Chapter 4 employs an originally constructed data set, the China Global Finance Index, to conduct cross-national tests spanning eighteen Latin American countries from 1990 to 2017. The index characterizes Chinese policy loans by their ?nancing channel (state-to-state vs. market-based) for each national-level investment project.The chapter ?nds that China’s state-to-state loans, as a share of a country’s external public debt, are positively correlated with budget de?cits, supporting the primary hypothesis that China’s patient capital expands governments’ ?scal policy space. In exchange for this lack of policy conditionality, however, policymakers tend to have more extensive commercial conditionality. Notably, when Chinese ?nancing is instead directly booked with corporate enterprises through private procurement in the marketplace, these commercial conditions are less extensive. China’s patient capital behaves more like long-term equity capital given the underlying private sector competition promoted by domestic procurement laws. National governments do not gain additional ?scal space and are more likely to comply with policy conditionality.

Chapter 7 assesses the cost and bene?ts of China’s commercial conditionality by employing extensive qualitative evidence, including more than 200 interviews with Chinese creditors and Latin American debtors, and in some cases, examining the original loan contracts. This chapter also evaluates the extent to which China can foster good governance and sustainable development without policy conditionality. For example, these loan provisions, which typically involve some combination of Chinese foreign content and commodity guarantees, are designed to improve the global competitiveness of Chinese ?rms. However, they may also impose costs on Latin American countries. Preferential treatment for Chinese capital inputs and machinery may undermine Latin America’s industrial competitiveness. At the same time, commodity guarantees embedded in loans-for-oil agreements risk eroding commodity proceeds that could otherwise be channeled toward domestic spending or reinvestment in state energy ?rms. Perhaps most important, China’s tendency to focus on commercial rather than policy terms may encourage governments to spend beyond their means, catalyzing future debt problems.