China pursues debt relief for developing countries

China has suspended debt repayments from 77 developing countries, including 40 in sub-Saharan Africa, in response to an agreement to support the world’s poorest countries during the coronavirus pandemic. An Out-Law.com report notes that the G20 countries issued a communiqué in April announcing they had agreed on a co-ordinated debt suspension approach with a common term sheet for the initiative. China’s Foreign Minister Wang Yi confirmed in May that China was pursuing debt relief for developing countries, largely in Africa, through the G20 debt suspension initiative. Last week Deputy Foreign Minister Ma Zhaoxu said repayments had been suspended from 77 developing countries. The World Bank estimates that highly indebted countries owe nearly $14bn under bilateral agreements in 2020, with China being one of the largest creditors to many of these countries. In particular, China has signed loan agreements with a number of developing countries in relation to its ‘belt and road’ initiative to build infrastructure along the former Silk Road trading route. Banking law and 'belt and road' initiative expert Kanyi Lui of Pinsent Masons said questions remained on how China’s debt relief would be carried out in practice. Lui said the announcement did not clarify whether the debt relief would only apply to concession loans, or also extend to commercial loans. The expectation is that commercial loans will be covered, as by some estimation commercial loans form over two thirds of all financings extended by China.