AIDDATA, a research lab at William and Mary, published in March 2021 a detailed study titled "How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments" by Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, and Christoph Trebesch.
The study provides a systematic analysis of the legal terms of China's foreign lending. It analyzes 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries. Government borrowers in Africa account for 47 percent of the 100 Chinese government contracts.
The major findings are:
1. Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt.
2. Chinese lenders use formal and informal collateral arrangements to maximize their repayment prospects.
3. Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep debt out of collective restructuring ("no Paris Club" clauses).
4. Cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors' domestic and foreign policies.
The authors conclude the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially-savvy lender to the developing world.
