China Development Finance in Emerging Markets : Project Financing versus Government Debt
Abstract
Development Finance to Emerging Market and Developing Economies (EMDEs) has a long history featuring long-standing lenders such as the IMF, the World Bank, Paris Club governments, and more recently China as the new largest official creditor to EMDEs. Our analysis takes the point of view of an EMDE small open economy by looking at the implications of China lending and highlighting a pattern in China development financing in EMDEs: via sovereign debt borrowing in the early 2000s, via project-financing (mostly in infrastructure) with the Belt and Road Initiative (BRI), and again via sovereign debt financing in the form of rescue loans after many EMDEs faced BRI’s loans repayment difficulties. We investigate whether these shifts are due to–or influenced by– i) the development stage of a country; ii) local investment capabilities; iii) government fiscal space; and/or iv) lenders’ preferences/project riskiness evaluation.
To do so, we first provide evidence of the new trends in China’s lending and in particular on the shift in development financing procedures in EMDEs. We then build a state-of-the-art quantitative economic model to rationalize these facts focusing on the choice between project financing and government borrowing.
About the speaker
Erica Perego is a researcher at Università Cattolica del Sacro Cuore di Milano in the “Economics and Finance” department. She holds a PhD in economics from the Université Catholique de Louvain and the University of Luxembourg (2014). Before joining UNICATT, she was a forecaster and researcher at CEPREMAP (2015-2017) in the Global Projection Model project joint with the IMF, she did a post-doc at the University of Evry-Val d’Essonne (Labex MME-DII, 2017-2018), and she worked as an international macro-economist at CEPII in the “Macroeconomics and International Finance” program (2018-2025). Her main research topics are international macroeconomics and international macro-finance, with a focus on developing countries. She has published her research in reviews such as the Journal of Monetary Economics and the Journal of International Money and Finance.
Language
English
This is a free seminar. Registration is mandatory.
Supported by the Fond National de la Recherche
Luxembourg (19441346)