Delegated Origination: Corporate Influence in Chinese Lending

Sovereign lending is usually analyzed as a bargain between creditor and debtor states, taking creditors’ capacity to identify lending opportunities for granted. We develop a theory of delegated origination: lenders lacking independent appraisal capacity rely on contractors to identify projects and package information for approval. China is a revealing case because its overseas lending expanded faster than its institutional capacity and integration into established creditor networks. Contractors possessed informational advantages over China-based lenders regarding local project conditions and over borrower-country officials regarding Chinese financing procedures. Delegation initially accelerated lending expansion, but contractors earned their returns at construction while lenders carried repayment for decades, and this divergence ultimately constrained lending. Using fieldwork in Zambia and Nigeria and an original panel of Chinese contractor activity in 38 African countries (2005-2024), we find that lending first rises and then falls with accumulated contractor footprint. Larger prior contractor footprints are associated with a higher probability of loan distress, and steeper post-2020 retrenchment. Our study highlights how creditors’ institutional capacity—not just their strategic intent—shape sovereign credit. Firms can play an outsized intermediary role where creditor capacity is weak, introducing incentive distortion in sovereign lending processes.