During the last major Global South debt crisis in the late 1980s, the United States pioneered an initiative that bundled together all of these countries’ debts into a bond that would then be re-packaged and sold to investors. These so-called “Brady Bonds” were very effective in giving many of the poorest, most indebted countries the breathing room they needed to recover.
Now, as developing countries are confronting yet another debilitating debt crisis, an update to the Brady Bond idea is now circulating but this time it’s coming from China, not the U.S.
Just like a Brady Bond, the so-called Shanghai Model would roll up poor countries’ debt into a bond asset and then sell it to investors. But there’s a catch: rather than price it in dollars, the Shanghai Model would use Chinese yuan.
Economists Ying Qian and Yan Wang from Boston University’s Global Development Policy Center have been writing a lot lately about the Shanghai Model and exploring its viability. Ying joins Eric & Cobus from Washington, D.C. to discuss whether it really can replicate the success of the Brand Bond.
- Boston University Global Development Policy Center: Reflections on Sovereign Debt Restructuring in Low-Income Countries and the ‘Shanghai Model’ by Ying Qian and Yan Wang
- Boston University Global Development Policy Center: Brady Bonds and the Potential for Debt Restructuring in the Post-Pandemic Era by Ying Qian
- Financial Times: UN launches African repo market in bid to lower borrowing costs by Tommy Stubbington
About Ying Qian:
Ying Qian is a Non-Resident Senior Research Fellow with the Global China Initiative at the Boston University Global Development Policy Center and a freelance consultant and researcher. Previously, he served as the Director of Public Management, Financial Sector and Regional Cooperation Division at the Asian Development Bank, where he and his colleagues implemented programs and projects in areas of public finance, financial market development and trade and investment in countries of Central Asia, South Asia and Southeast and East Asia. Dr. Qian has also worked at the World Bank and the American Express Co. He holds a Ph.D. in Economics from Duke University and an undergraduate degree in Computer Science from Renmin University, China.