China’s Role in Global Development Finance - China Challenge or Business as Usual?

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John H.S. Åberg
Senior Lecturer
john.aberg@mau.se
Malmö University
Babones, Salvatore, John H. S. Åberg, and Obert Hodzi.
“China’s Role in Global Development Finance: China
Challenge or Business as Usual?” Global Policy, 2020,
https://doi.org/10.1111/1758-5899.12802.

Attack a central debate
Ask a key question in relation to the debate
Present new data
Make a theoretical claim –straightforward and clear

What we ask China Challenge (CC) or Business as Usual (BaU)?
Does China intend to play the role of a ‘revolutionary leader’
spreading a new development paradigm, or is it simply a ‘bloc
leader’ that faithfully implements existing global economic
governance principles in areas under its sway?
BRI as CC or BaU?
We want to know Does China put its money where its mouth is?
What we do We apply role theory and conceive of the ‘China model’ as national
role conception and the ‘BRI’ as role performance
What we do We analyze the lending decisions of the AIIB, NDB, SRF, and CADF
What we claim We find that China’s role, when it comes to international
development finance, is largely characterized by BaU behavior
However, on a regional level this does represent a challenge to the
historical role Japan has played

The rise of China as a key actor in
international development finance is
widely perceived to be challenging
dominant models and norms associated
with the West
China is also seen as challenging
Western geoeconomic dominance, with
China’s push into development banking
portrayed as the lynchpin of its Belt &
Road Initiative for Afro-Eurasian
economic integration

The rise of the Belt & Road narrative
coincided with a shift in China’s role
performance during the 2008–2010
Global Financial Crisis (GFC)
From China’s historical role of
‘benevolent bystander’ to the new role
of ‘global development financier’
(Gottwald, 2015; Gottwald and
Duggan, 2011).
China has successfully begun
performing the role of a responsible
great power and a “regional leader”
(Aberg, 2016).
A shift from a foreign policy of
‘keeping a low profile’ to one of
‘striving for achievement’ (Yan, 2014)
Teacher-student relationship

But the question is whether this amounts to a system supporting
(BaU) or a challenging role (CC)
Does China truly intend to play the role of a ‘revolutionary
leader’ spreading a new development paradigm, or is it simply
a ‘bloc leader’ that faithfully implements existing global
economic governance principles in areas under its sway?
BRI as CC or BaU? There is a lot of rhetoric suggesting the
former, but does China put its money where its mouth is?

The idea that there exists a distinctive ‘China model’ of development
has become a rhetorical commonplace used to legitimize development
policies perceived to be:
(1) economically superior to other development models (more suitable for
developing countries and better at developing strong states);
(2) better for regime survival (e.g., no political conditionalities;
dissemination of resources to elites) (Hodzi and Aberg 2020)
What developing country elites regard as the ‘China model’ displays
considerable cross-national variation because it is variously understood
and because it has to be adjusted to diverse domestic conditions
China’s role as a ‘benevolent role model’ also stands out in contrast to a
perceived domineering, colonial style of Western donors, though it is
also hotly debated to what extent China should itself be considered a
neo-colonizer (Bond, 2015; Pelizzo, 2017).

Some scholars believe that a distinctive China development
model exists, but that it is unique to China and cannot be
exported to other countries (Naughton, 2010; Zhang, 2012)
Others argue that it can be exported and that it
provides a viable alternative to the Washington Consensus
(Halper, 2010; Ramo, 2004).
Justin Lin argues that other countries can learn from China’s
development experience (Lin, 2011, 2012; Lin and Treichel,
2012; Lin and Wang, 2015; Aberg and Becker 2020)
Even if China does not offer a distinct ‘model’, it provides
‘an example to others of what can be done, and an example
of other ways of doing things (as well as an alternative
economic partner)’ (Breslin, 2011, p. 1324).
This implies the notion of a ‘challenge’ to Western models
(Zhao, 2010) notwithstanding differences in the definition of just
what that challenge consists of

A more skeptical group of scholars suggest that
there is no unified development model promoted
by the Chinese government (Chen and Goodman,
2012; Ferchen, 2013; Kennedy, 2010).
The Chinese economist Zhang Weiying argues that
the notion of a ‘China model’ is not only factually
wrong, but that using the concept is ‘dangerous’
and has led to unwarranted ‘antagonism between
China and the West’ (Gan, 2018).
Others argue that the international appeal of a
Chinese version of authoritarian capitalism is
rather limited (Aberg, 2018; Ambrosio, 2012).
Such skeptical voices might be collected under a
‘Business as Usual’ (BaU) label, suggesting that
the rise of China has not changed the course of
global economic governance

Holsti (1970) introduced role theory from sociology to
international relations
From the behavior of individuals embedded in social
structures to patterned behaviors of countries in
international relations
Role performance defined as ‘the general foreign
policy behavior of governments’
Foreign policy statements and doctrines and behavior
Significant audience that recognizes the performance
as genuine
While roletaking and role self-understandings can
serve foreign policy goals, they can also serve internal
administrative and bureaucratic goals (Cantir and
Kaarbo, 2012)

The BRI is an ideal topic for role theory analysis, not
only because of its ubiquity in Chinese foreign policy
rhetoric, but also because it seems to trace its very
origin to Xi Jinping’s search for a national role
conception to encompass the many foreign policy
implications of China’s economic rise

BRI
CC vs BaU?
“China Model”
CC vs BaU?

Ever since the consolidation of power under Xi Jinping
multiple strands of China’s foreign policy have been
consolidated under the BRI umbrella
It is plausible that many of the policy decisions that
collectively form the BRI would have happened anyway,
without the ‘New Silk Road’ label attached to them
Yet the label gave them coherence and meaning as a policy
doctrine

SRF $40 billion; the AIIB $100 billion; NDB $50 billion;
CADF $10 billion (subscribed capital)
Comparison: AIIB $19 billion, World Bank $16,5 billion;
NDB $10 billion, Asian Development Bank $7 billion
(paid-in capital)
China’s BRI seems to have serious money behind it!

The official stories that China tells the world (and
even itself) are often severely at odds with its actual
behavior
Jones and Zeng (2019, p. 1415) suggest that China’s
foreign policy role performance –most of all the
overarching BRI –is ‘driven primarily by competing
domestic interests’

The publicly available data on the operations of these institutions
show much lower levels of actual lending than might be suggested by
their capitalization levels
AIIB and NDB for the first four years of their operations (2016–2019)
made total loan approvals of $11.4 billion (AIIB) and $12.14 billion
(NDB) over this period
Since many of the approved projects involve disbursements to be
made over multiple years, actual lending by these two institutions is
certainly far lower
The AIIB’s chief Asian rival, the ADB, does disburse new loans in this
range every year, despite having a paid-in capital base only 1/3 of
the AIIB (ADB, 2019).

AIIB is not lending in competition with the
ADB, the World Bank, and other
established development banks, but
involved in many co-financing projects
Our review of the 62 projects approved by
the AIIB over the period 2016–2019, shows
that the World Bank is a partner lender on
19, the ADB on 5, and European
development banks on 3
The average AIIB project was funded
50,1 % by the AIIB itself
But bigger projects have a smaller AIIB
financing component –so across its entire
portfolio AIIB financing represented
30,4 % of total project costs

Founding governments in effect lend
back to themselves
It can be questioned if the NDB
generates any net financing gain for its
members
Over the period 2016–2019, the average
NDB project was funded 56,9 % by the
NDB itself, with the remainder of funding
coming in all cases from national or
regional government or government-
linked organizations within the host
countries
Bigger projects tended to have a smaller
NDB financing component, so across its
entire portfolio, NDB financing
represented 33,2 % of total project costs

China and India lead in terms of
loan approvals and loan amounts,
despite the fact that China has
more than four times India’s GDP
per capita
It thus seems inappropriate to
view the NDB as a mechanism
through which China supports
the development of its fellow
BRICS countries.
The other BRICS collaborators in
the NDB are in fact subsidizing
China

Predictions that lending portfolios of
the AIIB and NDB would soon equal
those of the ADB and the World Bank
have thus far failed to materialize
The lending portfolios of these
institutions do not reflect any
coherent plan to reorient Afro-
Eurasia around a Chinese core.
Most of the projects approved focus
on ordinary infrastructure like urban
sewer systems, mass transit, power
transmission, and rural roads
?

Even the transportation projects hardly
represent a reorientation of the continent
toward China
The AIIB approved a total of eight
transportation projects over the period 2016–
2019:
3 for rural roads in India, 2 for metro lines in
India, 1 for a road bypass in Georgia, and 1 for
bus rapid transit in Pakistan
And 4 that might be considered BRI-related: a
port development project at Duqm in Oman,
the M4 motorway in Pakistan, the upgrade of a
road connecting Tajikistan to Uzbekistan, and
the upgrade of National Road 13 in Laos
These could potentially be considered
elements of a New Silk Road plan to integrate
Afro-Eurasia around a Chinese core, yet they
are by any measure minor elements of such a
grand plan
?

AIIB follows multilateral development banks in its governance structure
The AIIB collaborates extensively with existing multilateral development
finance institutions
AIIB and NDB have sought credit ratings from the major American credit
agencies
The NDB countries basically lend to themselves
The greatest beneficiary of both AIIB and NDB lending has been India,
which has so far resisted enticements to officially endorse the BRI
The CADF seems to focus on Angola (71 % of the loans), which is remote
from the New Silk Road but strategically important to China because of oil
The SRF is opaque and does not release financial data or annual reports –
hence the ‘$40 billion’ headline figure cannot be treated as more than a
political commitment by the Chinese government

It might make sense to view
China’s actions as an attempt to
displace Japan as the natural
‘bloc leader’ of Asia
Intra-regional ‘leadership’
competition within a BaU
framework
BFF? 

With the possible exception of the SRF, China’s development finance
institutions do not seem to reinforce the broader Silk Road foreign
policy narrative
Far from promoting a new approach to development finance, China
seems to be trying to upgrade its own role within existing structures
of global economic governance
This does not directly contradict the ‘China model’ narrative, but it
does suggest that the China model in operation represents ‘Business
as Usual’ to a much greater extent than is often thought
This puts China’s self-presentation of its international role directly in
conflict with its actual role performance
This contradiction at the heart of China’s flagship foreign policy
initiative may ultimately force either a change in Chinese rhetoric or
a change in its partners’ willingness to believe it