China's Debt Collection Dominance: Lessons Learned and Strategies to Reduce Distressed Debt Exposure
China has become the world's largest debt collector, with developing countries owing between $1.1tn and $1.5tn to China, according to a report. Around 80% of China's overseas lending portfolio is now supporting financially distressed countries. As the debts to Chinese lenders have increased, so have the number of suspended or cancelled projects. China is concerned about the risk of defaults and has introduced measures to mitigate this, including reducing loans for infrastructure projects and increasing emergency lending. Chinese lenders have also increased penalties for late repayments, potentially alienating borrowers. The terms and conditions of Chinese loans are often not transparent, but economists estimate that they typically have a higher interest rate than World Bank loans. China is working to minimize debt distress while safeguarding its Belt and Road Initiative.