A Tougher China Agenda in Europe

After two years of significant advances on China policy, China hands in Brussels and European capitals are working to maintain continuity when a new EU Commission leadership takes over this fall following recent elections. They hope to lock down the China priorities that have been hard fought, to avoid starting again from scratch in 2020. Their efforts will benefit from support for a stronger China agenda across most member states, in Parliament, and from business. This get-tougher tendency is gathering steam despite Trump’s China policy disruptions, not because of them. As a result, we expect continued and expanded action in the next five years, beyond trade and investment rules into procurement, competition policy, and industrial policy.

Posted June 21, 2019
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New Data on the “Debt Trap” Question

The Belt and Road Forum takes place this week, in a context of mounting pushback against Beijing’s signature foreign policy initiative. Debt sustainibility concerns are at the center of current criticism, with the Sri Lankan example—where China assumed control of the Hambantota port—serving as a cautionary tale of the risks of reliance upon Chinese financing for infrastructure projects. We reviewed 40 cases of China’s external debt renegotiations to understand the broad patterns of outcomes, and to explore whether asset seizures as occurred in Sri Lanka are typical or exceptional. Key findings include:

Debt renegotiations and distress among borrowing countries are common. The sheer volume of debt renegotiations points to legitimate concerns about the sustainability of China’s outbound lending. More cases of distress are likely in a few years as many Chinese projects were launched from 2013 to 2016, along with the loans to finance them.

Asset seizures are a rare occurence. Debt renegotiations usually involve a more balanced outcome between lender and borrower, ranging from extensions of loan terms and repayment deadlines, to explicit refinancing, or partial or even total debt forgiveness (the most common outcome).

Despite its economic weight, China’s leverage in negotiations is limited. Many of the cases reviewed involved an outcome in the favor of the borrower, and especially so when host countries had access to alternative financing sources, or relied on an external event (such as a change in leadership) to demand different terms.

Posted May 2, 2019
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Brussels Awakening: A New Era for EU-China Relations?

The EU Commission, jointly with the European External Action Service (EEAS), published a major statement of position on EU’s relation with China this Tuesday, March 12. The “Joint Communication” illustrates a major shift in China strategy in Brussels and European capitals. This notes highlights some of its main takeaways.

Posted April 10, 2019
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