China’s Emergency Loans:
A New Alternative to the IMF
for Developing Countries
by Ioanna Okeania Polychronopoulou
This article examines China’s rise as a significant provider of emergency loans to developing nations and its impact on the international financial assistance framework, particularly the role of the International Monetary Fund (IMF). While some argue that China’s lending practices amount to ‘debt trap diplomacy”, others argue that China’s loans offer an alternative to the IMF’s conditionalities, providing infrastructure aid without imposing stringent conditions. However, this essay argues that China cannot replace the IMF in the long run. For this reason, it discusses the IMF’s traditional role and challenges posed by its loans, using Sri Lanka as a case study. Additionally, it explores China’s incentives for providing loans and evaluates their benefits, as well as the risks and implications for global power dynamics. Additionally, it discusses China’s challenge to IMF dominance and its impact on global economic governance. As a possible solution, this article proposes transparent loan agreements, sustainable debt levels, and responsible lending practices. Ultimately, the essay emphasizes the need for comprehensive reforms in the global financial landscape to address transparency, accountability, and debt distress concerns arising from China’s financial practices, while recognizing its limited but significant role as an alternative to the IMF.
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Picture: ‘Bank of China’ by PAM Phạm under a CC BY-NC 2.0.
The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of the Institute of International Relations or its Researchers.