Conditionality in Chinese bilateral lending

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Title: Conditionality in Chinese bilateral lending
ISBN: 78-952-462-709-2
Author: Mattlin, Mikael ; Nojonen, Matti
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2011
Series number: 14/2011
Year of publication: 2011
Publication date: 20.6.2011
Published in: Published in Journal of Contemporary China, Volume 24, Issue 94, 2015: 701-720 as Conditionality and Path Dependence in Chinese Lending.
DOI: 10.1080/10670564.2014.978154
Pages: 36 s.
Keywords: Kiina; luotonanto; luotot; kansainvälinen; Bofit-kokoelma; ehdollistaminen; lainaehdot; politiikkapankit
JEL: F34; F36; F59
Abstract: China.s long insistence on non-interference and sovereignty and frequent criticism of Western in-terventionism has contributed to a widely held impression that China lends and invests abroad without attaching policy conditions. This discussion paper surveys the general policy debate on conditionality in lending, as well as China.s own debate on conditionality. We then examine bila-teral loans provided by Chinese state-owned policy banks, notably China Exim Bank, arguing that the assumption of China.s shunning conditionality is valid only if the term is taken narrowly to imply the specific set of policy conditions (e.g. privatisation and financial liberalisation) routinely called for by World Bank Group lenders. Based on a literature review and analysis of loan features along with tentative evidence from empirical cases of Chinese bilateral lending, we identify four hypothetical types of conditionality: political conditionality, embedded conditionality, cross-conditionality and emergent conditionality. In all likelihood the last three types of conditionality are not imposed by a unitary state actor, but emerge as an indirect consequence of the voluminous busi-ness activities of Chinese state-linked lenders and enterprises in developing countries. Keywords: China, bilateral lending, conditionality, policy banks JEL codes: F34, F36, F59

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