China as an International Lender of Last Resort

This paper shows that China has created a new global system for cross-border rescue lending to countries in distress. We build a comprehensive new dataset on China’s overseas bailouts between 2000 and 2021 and come to surprising new insights. Most importantly, we find that the People’s Bank of China’s (PBOC) global swap line network has been heavily used as a financial rescue mechanism, with more than USD 170 billion in emergency liquidity support to crisis countries. In addition, we document that Chinese state-owned banks and enterprises have extended an additional USD 70 billion in rescue loans for balance of payments support. In total, China’s overseas bailouts correspond to more than 20% of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) have relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. Our results have implications for the international financial and monetary system, which is becoming more multipolar, less institutionalized, and less transparent.