The Debt-Trap Debate: Reconciling Competing Perspectives on Chinese International Lending
P6-S149-3
Presented by: Patrick Shea
The notion that China engages in "debt-trap diplomacy" - deliberately using loans to gain strategic advantages over borrowing countries - has generated considerable debate among scholars and policymakers. However, this debate has been hampered by conceptual ambiguity, reliance on individual cases, and insufficient attention to borrower agency. We address these limitations by developing a more precise conceptual framework for identifying debt-trap diplomacy. Drawing on research in international political economy and authoritarian politics, we propose multiple empirical approaches to examine debt-trap dynamics. Using data on Chinese lending patterns and borrower characteristics from 2000-2020, we find limited evidence for the conventional debt-trap narrative. However, our analysis reveals that certain combinations of lender practices and borrower characteristics - particularly personalist authoritarian regimes with weak institutions - create conditions conducive to unsustainable debt. Our findings suggest that while "debt-trap diplomacy" may be too simplistic a characterization, the interaction between Chinese lending practices and recipient country political institutions merits attention. This study advances the debate by providing conceptual clarity, systematic evidence, and a clearer understanding of how domestic political factors shape international lending relationships.
Keywords: sovereign debt, default, debt-trap, China