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Borrowing from China and Sovereign Credit Risk

Author

Listed:
  • Illenin Kondo
  • Astghik Mkhitaryan
  • César Sosa-Padilla

Abstract

China's lending to developing nations has surged since the mid–2000s, making it these nations' largest official creditor. Contracts frequently feature unique terms, indicating China's substantial privileges as a lender. However, other lenders are also involved. We examine how these lending relationships with China affect access to credit from international bondholders. Combining data on external marketable debt and prices with Chinese lending data, we find that Chinese funding events decrease marketable debt issuance and sovereign yields. Conversely, debt restructuring with China leads to higher spreads. These findings underscore the impact of China's lending on international credit access.

Suggested Citation

  • Illenin Kondo & Astghik Mkhitaryan & César Sosa-Padilla, 2024. "Borrowing from China and Sovereign Credit Risk," AEA Papers and Proceedings, American Economic Association, vol. 114, pages 148-152, May.
    • Handle: RePEc:aea:apandp:v:114:y:2024:p:148-52
    DOI: 10.1257/pandp.20241068
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    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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