This In Brief is the second of a two-part series on Chinese concessional loans. The first paper discusses the nature of the loan schemes and three common misperceptions. This paper focuses on two aspects: (1) the possibility of debt-for-equity deals in the Pacific; and (2) what happens if Pacific states default on repayments. It aims to enrich the debates by adding a Chinese perspective.

The research notes that currently China is not a main lender to Pacific Island countries (PICs) and argues that loan forgiveness is extremely difficult and extension is more practical.

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