That's pretty much what China has been doing in Africa; insisting all debtors (private, state & institutional) take equal haircuts.

The pressure has not worked, consent manufacturing has so far been too strong.

China has still unilaterally forgiven a lot of African sovereign debt over the last few years.

This is what I have been saying. In fact, China can actually use its $800 billion dollar reserve to pay back the entirety of Africa’s dollar debt. That will drastically change the entire game and turn the table against the US.

However, their time is running out. There’s a reason why I said the fall of 2022 was the best timing for this. The US had started hiking interest rates in early 2022 after 14 years of near-zero rate, and as the global dollar liquidity was sucked into the US treasuries, it placed a lot of Global South countries in a situation where there isn’t enough circulating dollar to earn, while having the burden of higher interest rates being added on it. In other words, it was very difficult to find dollar to pay back their growing dollar debt.

What most people didn’t see at the time, was that as the short term treasuries mature, the US would have added $1 trillion USD in 2023. Huge amount of dollar is going to flow out again, and once the Global South countries get addicted to dollar again, it would be very hard for them to switch to another currency anymore. At 8% budget deficit in 2023, there is going to be a lot of dollar being pumped out and I don’t think it’s going to slow anytime soon.

This is why 2022 was the best timing for China and Russia to forgive the debt (in fact, they both did, but didn’t pursue it any further into 2023) and start flooding the Global South with yuan to displace the dollar. This would require China to give up its net exporter status, but because China had not been preparing for this by starting the transition into internal consumption economy years before, they were afraid of losing the export revenues which could drag their economy down. Meanwhile, BRICS has failed to come up with an alternative financial system that could displace the dollar system, and so, the rest of the world had remained unconvinced, and the dollar status is preserved.

Still, it would have been a better option in the long run because the US is adamant about decoupling from China anyway, even if it meant a radical and painful transformation of China’s economy. China staying as a net exporter country in the long term is a losing position as long as the dollar continues to remain as the global reserve currency.

A bit of history lesson here will help. The US was able to turn China into the global industrial hub by denying the rest of the Global South their industrial capacity. This helped the US to concentrate all the manufacturing base in China, which at the time they thought would be easy to control as China was still relatively weak as an economic power.

Now, all the US has to do is to let the Global South countries industrialize - as long as China’s and BRICS’s debts continue to be denominated in dollar, the US will be able to get free lunches if they play the long game. By then, the US doesn’t need China anymore, and if China still has a huge segment of its economy dependent on export, it will have to start competing with the rest of the world. China wouldn’t have a global reserve currency (because they wanted to remain as net exporter country, which means they want people to use yuan to buy stuff from them, and not saving the yuan), and it has to compete with an industrialized Global South, so that’s a losing position.

This is why I said the transition into the internal circulation economic model should be the priority for China, while at the same time forgiving dollar debt and use its huge dollar reserve to pay back as much Global South debt as possible to slow down the US monetary imperialism. Once they got out, they would be truly free from US hegemony. But for now, they are still stuck inside the vampire castle with a starving, deranged bloodsucker out for a feast.

TL;DR: 1. China needs to go internal circulation and give up the export economy as fast as it can; 2. write down and/or forgive as much dollar debt as they can; 3. if the dollar remains dominant, China staying as export economy is a losing position for them in the long term.

That's exactly what it's doing. The IMF caught on eventually and is trying to get a lopsided deal, however: pressuring China to forgive debt and then not forgiving it themselves, effectively making it so that the IMF gets paid debts but China does not. China is pushing back, though, which they absolutely should.