Political institutions and national responses to China’s state financing in South Asia

Abstract

This paper argues that domestic political institutions, not material fiscal pressures alone, determine whether fiscal stress resolves into crisis-driven renegotiation or continuity-oriented management. The research objective is therefore twofold. First, to identify how domestic political institutions shape the management of Chinese state financing during periods of fiscal stress. Second, it seeks to advance the existing debate from creditor-centric to debtor-institutional terms by developing a theoretically informed comparative account. The paper uses historical institutionalism, which treats crises not as moments of institutional breakdown but as critical junctures in which pre-existing institutional arrangements condition the range of viable policy responses. Within this scenario, Chinese state financing is theorized as an external policy shock whose political consequences are facilitated by domestic institutions rather than dictated by creditor leverage. Methodologically, the study employs a structured, focused comparison combined with within-case process tracing, oriented toward theory development rather than hypothesis-testing in a strict causal-inferential sense. The design acknowledges the limitations of a two-case study including possible selection effects and the presence of plausible alternative explanations and frames its contribution as the specification of causal mechanisms rather than the establishment of generalizable causal laws.