The Finance for Development Lab’s first China conference took place over two days (27 & 29th March 2023), aiming to build a better understanding of the country’s key challenges as a leading provider of finance to developing countries. Day 1 focused on the macroeconomic aspects of Chinese lending, whilst Day 2 discussed the new objectives of China’s lending operations and approach to development finance in today’s context of increasing debt levels and pressing climate and nature-related challenges. A summary paper of the discussions has been published here.
" The Common Framework, being a case-by-case approach to debt restructuring, cannot be industrialised like the Heavily Indebted Poor Countries (HIPC) Initiative. There needs to be a win-win approach to the debt crisis (…), a consensus on what constitutes a cut-off date for a country in default and for a process to define a capital state.”
Guillaume Chabert, IMF
" (There is) increasing difficulty of developed countries to access markets at reasonable rates, leading to more competition for capital flows. The World Bank has announced more flexible lending policies and the use of guarantees to access formal markets, but there is still little appetite for recapitalising or changing the rules in some Asian countries.”
Simon Cueva, former Minister of Economy and Finance of Ecuador
" Chinese creditors are hesitant to participate in debt restructuring when they feel that privileged creditors and non-creditors are pushing major creditors to pay the bill (...). A timely solution requires a fair and equitable burden sharing by all creditors.”
Dr Jin Zhongxia, People's Bank of China
- The seminar opened with a Keynote Address by Dr Jin Zhongxia, Director General of the International Department of the People's Bank of China
- Day 2 opened with a Keynote Speech by Dr Justin Lin, Dean of the Institute of New Structural Economics, and a dialogue with Bert Hofman, Director of the East Asia Institute at the National University Singapore
- Followed by a discussion with Dr Deborah Brautigam, Director of the China Africa Research Initiative (CARI) at Johns Hopkins University
Four Research papers were presented:
--> Comparability of Treatment, by Gong Cheng (BIS) and Aitor Erce (INARBE)
The paper discusses debt relief games and the interaction between different types of creditors, specifically the Paris Club, the private sector, and China. It proposes to build indicators or coincidence to investigate historical restructuring data and how different creditors interacted among themselves. The focus is on de facto inter-creditor coordination, rather than on the application of Comparability of Treatments (CoT).
--> Use of SDRs by China for the development of African countries, by Etsehiwot Kebret and Hannah Ryder (Development Reimagined)
The paper discusses China's commitment to reallocate 10 billion US dollars of its Special Drawing Rights (SDRs) to African countries, which accounted for around 25% of its new SDR allocation, the largest proportion of SDR locations committed to reallocate by any country in the IMF.
The paper suggests innovative ways to reform the system, exploring 5 options to re-channel China's SDRs to Africa.
--> Christoph Nedopil Wang, Director of the Green Finance and Development Center, Fudan University: "Can tripartite cooperation with China mobilise green project finance in the global South?"
The research examines the intersection of project infrastructure and finance, with a particular focus on green infrastructure finance. The paper feeds into the broader discussion on how to accelerate green infrastructure project funding in emerging countries, with an emphasis on addressing the environmental, social, and governance (ESG) challenges for tripartite cooperation between China, international institutions, and host countries.
--> Tianshu Sun (CAITEC) and Wei Shen (Institute for Development Studies) on: "Horizontal Fragmentation and Coordination Vacuum in China’s Foreign Aid System"
The paper focuses on the integration of climate and nature considerations into public financing. It examines the fragmentation and coordination vacuum in China's foreign biodiversity aid. Protection of nature as a focus of Chinese development assistance really took off in the run-up to the 15th Conference of the Parties for biodiversity hosted by China in 2021 and co-hosted by Canada in 2022. The initial goal of this research was to look at what China has been doing in terms of international development supporting biodiversity. Interviews were conducted with institutes involved in such projects.