The China in Africa Podcast How China Really Secures Its Loans to Developing Countries
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Jul 17, 2025 
In this discussion, Anna Gelpern, a legal scholar at Georgetown University, and Brad Parks, director of AidData, dive deep into China's approach to securing loans to developing countries. They debunk the 'debt trap' narrative, revealing there's no evidence of China seizing assets due to unpaid debts. The two experts explore innovative collateral methods, such as future cash flows from infrastructure projects. They also analyze the complexities involved in loan agreements, using case studies from Kenya and Ghana to highlight transparency issues and ethical implications in international finance.
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Cash Flow Not Physical Assets
- Chinese loans often use cash flow collateral, notably offshore foreign currency revenues, not physical assets.
- This makes repossession of tangible infrastructure like ports less likely and shifts focus to revenue streams.
Extensive Use of Liquid Collateral
- Half of $911 billion of public loans are collateralized, impacting 57 countries with $418 billion tied.
- Most collateral is liquid, like offshore accounts with dollars or euros, allowing creditors control on repayment priority.
Collateral Adapted for High Risk Projects
- Collateral structures used by China are common globally but combined and adapted uniquely for higher-risk loans.
- They use established commodity export revenues as collateral for unpredictable, risky projects to de-risk their lending.