Zambia’s Debt Deal With China Is a Landmark Moment
The restructuring of the African country’s borrowings signals that China is ready to play by the developed world’s rules.
A landmark debt deal.
Photographer: Alex Davidson/Getty Images
Zambia may seem like an unlikely catalyst for an epochal shift in global finance, but the significance of the landlocked African nation’s $6.3 billion debt restructuring agreement isn’t to be doubted. The immediate consequences were evident: a rally in the bonds and currencies of low-income countries as a potential blockage in the framework for dealing with sovereign debt distress is lifted. The more enduring legacy, though, may lie in what this deal says about China.
The world has changed beyond recognition since the Latin American debt crisis of the 1980s, a situation with parallels to Africa’s current troubles. Back then, almost 40 years ago, China was a poor country, still emerging from decades of hardline Maoist policies. Now, it is a global superpower, owner of the world’s second-largest economy and Africa’s largest bilateral lender, holding more than $70 billion of debt as of 2020. Yet the architecture for restructuring the debt of countries that get into economic difficulties hasn’t fundamentally changed.