Strategic and collective efforts are needed from both the creditors and borrowing countries facing the looming debt crisis, with a full understanding of what are good debts and what are bad debts depending on how they are used. The current narrative on debt sustainability often ignores the issue of what a government owns (assets) versus what a government owes (liabilities). While conventional approaches largely focus on the liability side, the kinds of assets a country tries to build are vital to economic development and debt sustainability. This paper proposed a new narrative on debt sustainability and thoughts on infrastructure financing under the circumstance of debt restructuring. The empirical part of the study presented both the conventional and a novel method to investigate the role of completed infrastructure projects, co-financed and jointly built by China and African countries, focusing on whether and to what extent they have addressed infrastructure bottlenecks. Both methods validate the hypothesis that China-financed and completed projects match the host country’s most backward sectors and address their development bottlenecks. These completed projects form a part of a country’s public operational assets that generate essential social services, jobs, government revenues, exports and growth.

debt sustainability; public sector balance sheet; infrastructure financing; development bottlenecks; debt restructuring

Acker K, Bräutigam D and Huang Y (2020). Debt Relief with Chinese Characteristics (Working Paper No. 2020/39). China Africa Research Initiative, School of Advanced International Studies, Johns Hopkins University, Washington, DC. http://www.sais-cari.org/publications

Akyüz Y (2007). Debt Sustainability in Emerging Markets: A Critical Appraisal (DESA Working Paper No. 61). DESA.

Ball I, Detter D, Amin-Salem H and Walker D (2020). How Smart Public Assets Management Can Drive the Post-COVID-19 Recovery. https://publicwealth.se/wp-content/uploads/2020/10/Public-Wealth-_Citi_Oct2020.pdf

Ball I, Detter D, Manuelides Y, et al. (2021, April 19). Why Public Assets are Key to Debt Sustainability: A Moral Goal. https://blog-pfm.imf.org/pfmblog/2021/04/-why-public-assets-are-key-to-debt-sustainability-a-moral-goal-.html

Brautigam D (2011). The Dragon’s Gift: The Real Story of China in Africa. Oxford University Press.

Brautigam D (2020). “A critical look at Chinese ‘debt-trap diplomacy’: The rise of a meme”. Area Development and Policy, 5(1): 1–14. https://doi.org/10.1080/23792949.2019.1689828

Brautigam D (2022). “China and Zambia: Creating a sovereign debt crisis”. International Affairs, 98(4): 1347–1365. https://doi.org/10.1093/ia/iiac109

Crawford G and Botchwey G (2017). “Conflict, collusion and corruption in small-scale gold mining: Chinese miners and the state in Ghana”. Commonwealth & Comparative Politics, 55(4): 444–470. https://doi.org/10.1080/14662043.2017.1283479

Detter D (2021). Exploring the Unknown—How Asset Maps Can Transform Public Financial Management. https://blog-pfm.imf.org/pfmblog/2021/08/-exploring-the-unknown-how-asset-maps-can-transform-public-financial-management-.html

Dreher A, Fuchs A, Parks B, et al. (2022). Banking on Beijing: The Aims and Impacts of China’s Overseas Development Program. Cambridge: Cambridge University Press.

Gallagher KP and Wang Y (2020). Sovereign Debt through the Lens of Asset Management: Implications for SADC Countries (GEGI Working Paper 042). Boston University GDP Center. https://www.bu.edu/gdp/files/2020/11/GEGI_WorkingPaper_042.pdf

Goldstein M (2003, February). Debt sustainability, Brazil, and the IMF (The Institute for International Economics Working Paper 03-1). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=384022

Gray DF, Lim CH, Loukoianova E and Malone S (2008). A Risk-Based Debt Sustainability Framework: Incorporating Balance Sheets and Uncertainty (IMF Working Paper No. 08/40). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1094222

Hostland D and Karam PD (2006). Specification of a Stochastic Simulation Model for Assessing Debt Sustainability in Emerging Market Economies (IMF Working Paper No. 08/64). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=956731

IMF (2018). Fiscal Monitor: Managing Public Wealth. International Monetary Fund.

IMF (2019, June 18). A Global Picture of Public Wealth. https://blogs.imf.org/2019/06/18/a-global-picture-of-public-wealth/

IMF (2021, February 3). IMF Executive Board Reviews IMF Debt Sustainability Framework for Market Access Countries (Press Release No. 21/31). https://www.imf.org/en/News/Articles/2021/02/02/pr2131-imf-executive-board-reviews-imf-debt-sustainability-framework-for-market-access-countries

Kaplan SB (2018). The Rise of Patient Capital: The Political Economy of Chinese Global Finance (Institute for International Economic Policy Working Paper Series). Elliott School of International Affairs and the George Washington University.

Lin JY (2012). New Structural Economics: A Framework for Rethinking Development and Policy. World Bank.

Lin JY (2014). The Quest for Prosperity: How Developing Economies Can Take Off. Updated Edition. Princeton University Press.

Lin JY (2018). “China’s rise and opportunity for structural transformation in Africa”. Journal of African Economies, 27: 115–128. https://doi.org/10.1093/jae/ejy012

Lin JY and Wang Y (2013). Beyond the Marshall Plan: A Global Structural Transformation Fund (Background Research Paper for the UN High Level Panel on the Post-2015 Development Agenda). World Bank.

Lin JY and Wang Y (2017a). “The new structural economics: Patient capital as a comparative advantage”. Journal of Infrastructure, Policy and Development, 1: 4–23. http://dx.doi.org/10.24294/jipd.v1i1.28

Lin JY and Wang Y (2017b). Going Beyond Aid: Development Cooperation for Structural Transformation. Cambridge University Press.

Lin JY and Wang Y (2021, December 6). Development Begins at Home. https://www.project-syndicate.org/commentary/focac-china-investment-in-africa-sustainable-development-by-justin-yifu-lin-and-yan-wang-2-2021-12

Mazzucato M (2015). “Innovation, the state and patient capital”. The Political Quarterly, 86: 98–118. https://doi.org/10.1111/1467-923X.12235

MOFCOM (Ministry of Commerce) (2020). Report on Development of China’s Outward Investment and Economic Cooperation. MOFCOM.

Ofosu G, Dittmann A, Sarpong D, et al. (2020). “Socio-economic and environmental implications of Artisanal and Small-Scale Mining (ASM) on agriculture and livelihoods”. Environmental Science & Policy, 106: 210–220. https://doi.org/10.1016/j.envsci.2020.02.005

OECD (2012). Mapping Support for Africa’s Infrastructure Investment. Organization for Economic Cooperation and Development.

Peppel-Srebrny J (2018). Government Borrowing Cost and Balance sheets: Do Assets Matter? (University of Oxford Department of Economics Discussion Paper Series No. 860).

Qian Y and Wang Y (2022). Reflections on Sovereign Debt Restructuring in Low-Income Countries and the Shanghai Model. https://www.bu.edu/gdp/2022/01/30/reflections-on-sovereign-debt-restructuring-in-low-income-countries-and-the-shanghai-model/

Reinsberg B, Stubbs T and Kentikelenis A (2022). “Compliance, defiance, and the dependency trap: International Monetary Fund program interruptions and their impact on capital markets”. Regulation & Governance, 16(4): 1022–1041. https://doi.org/10.1111/rego.12422

Simmons BA, Ray R, Yang H, Gallagher KP (2021). “China can help solve the debt and environmental crises”. Science, 371(6528): 468–470. https://doi.org/10.1126/science.abf4049

The State Council Information Office of the People’s Republic of China (2021). China and Africa in the New Era: A Partnership of Equals. http://www.news.cn/english/2021-11/26/c_1310333813.htm

Tang K and Shen Y (2020). “Do China-financed dams in Sub-Saharan Africa improve the region’s social welfare? A case study of the impacts of Ghana’s Bui Dam”. Energy Policy, 136: 111062. https://doi.org/10.1016/j.enpol.2019.111062

Koshima Y, Harris J, Tieman AF and De Sanctis A (2021). The Cost of Future Policy: Intertemporal Public Sector Balance Sheets in the G7 (No. 2021/128). International Monetary Fund.

Volz U, Akthar S, Gallagher KP, et al. (2020). Debt Relief for a Green and Inclusive Recovery. Heinrich Böll Foundation; Center for Sustainable Finance at SOAS, University of London; Boston University Global Development Policy Center. https://drgr.org/2020/11/16/report-debt-relief-for-a-green-and-inclusive-recovery/

Wang Y and Xu Y (2022). Debt Restructuring in Africa: Building Public Assets and Addressing Bottlenecks for Low-Carbon Economic Transformation (GCI Working Paper 020). Boston University GDP Center.

World Bank (2022). Global Economic Prospects June 2022 Edition. World Bank.

Yousefi MR (2019). Public Sector Balance Sheet Strength and the Macro Economy (Working Paper No. 19/170). International Monetary Fund.