Support is growing for debt relief to help the world's poorest, indebted nations - most of them in Africa - confront the economic havoc wreaked by COVID-19. But there is one big question mark: China.
A two-decade lending spree has propelled China to the top of Africa's creditor list and any comprehensive debt deal, including write-offs, would require Beijing to take a leading role and swallow losses, analysts say.
"China is in the driver's seat," said Scott Morris, a senior fellow at the Center for Global Development (CGD), a Washington think tank. "But this is going to require real pain for creditors, and I'm not sure they've come to terms with that."
Beijing is likely to endorse a temporary freeze on debt payments by African countries as part of an expected agreement by the Group of 20 (G20) major economies this week, two sources familiar with the process told Reuters.
Debt relief is the obvious next step but China is unlikely to lead the charge on such a move, analysts say, despite the potential opportunity to burnish its soft power credentials.
China's Foreign Ministry and the China International Development Cooperation Agency did not respond to Reuters' requests for comment.
Unlike major Western countries that granted debt relief in the past, a large part of China's debt to Africa carries commercial terms. And China itself is still an emerging economy with per capita income of $10,153 in 2019, below the average of $45,447 for the top seven major economies, according to data from the International Monetary Fund (IMF).
"China is still a rising power, and it is only a recent ... entrant as a major financial partner in Africa," said Yunnan Chen of the Overseas Development Institute (ODI), a London think tank.
"It also needs to make financial and economic returns on its investments. We are very unlikely to see direct loan forgiveness for a substantial bulk of loans."
With its own economy expected to contract for the first time in three decades, China has signalled little appetite to go beyond its well-worn playbook of bilateral negotiations with debt-distressed partners.
"We can't answer to every debt relief request without detailed analysis," said He Haifeng, director of the Institute of Financial Policy at the Chinese Academy of Social Science, a government think tank.
"Some of the requests could cause moral hazard."
Wealthy governments watching their own economies lurch towards recession are unlikely to pour significant resources into debt relief if they think the money will indirectly support Chinese creditors, analysts say.
URGENT HELP NEEDED
With around 12,500 COVID-19 cases to date, Africa accounts for a small fraction of the more than 1.7 million infections globally.
Nonetheless African countries have taken a disproportionate hit due to plummeting oil and commodity prices and weaker currencies, which ramp up external debt servicing costs.
Their economies are expected to contract sharply this year and could lose 20 million jobs.
As an immediate step, the IMF and World Bank are pushing for a payment moratorium on bilateral debt owed by the world's poorest countries.
Last week, IMF chief Kristalina Georgieva said China was "constructively" engaging on the issue. A Chinese official told Reuters that Beijing was willing to work with borrowers on a bilateral basis and agreed some countries should not be forced to service debt during the crisis.
The IMF is not currently pushing for a broader initiative, but experts say a payment freeze is a first step towards that.
African finance ministers are calling for a $100 billion stimulus package, of which $44 billion would come from not servicing debt - bilateral, multilateral or commercial. They want some debt owed by Africa's poorest nations cancelled and the remainder converted into long-term, low-interest loans.
That's a big ask, say experts.
NO GRAND GESTURES
China's government, banks and companies lent some $143 billion to Africa between 2000-2017, much of it for large-scale infrastructure projects, according to data from Johns Hopkins University. By some estimates, Chinese lending now dwarfs World Bank loans in Africa.
The ODI estimates lending from China makes up 33% of external debt service in Kenya, 17% in Ethiopia and 10% in Nigeria.
Terms of Chinese lending have generally been favourable, though a CGD study published earlier this month found they were consistently harder than World Bank terms, particularly for the poorest countries.
Chinese institutions offered fewer grants; grace periods on loans were shorter, and the weighted mean interest rate was higher - 4.14% compared to the World Bank's 2.1%.
While China has played a highly publicised role in Africa's fight against the pandemic - with billionaire Jack Ma dispatching planeloads of medical equipment - there's little indication of a similar grand gesture on debt.
Beijing has a history of working with struggling borrowers, but the process often aims to ease short-term pressure to ensure eventual repayment.
The New York-based Rhodium Group research firm, analysing some recent negotiations between China and its borrowers, last year found debt forgiveness was relatively common, though the sums involved were often small and paired with substantial additional lending.
In Sudan, for example, China wrote off $160 million in 2017, 2.5% of the estimated $6.5 billion it was owed.
Ghana's finance minister Ken Ofori-Atta said last week that China needed to do more. A foreign ministry spokesman said China would engage its partners individually.
Experts say China's ad hoc approach cannot work in the current crisis but a coordinated initiative involving all creditors would require Beijing to open its books, something it has repeatedly resisted.
The Trump administration has in the past signalled reluctance to support broad debt relief, given Africa's heavy borrowing from China.
U.S. officials did not respond to a request for comment.
Washington's current absence from the conversation has left a leadership vacuum. But it will likely bristle at any process over which it deems Beijing has too much influence, analysts say.
"I worry that even if China sees this as an opportunity to seize leadership and exploit it, the U.S. could walk away from it," the CGD's Morris said.
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