The Shanghai Institutes for International Studies (SIIS), a leading Chinese government-affiliated think tank, published in October 2021 a paper titled "The G20s Sovereign Debt Agenda: What Roles for China and the US?" by Ye Yu and Zhou Yuyuan.
The study acknowledges the current poor state of US-China relations, arguing that the root cause is Washington's intolerance of another great power with non-Western political institutions and ideologies embarking on accelerated rejuvenation. Beijing opposes the US policy of "strategic competition" with China. Nevertheless, SIIS argues there is actually room to explore how China and the US can work together to develop a new agenda for bilateral collaboration. In this connection, it has identified areas of cooperation on cyberspace, climate change, and institutional reform on global economic governance.
The US and China, one as the dominant financial power (US) and the other as the largest official bilateral creditor (China), share common interests and responsibilities in enhancing sovereign debt governance and fostering global sustainable development under the G20. SIIS proposes five steps the US and China could take.
First, both sides should put politics right and prioritize cooperation on sovereign debt treatment and sustainable development. The US should stop scapegoating China for the sovereign debt of developing countries, by hyping the theory of "debt trap," while China should address US concerns about lack of China's transparency. Second, the two countries should lead in coordinating macroeconomic policies, controlling global debt risks and mobilizing new resources for alleviating the debt burdens of the debtor countries. Third, China and the US should work together in exploring truly multilateral and public-private partnership approaches to deal with the unsustainable debt, based on case-by-case terms, ensuring equitable and fair burden-sharing among all categories of creditors. Fourth, the two countries should take the opportunity of debt treatments in fostering green and sustainable development of the debtor countries, while respecting their ownership and development level. Fifth, both countries should deepen trilateral development cooperation in the developing world through broader policy dialogue in the future.
Comment: This is a curious paper to be published at a time when US-China relations are so fraught. China has more to gain from this particular proposal than does the US because Beijing holds far more sovereign debt of countries that are debt distressed or at high risk of debt distress. The US ended nearly all loans to these countries many years ago. Nevertheless, even in the best of times, China never demonstrated much interest in cooperating with the US on development of low income countries.
