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In the media
Professor Toshiro Nishizawa’s article titled “China’s double-edged debt trap” was published by the East Asia Forum.
As the world’s largest bilateral lender, China faces challenges in dealing with the debt distress of some of its borrowers under the Belt and Road Initiative (BRI). Whether China can support those debtors and avoid trapping itself in unpaid debts will depend on its policy choices. Past debt crises give China a lesson to consider upfront debt treatment for countries with unsustainable debt burdens, especially those disproportionately owed to China. It is worth considering the debt reduction in net present value terms. Another option could be a climate-centric approach such as debt-for-climate swaps, especially if China commits to promoting a green BRI. China should release itself at an early stage from the risk of being debt-trapped. Otherwise, it may make the same mistake that Western creditors made and eventually lose its financial claims.
