Right problem – wrong solution: The Chinese ECA threat to the multilateral official finance system

(TFX News, London, 10 December 2018) Often priced at well below accepted market rates, Chinese official finance is a major hurdle to fair competition in the global export market. A growing number of governments are attempting to compete by circumventing OECD rules and blurring trade with aid. But adding more unfair trade practices risks the global official finance system self-combusting and ending any real chance of a lasting and fair resolution to the problem. While delegates dressed in matching stilettos and pinstripe suits would probably spice up your average OECD meeting, real ECA and DFI cross-dressing – the increasingly blurred lines between tied ECA support and untied multilateral/DFI support – is a serious and growing problem, and one that governments need to address. ECA/DFI cross-dressing is a reaction to a common issue for non-Chinese ECAs – how to compete with opaque official finance offerings from China, which has long been providing cheap debt, arguably at unrealistic market rates. During the past 10 years China has transformed itself from an aid recipient into the largest official financier of developing countries. But many OECD companies are rightly concerned about the completely unregulated official finance practices of China.