US faults China over opaque overseas lending, warns of emerging-market debt risks

The United States has intensified its scrutiny of China's overseas lending, issuing a warning that the lack of transparency surrounding these financial activities could heighten the risk of unexpected defaults and debt restructuring in emerging markets. This concern was highlighted in the US State Department's 2026 Fiscal Transparency Report.

The report states that China has not met the minimum transparency requirements, pointing to deficiencies in both its domestic financial disclosures and the way it reveals its claims against foreign borrowers. The State Department argues that China's opacity regarding its foreign claims, which include loans and other obligations held by both state-owned and private commercial banks, as well as state-owned enterprises, obscures the true scale and terms of many sovereign liabilities.

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China’s lack of transparency related to its foreign claims – including loans and other obligations held by state-owned and private commercial banks and state-owned enterprises – obscures the scale and terms of many sovereign liabilities.

This lack of disclosure, according to the report, undermines the ability to conduct accurate risk assessments. Consequently, it increases the likelihood of unforeseen defaults or the need for debt restructuring in emerging economies that rely on Chinese financing. China is a significant source of funding for infrastructure and development projects across Asia, Africa, Latin America, and other developing regions.

The US State Department has introduced a new requirement for governments to publicly disclose the terms and conditions of sovereign loans provided to foreign borrowers. This includes detailing liabilities and collateralized assets. While the report does not explicitly state this new requirement was a direct response to China, the timing and context suggest a strong focus on Beijing's lending practices.

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The lack of disclosure undermined accurate risk assessments and increased “the likelihood of unexpected defaults or debt restructuring in emerging markets”.