How China Collateralizes

This paper is the first comprehensive analysis of the secured lending practices of Chinese creditors in emerging market and developing economies (EMDEs). We present a new dataset and detailed case studies of their collateralized public and publicly guaranteed (PPG) loans in EMDEs between 2000 and 2021. Almost half of China's total PPG loan portfolio to EMDEs is effectively collateralized - amounting to $420 billion in collateralized debt across 57 countries. We document that Chinese lenders build multi-layered legal safety nets around risky EMDE loans, adapting techniques from export and project finance. They rarely take infrastructure project assets as collateral, but rely on liquid, easily accessible assets, such as cash in bank accounts in China, funded from established commodity revenue streams unrelated to the project. These commodity revenues are routed overseas as security - out of public sight and largely beyond the borrower’s reach. Our findings raise new concerns about debt transparency, fiscal autonomy, and macroeconomic surveillance, particularly in commodity-exporting EMDEs.