The issue of sovereign debt governance, especially for lower-income countries, entered into the G20 agenda well before the outbreak of the Covid-19 pandemic. But the pandemic brought this issue to the center of the G20’s collective efforts in assisting the developing world to tackle the crisis. The US and China, one as the dominant financial power and the other as the largest official bilateral creditor, share common interests and responsibilities in enhancing sovereign debt governance and fostering global sustainable development under the G20. The two countries have played constructive roles for the G20 to successfully launch the Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatments beyond the DSSI, and for the multilateral financial institutions to mobilize emergent resources for indebted countries, exhibiting the catalytic role of the G20 for global governance.
However, this is far from enough. When sovereign debt vulnerabilities are expected to rise due to the inflation pressure in the next several years, the two countries need to exhibit more spirit of multilateral cooperation on this issue. First and foremost, both sides should put politics right and prioritize cooperation on sovereign debt treatment and sustainable development. The US should stop scapegoating China for the sovereign debt of developing countries, by hyping the theory of “debt trap”, while China should also address the concerns of the US, such as on the issue of debt transparency. Second, the two countries should lead in coordinating macroeconomic policies, controlling global debt risks and mobilizing new resources for alleviating the debt burdens of the debtor countries. Third, China and the US should work together in exploring truly multilateral and public-private partnership approaches to deal with the unsustainable debts, based on case-by-case terms, ensuring equitable and fair burden-sharing among all categories of creditors. In particular, the International Monetary Fund and the World Bank need to play constructive roles in leveraging all parties’ participation and promoting equitable solutions. Fourth, the two countries should also take the opportunity of debt treatments in fostering green and sustainable development of the debtor countries, while respecting their ownership and development level. Lastly, China and the US should deepen trilateral development cooperation in the developing world through broader policy dialogue in the future.