Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
China's Lending to Developing Countries: From Boom to Bust
Journal of Economic Perspectives
(pp. 75–100)
(Complimentary)
Abstract
This paper provides a comprehensive overview of China's lending to developing countries—a central feature of today's international financial system. Building on our previous research and the work of others, we document the scale, destination, and terms of China's overseas lending boom, as well as the lending bust and defaults that have followed. We compare China's lending boom to past boom-bust cycles and discuss the implications of China's rise as an international creditor on recipient countries and sovereign debt markets. The evidence indicates that Chinese state banks are assertive and commercially sophisticated lenders. For recipient countries, however, the jury is still out: it remains to be seen whether the gains from China's lending—through growth and improved infrastructure—will outweigh the more immediate burdens of debt service or the multifaceted costs of default.Citation
Horn, Sebastian, Carmen M. Reinhart, and Christoph Trebesch. 2025. "China's Lending to Developing Countries: From Boom to Bust." Journal of Economic Perspectives 39 (4): 75–100. DOI: 10.1257/jep.20241433Additional Materials
JEL Classification
- F34 International Lending and Debt Problems
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- L32 Public Enterprises; Public-Private Enterprises
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O19 International Linkages to Development; Role of International Organizations
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
- P34 Socialist Institutions and Their Transitions: Financial Economics