As the world's largest official bilateral creditor, China should participate in meaningful debt relief for countries facing problems but has served for too long as a "roadblock" to necessary action, Treasury Secretary Janet Yellen said in a major speech on U.S.-China relations on Thursday.
Yellen said the United States expected China to make good its pledge to work constructively on issues such as debt relief and climate change, noting that delays in restructuring raised costs for both borrowers and creditors.
Speaking at Johns Hopkins University's School of Advanced International Studies, Yellen welcomed China's recent provision of credible financing assurances for Sri Lanka, but said Washington continued to urge China's "full participation" in providing debt treatments for Zambia, Ghana and other countries.
Yellen's remarks came after global finance officials from creditor and debtor countries, the International Monetary Fund, the World Bank and the private sector met in Washington last week on ways to accelerate long-stalled debt restructuring efforts. The IMF estimates that more than half of low-income countries are close to or already unable to service their debts.
IMF chief Kristalina Georgieva said on Friday that the new Global Sovereign Debt Roundtable had made "tangible progress" on debt restructuring issues. She said China and other participants had reached a common understanding that multilateral development banks could provide positive net flows to countries in need, instead of accepting outright reductions in debt levels.
China has long been unwilling to accept losses on loans unless private-sector creditors and multilateral development banks shoulder their share of the burden.
"China's participation is essential to meaningful debt relief, but for too long it has not moved in a comprehensive and timely manner. It has served as a roadblock to necessary action," Yellen said.
The United States and China — as the world's largest economies — had a responsibility to work together to help emerging markets and developing countries facing debt distress, she said.
"China’s status as the world’s largest official bilateral creditor imposes on it the same inescapable set of responsibilities as those on other official bilateral creditors when debt cannot be fully repaid," the Treasury secretary said.
Yellen said Washington was working with other stakeholders to improve the Group of 20's Common Framework process for low-income countries and the overall debt treatment process, adding, "Solving these issues is a true test of multilateralism."
She said the United States and China — the two largest emitters of greenhouse gases — also needed to work together to tackle climate change and called on Beijing to end overseas financing of unabated coal-fired power plants.
