The Myth of the “Debt-Trap” in China-CEEC Cooperation: A Fact Check
Junchi MA
Assistant Professor in Institute of European Studies, Chinese Academy of Social Sciences
Summary
According to some, China has been trapping its borrowers in debt. China’s collaboration with Central and Eastern European countries has also been criticized for the same reason for projects in Montenegro, North Macedonia, and Hungary. According to publicly available data, the public debt levels in Montenegro, North Macedonia, and Hungary have not been inflated by Chinese loans, and the prospects for economic recovery in the three countries are favorable. Along with the politicization of the debt issue, the author argues there are two previously overlooked explanations. To begin, China has disrupted the existing foreign creditor system in all three nations, further reducing the share of debt owed to Western financial institutions. Second, financing activities in China and large Western financial institutions are quite distinct. The experience of the EIB, World Bank, and EBRD is instructive in terms of widening financing channels and introducing private capital in order to further develop China-CEEC and China-EU collaboration.
Keywords: China-CEEC Cooperation, Debt Trap, Public Debt, Infrastructure Financing