Publication: China as an International Lender of Last Resort
Date
2023-03-28
ISSN
Published
2023-03-28
Author(s)
Horn, Sebastian
Parks, Bradley C.
Reinhart, Carmen M.
Trebesch, Christoph
Abstract
This paper shows that China has
launched a new global system for cross-border rescue lending
to countries in debt distress. It builds the first
comprehensive dataset on China’s overseas bailouts between
2000 and 2021 and provide new insights into China’s growing
role in the global financial system. A key finding is that
the global swap line network put in place by the People’s
Bank of China is increasingly used as a financial rescue
mechanism, with more than USD 170 billion in liquidity
support extended to crisis countries, including repeated
rollovers of swaps coming due. The swaps bolster gross
reserves and are mostly drawn by distressed countries with
low liquidity ratios. In addition, we show that Chinese
state-owned banks and enterprises have given out an
additional USD 70 billion in rescue loans for balance of
payments support. Taken together, China’s overseas bailouts
correspond to more than 20 percent of total IMF lending over
the past decade and bailout amounts are growing fast.
However, China’s rescue loans differ from those of
established international lenders of last resort in that
they (i) are opaque, (ii) carry relatively high interest
rates, and (iii) are almost exclusively targeted to debtors
of China's Belt and Road Initiative. These findings
have implications for the international financial and
monetary architecture, which is becoming more multipolar,
less institutionalized, and less transparent.
Link to Data Set
Citation
“Horn, Sebastian; Parks, Bradley C.; Reinhart, Carmen M.; Trebesch, Christoph. 2023. China as an International Lender of Last Resort. Policy Research Working Papers; 10380. © World Bank, Washington, DC. http://hdl.handle.net/10986/39605 License: CC BY 3.0 IGO.”