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Accepted Paper:

China, capital markets and the sovereign debt crisis amid fraying universalism  
Nicholas Jepson (University of Manchester)

Paper short abstract:

The sovereign debt crisis is at an impasse, with multilateral backstops failing. US reassertion of hegemony has brought stability, while eroding the global financial order. A complex patchwork of multi-scalar competition and collaboration is more likely to emerge than rival US and Chinese blocs.

Paper long abstract:

Covid-19 has produced a severe global economic shock. One result has been a sovereign debt crisis encompassing dozens of predominantly low- and middle-income states. Key multilateral crisis governance mechanisms- the International Monetary Fund as lender of last resort and the Paris Club as a forum for debt restructuring- have failed to adequately perform their expected backstop functions within the global financial order. One important cause has been the rise of a parallel system of Chinese development finance, only weakly connected to the incumbent US-centred regime and incompatible with many of its modalities. Concurrently, a global liquidity glut has seen a much wider range of states borrow from capital markets at commercial rates, greatly complicating restructuring processes. In response, the US has reasserted a hegemonic role through liquidity provision, relying on national institutions such as the Federal Reserve rather than multilaterals such as the IMF to bring temporary stability. I argue that these shifts represent a fraying of US-centred universalist institutions of the global economic order (a trend already observed at the WTO). US-Chinese geoeconomic competition increasingly extends to development finance in individual countries, presenting new opportunities and pitfalls for national-level actors, which I explore via examples from Sri Lanka and Ecuador. However, rather than a divergence into separate US- and China-centred financial blocs, a more likely medium term scenario may see the emergence of a patchwork of regional polarities and ad hoc configurations of private and state actors, an environment somewhat reminiscent of the turn of the 20th century.

Panel P03a
The rise of China and the re-scaling global development politics
  Session 1 Friday 8 July, 2022, -