Show Notes
China became the world's largest bilateral creditor to developing countries over two decades, and for most of that time the scale of what it was doing was effectively a state secret. Its state-owned banks lent close to $1 trillion to developing-country governments, structured roughly half those loans against commodity export revenues held in offshore accounts, and concentrated the riskiest lending in countries such as Venezuela, Angola, and Russia. Net financial flows turned negative in 2019, and the countries that borrowed now repay more to China than they receive in new lending. Sebastian Horn of the Kiel Institute tells Tim Phillips that despite the opacity and the distinctive collateral structures, we’ve seen this movie before, in the 1920s and 1980s: in the bust, serial short-term extensions of grace periods that defer payments without resolving the underlying debt, while affected countries cut spending to stay current. What Horn calls a "silent crisis" is underway in a cluster of highly indebted developing countries, too small to trigger global contagion but large enough to matter profoundly for the people living through it. The challenge is whether China's lenders, debtor governments, and the broader international financial architecture can coordinate the kind of relief that will make a difference. The research behind this episode: Horn, Sebastian, Carmen M. Reinhart, and Christoph Trebesch. 2025. "China's Lending to Developing Countries: From Boom to Bust." Journal of Economic Perspectives 39 (4). To cite this episode: Phillips, Tim, and Sebastian Horn. 2026. "China's Lending to Developing Countries: From Boom to Bust." VoxDev Talk (podcast).
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About Sebastian Horn
Sebastian Horn is a professor of economics at the Kiel Institute for the World Economy and at the University of Hamburg, where his research focuses on international finance, sovereign debt, and China's role as a global creditor. Research cited in this episode
AidData. 2021. AidData's Global Chinese Development Finance Dataset, Version 3.0. AidData, William & Mary. A comprehensive public dataset tracing Chinese government-backed lending and grants to 165 countries between 2000 and 2017, built from embassy records, parliamentary gazettes, central bank reports, and news sources. Much of the quantitative evidence in the episode depends on it, since China has never published a consolidated balance sheet of its overseas lending. More VoxDev Talks on this topic
Is debt leading to the unsustainable exploitation of natural resources?: Tim Phillips speaks with Pushpam Kumar about how sovereign debt obligations shape governments' incentives to extract natural resources more intensively, and what that means for the long-run sustainability of resource-dependent developing economies. Related reading on VoxDev
Navigating Senegal's unexpected debt crisis: how a country widely regarded as a model of fiscal prudence found itself in acute debt distress, and what the episode reveals about the vulnerabilities facing developing-country borrowers in the current environment. Chinese development finance and public opinion: evidence on how Chinese-funded infrastructure projects affect attitudes towards China in recipient countries, with implications for understanding the political economy of China's overseas lending strategy.
More from VoxDev Development Economics
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King Leopold II of Belgium told his envoy in London that he did not want to lose his slice of "this magnificent African cake". The cake was the Congo Free State. Today the Democratic Republic of Congo holds 70% of the world's cobalt reserves, and so the cake is back on the table. Christopher Adam (Oxford) is one of the editors of a special issue of the Oxford Review of Economic Policy on the new scramble for critical minerals. The minerals lie mostly in the Global South, and the demand comes mostly from the North. In this week's VoxDev talk, Chris explains why a mining boom may create few jobs, why it might not last, and why hiring the best lawyers could be the smartest way to use an aid budget. The research behind this episode: Adam, Christopher, Rabah Arezki, and Frederick van der Ploeg. 2026. "The scramble for critical minerals." Oxford Review of Economic Policy 42 (1): 1-13. Open access. The introduction to Volume 42, Issue 1, a special issue on critical minerals. To cite this episode: Phillips, Tim, and Christopher Adam. 2026. "The critical minerals scramble.” VoxDev Talks (podcast).
This is an episode from VoxDev's new podcast series, Ideas in Development. This series has a separate podcast feed, where you can find every episode of Oliver Hanney’s conversations on evidence. YouTube: https://www.youtube.com/watch?v=R8eCnQy5fF4 Apple Podcasts: https://podcasts.apple.com/us/podcast/givedirectlys-quest-for-scale/id1866874059?i=1000791048981 Spotify: https://open.spotify.com/episode/2ffbhYkt9bYNiWUc5KPIuZ?si=13787b330c604508 Audioboom: https://audioboom.com/posts/8955404-givedirectly-s-quest-for-scale GiveDirectly started out as a small nimble team founded by PhD economists, who had a novel approach to ending poverty – just give cash. But they are no longer the new kids on the block, and have been scaling their operations rapidly in recent years, a trend that could intensify if the third wave of American philanthropy materialises. That’s a huge opportunity, but the potential of operating across entire countries is a radically different proposition. So what does an evidence-driven organisation research when it's trying to go from moving millions a year to billions? Caitlin Tulloch, Senior Director for Research, Learning and Product at GiveDirectly, joins Oliver Hanney for a wide-ranging conversation on cash transfers at scale. We cover running a research portfolio like the treasury, the macro forecasting work around a new Malawi project, the trade-off between fraud and reach, building a global emergency response capability, and the politics of putting a lot of cash into someone else's economy. Ideas in Development is a VoxDev podcast on economic policy and research. Find us wherever you get your podcasts, and read the full write-up on our Substack: https://ideasindevelopment.substack.com/