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Over the past 15 years, China has fueled one of the most dramatic and geographically far-reaching surges in official peacetime lending in history.While China in 2016 joined the ranks of countries reporting to the Bank for International Settlements, the lending from development banks in China is not broken down by counterparty in the BIS data.Because these are mostly dollar debts, missing the China connection leads to underestimating balance sheets' vulnerability to currency risk.Equally plausible (and not mutually exclusive), borrowers' external debt obligations may have reached the point where repayment difficulties have begun to emerge, leaving China's development banks with considerable exposure to risky or nonperforming sovereign loans.On the supply side, because there was little or no prior credit exposure to these countries, and because some of the major official creditors were not ready to return to development lending following the HIPC Initiative write-offs, a vacuum in official lending emerged.China is not a member of the Paris Club, so there is no reason to assume that the usual approach to official debt negotiations is relevant to understanding what may happen.
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