Image of Photo of Prof Deborah Brautigam
Photo credit Kaveh Sardari

China, the G20, and sovereign debt: from club to global governance

The China Forum lecture on Tuesday 7 March 2023 was delivered by Professor Deborah Brautigam (Bernard L. Schwartz Professor of International Political Economy Emerita and Director of the China Africa Research Initiative (CARI), Johns Hopkins School of Advanced International Studies (SAIS), Washington DC).

Professor Brautigam’s lecture examined the evolving relationship between China and the G20 in relation to sovereign debt, which is a key issue for understanding China’s changing role in global governance. There is growing risk of debt distress and default in developing countries. Professor Brautigam noted that the ‘myth of the Chinese debt trap’ is still widespread in the western media and among western politicians. Although Chinese financial institutions have significantly increased their lending, they still account for only five per cent of all outstanding public and publicly guaranteed (PPG) debt in low- and middle-income countries, compared to 23 percent held by the World Bank and other multilateral lenders. China’s share in Sub-Saharan Africa’s sovereign debt is higher than its share overall, but still stands at only 17 per cent of the total. Professor Brautigam noted that the mechanisms of global debt governance are ‘surprisingly informal’. Since the debt crisis in developing countries in the 1980s, the Bretton Woods institutions have engaged in repeated debt restructuring on an ad hoc basis. China also has followed a case-by-case approach to debt restructuring. In the face of the covid pandemic, there has been a historic shift in sovereign debt management. In April 2020, China joined with other G20 members in launching the Debt Service Suspension Initiative (DSSI). It allowed 73 low-income economies to apply for temporary suspension of interest and principal payments on their official bilateral external debt. Chinese financial institutions provided 63% of the total DSSI debt relief, despite being responsible for only 30% of the debt service due. Finding an agreed approach within the G20 has been complicated by China’s fears that private creditors might free-ride on debt relief agreed to by Chinese financial institutions

The following issues were raised in the Q&A session: the extent to which China can be considered to be a ‘rule breaker’, ‘rule maker’ or ‘rule shaker’; the role of western-trained Chinese bureacrats within the Chinese government; the role of ‘moral hazard’ in sovereign debt relief; the composition of global sovereign debt; whether the debt relief model adopted by China in Angola should be considered an example of ‘rule breaking’ or ‘rule shaking’; the reliability of the data on the World Bank’s public and publicly guaranteed (PPG) debt; the extent to which loans from China Exim Bank should be treated as sovereign debt; the role of the international media in shaping perceptions of China’s lending to developing countries; the relative merits of different approaches to solving developing countries’ sovereign debt problems; the relevance of China’s methods of resolving domestic insolvency to understanding China’s approach to debt restructuring outside China; and prospects for the long-run evolution of the G20’s governance structure.

Deborah Brautigam is the Director of the China Africa Research Initiative and the Bernard L. Schwartz Professor of International Political Economy Emerita at Johns Hopkins University’s School of Advanced International Studies (SAIS).

A Sinologist with extensive Africa research experience, her most recent books include The Dragon’s Gift: The Real Story of China in Africa (Oxford UP, 2010) and Will Africa Feed China? (Oxford UP, 2015), and Taxation and State-Building in Developing Countries (Cambridge UP, 2008). Before joining SAIS in 2012, she taught at Columbia University’s School of International and Public Affairs (SIPA) and American University’s School of International Service (SIS).

A firm believer that scholars can bridge the gap between research and policy, Dr Brautigam has been a visiting scholar at the World Bank, a senior research fellow at the International Food Policy Research Institute (IFPRI) and advised more than a dozen governments on China-Africa relations.

She has twice won the Fulbright research award and is a recipient of fellowships from the Council on Foreign Relations, the Woodrow Wilson International Center for Scholars and research grants from the UK Economic and Social Research Council (ESRC), the UK Centre for Economic Policy and Research (CEPR), and the Carnegie Corporation of New York.

Her PhD is from the Fletcher School of Law and Diplomacy, Tufts University.