Hidden in Plain Sight: Chinese Development Finance in Central and Eastern Europe

Abstract

China's bilateral loans have been the subject of much controversy. Most recently, an influential paper by Horn, Reinhart and Trebesch claimed that a large proportion of Chinese overseas lending is ‘hidden’ and not reported to any of the institutions which monitor global financial flows. This article examines this proposition in relation to Central and Eastern Europe, through an analysis of official Chinese lending to four countries (Belarus, Montenegro, North Macedonia and Ukraine). It finds that the most recent estimates of emerging markets’ and developing economies’ debts to China tend to be exaggerated, at least with respect to Central and Eastern Europe, and so are claims of hidden loans. In line with trends elsewhere, in three of the four cases private capital market debts outweigh debts to China. Although a lack of centralized data sources makes it challenging to form a full picture of Chinese lending, there seems to be less secrecy involved than is often suggested. Concerns remain regarding the apparent readiness of Chinese creditors to finance projects of dubious viability, as well as related issues of waste, corruption and environmental impact.