> Compounding this unease is a persistent comparison circulating in public discourse: Sri Lanka’s Hambantota Port. Once hailed as a gateway to global maritime trade, the port became an emblem of debt vulnerability after Sri Lanka, unable to service over US$1.4 billion in Chinese loans, granted China Merchants Port a 99-year operational lease in 2017.
> This paper is the first comprehensive analysis of the secured lending practices
of Chinese creditors in emerging market and developing economies (EMDEs).
We present a new dataset and detailed case studies of collateralized public and
publicly guaranteed (PPG) loans from Chinese state-owned institutions in EMDEs
between 2000 and 2021. Almost half of China’s total PPG loan portfolio in EMDEs
is effectively collateralized—amounting to $420 billion in collateralized debt
across 57 countries.
> We document that Chinese lenders use techniques adapted
from export and project finance to build multi-layered legal safety nets, which
help ensure that risky EMDE loans will be repaid. As security, they use liquid,
easily accessible assets, such as cash in bank accounts located in China. They
rarely take infrastructure project assets as collateral, but often rely for repayment
on established commodity revenue streams unrelated to the project.
1 Comment
> Compounding this unease is a persistent comparison circulating in public discourse: Sri Lanka’s Hambantota Port. Once hailed as a gateway to global maritime trade, the port became an emblem of debt vulnerability after Sri Lanka, unable to service over US$1.4 billion in Chinese loans, granted China Merchants Port a 99-year operational lease in 2017.
Some narratives just never die, no matter how comprehensively they’re [disproven by the data](https://sccei.fsi.stanford.edu/china-briefs/how-china-collateralizes-inside-400-billion-cash-secured-lending-system#:~:text=Contrary%20to%20the%20common%20perception,based%20rather%20than%20asset%2Dbased.).
> This paper is the first comprehensive analysis of the secured lending practices
of Chinese creditors in emerging market and developing economies (EMDEs).
We present a new dataset and detailed case studies of collateralized public and
publicly guaranteed (PPG) loans from Chinese state-owned institutions in EMDEs
between 2000 and 2021. Almost half of China’s total PPG loan portfolio in EMDEs
is effectively collateralized—amounting to $420 billion in collateralized debt
across 57 countries.
> We document that Chinese lenders use techniques adapted
from export and project finance to build multi-layered legal safety nets, which
help ensure that risky EMDE loans will be repaid. As security, they use liquid,
easily accessible assets, such as cash in bank accounts located in China. They
rarely take infrastructure project assets as collateral, but often rely for repayment
on established commodity revenue streams unrelated to the project.