Read on Twitter
V. informative piece by @TJMa_beijing summarizing the debates in China about how to manage the external debts. One article cited in this post by two Chinese economists is particularly interesting: They propose to convert the dollar-dominated loans into... https://pandapawdragonclaw.blog/2020/06/21/how-will-china-handle-multiple-debt-repayment-crises/
...RMB-denominated ones before considering any haircuts or even write-offs. They see this as an opportunity to activate the dormant offshore RMB (and argue that BRI financing has so far helped reinforce dollar's position in int'l monetary system)... https://www.sohu.com/a/392534144_465450
...Not sure how feasible this is and it's probably just one of many ideas emerging out of this round of debates. Point is that many in China are now thinking hard to find some innovative solution. My take-away: debt write-offs are the last thing Chinese banks will consider...
...They'll try their best to preserve the value of the assets on their books as their performance evaluation hinges on this. Debt-to-equity swaps may be China's preferred approach but it won't be straight forward, as the bank will still need to find an industrial partner...
...willing to come in and take equity(& risk) in the underlying project. But D2E swaps will likely be controversial in the host countries since they give controlling stakes of major infrastructure projects to a Chinese entity. So potentially a deadlock situation in negotiations.
