relief operations have been executed through directly forgiving debt rather than rescheduling with maturity extension and interest rate reduction. Interestingly, a large number of Chinese debt relief operations took place within a two-year timeframe of similar actions by Paris Club or private sector creditors and in the context of financial assistance from the IMF. The paper uses local projections to identify the macroeconomic implications of Chinese debt relief operations and finds that growth effects are not pronounced once debt relief by other creditors and IMF financing are controlled for. Finally, it shows that varying restructuring terms lead to different macroeconomic effects and sovereign debt trajectories.