**4.3 Implications of the rise in China's lending14**

In contrast to global lending by advanced economies that originates in private banks and private capital markets, Chinese international lending originates in official sources. By 2017, China has become the largest official creditor surpassing the World Bank and the IMF. China has been lending to well over 100 countries. As of 2017, the highest ratio of official lending to local GDP was around 70% for Djibouti and about 6% for Ghana, which occupies the fiftieth place in this ranking (Figure 6 in Ref. [17]). The terms of Chinese official lending typically resemble those of commercial banks and about 50% of such loans to developing countries are not reported in standard debt statistics. Loans are denominated in USD or in local currencies. They are usually secured by means of domestic real assets or receipts owned by the borrower's country public or private entity that received the loan.

In case of default, the Chinese government takes over those assets. Essentially, potential financial difficulties are resolved directly through debt-to-equity swaps. It is probable that in some cases, Chinese authorities extend official loans to relatively risky ventures hoping that the borrowers will be unable to repay in order to expand China's control of world real resources. Although this is likely to be disliked by borrowing countries, these built-in debt-equity swaps reduce the likelihood of an open financial crisis triggered by defaults. On the other hand, the opaqueness of Chinese official lending statistics makes it difficult, if not impossible, to evaluate other potential risks embedded in those loans.
