China’s stance on debt forgiveness is causing tension with “multilateral” international lenders, as highlighted in a recent report by economists Radhika Desai and Michael Hudson.
The report notes that China is questioning the priorities of the International Monetary Fund (IMF) and the World Bank, asking why its debt should not be cancelled and why the institutions should have priority.
This is in contrast to the West, which wants China to refinance the debt owed to it so that Third World debt repayments go to private lenders.
However, China argues that it will only accept debt forgiveness if multilateral, bilateral and commercial creditors share the burden equally.
A recent three-point proposal put forward by China calls for the IMF to quickly share its debt sustainability assessments for countries in need of debt relief, and for creditors to detail how they will carry out restructurings on comparable terms.
The report also notes that anonymous sources may have misled Reuters into reporting that China had dropped its demand for multilateral development banks to share losses in sovereign debt restructurings for poor nations, when this is not the case.
Read the full analysis here.
