China’s Manifesto for Leadership in Global Development

The publication of the White Paper on China’s International Development Cooperation in the New Era (Chinese, English) in January 2021 was an exciting development for researchers of Chinese foreign aid.

First published in 2011, then in 2014, China missed the scheduled 2017 update, making 2021 the first new update of the White Paper on foreign aid for over six years. The landmark document does not just provide the long-overdue update about China’s foreign aid (now reframed as “international development cooperation”), however. It should also be seen as a piece in China’s broader discourse-making about the role it seeks to play in the world – it is China’s manifesto for leadership in global development.

The White Paper demonstrates how the Chinese government’s thinking on foreign aid and development assistance has undergone significant evolution, if not a total paradigm shift. It adopts an internationally recognized lexicon to describe extensive development engagements that go far beyond conventional “aid”, and reflects the moral framing China has adopted for its overall foreign policy toward developing countries in recent years, which emphasizes the “greater good” over self-interests. Both shifts in the discourse aim to gain legitimacy among international and domestic audiences. While it remains to be seen whether China can live up to its purported moral guidelines, some potentially significant changes are already under way, including untying some of the aid and the increasing involvement of non-government entities in development programs.

Source: Screenshot from the State Council Information Office website

From “Aid” to “International Development Cooperation”

The change in terminology from foreign aid to International Development Cooperation (IDC) in the title of the White Paper is not simply semantic. It reflects the international movement to shift away from the terminology of “aid” and “donor-recipient relationship” to development “cooperation” and “partnership”, which have more equalizing connotations. More importantly, it gives formal recognition to the existence of China’s various practices that go beyond the scope of simply “aid.”

Indeed, foreign aid is but one instrument used in China’s IDC, albeit the one with the longest history (China just celebrated the 70th anniversary of its foreign aid program in 2020). China’s IDC instruments can be divided into financial and non-financial instruments. In terms of development finance, China has now established a tiered system, of which aid, suggest Justin Yifu in and Yan Wang, is the foundation. The system consists of preferential export buyer’s credits, non-concessional loans from state entities for development purposes, equity investments by sovereign wealth funds, state guarantees for development projects, and infrastructure projects financed with public-private-partnership. Their expression in the Chinese system is shown in Table 1.

Table 1 A non-exhaustive list of instruments in China’s tiered development finance system, compiled from public sources by the author.

As such, we may see a clearer division of labor between China’s foreign aid and other development finance instruments. Foreign aid may increasingly go to “soft” areas such as knowledge sharing, training, and public service programs (such as schools and hospitals) that serve a role in supporting “hard” projects such as infrastructure and industry, whose financing is likely to come from commercial sources (such as banks and equity investment funds). In other words, equipped with increasingly diversified sources of development finance, China can use its foreign aid more smartly to leverage greater impact.     

One good example is the Phnom Penh-Sihanoukville Expressway in Cambodia, a key project under the two countries’ BRI cooperation. Some of the preliminary work for the project was funded by an 88.5 million USD grant from the Chinese government (i.e. “aid”), but the actual construction, estimated to cost about 2 billion USD, will take on a Build-Own-Transfer (BOT) model in which the Chinese contractor China Road and Bridge Corporation will be responsible for the financing, partly provided through commercial loans from the China Development Bank.

Development finance has been a major focus of Western studies of China’s foreign aid. Much of this research seeks to quantify China’s development finance, with the intention to compare it with the traditional donors’ aid spending. However, this has led to an analytical cul-de-sac because the composition of China’s development finance is constantly evolving and will continue to do so. With such a diverse range of instruments available, it is also challenging to compare Chinese development finance with that of other donors. A focus on development finance also tends to overlook China’s non-financial IDC, a realm that can potentially have more profound implications.

Not just about money

China’s non-financial IDC involves various forms of intellectual support, such as technical assistance, advice, and training. For example, since 1998 China has provided seminar programs for officials from developing countries on technical topics such as weather modification to more political topics such as China’s governance system. More recently, in 2016 China established an Institute of South-South Cooperation and Development (based in the prestigious Peking University and headed by Justin Yifu Lin, former Vice President of the World Bank) to provide graduate programs for elite foreign students. Another, the Center for International Knowledge on Development (CIKD) housed in the State Council’s Development Research Center, the top official think tank, was established in 2017, to “research and communicate theories and practices of development that suit the national circumstances of different countries.”

In recent years, China, following in Japan’s footsteps, has also helped other countries to draft plans for macro-economic development, infrastructure, or industries, based on China’s experience in development planning. China is also sending cadres with work experience in domestic poverty alleviation to other countries to share poverty-reduction solutions. It is clear that China is now of the view that its experience in domestic development can be applied to other countries, and is actively disseminating such codified knowledge.

It is also worth noting that the China International Development Cooperation Agency (CIDCA), the agency set up in 2018 in a major revamp of China’s foreign aid system, is explicitly tasked with serving the Belt and Road Initiative, the all-encompassing banner for China’s international economic engagement. This does not only mean that the geographic allocation of China’s foreign aid will be tilted toward BRI countries, but also that the programming of aid will integrate both “hard” and “soft” international engagement. Aid mechanisms will facilitate policy dialogues, infrastructure connectivity, trade promotion, financial integration, and people-to-people exchange, the official five-point framework of the BRI.

The opening ceremony for CIDCA in 2018, Image: Xinhua

Speaking the international language

In fact, the transition to the concept of IDC is not brand new in China. The concept of “international economic cooperation” has long been taught in the economics and business programs of Chinese universities. Its textbook definition includes a wide range of activities from FDI, to financial investment, technology transfer and assistance, international service provision (such as project contracting and labor services), land use cooperation (such as special economic zones), management contracting, aid, and policy cooperation. China’s conceptualization of foreign aid has long been an integral part of international economic exchanges.

But rather than promoting this indigenous concept, China has decided to adopt the terminology of IDC that is more consistent with international practice. It is likely that in doing so China is seeking to speak a language that is more easily accessible for international audiences and overcome its traditional inability to direct and shape international narratives about its overseas aid practices.

In contrast to the esoteric presentation of Chinese aid in the White Papers of 2011 and 2014, which were explicitly based on China’s own aid methodology and lexicon, the 2021 White Paper ticks many boxes of widely accepted international norms: the commitment to green economy and the United Nations’ Sustainable Development Goals, gender equality, recipient ownership, and so on. Such a representation of Chinese IDC may, however, lead observers to forget that China’s practices remain distinct and have grown out of very different conceptual and normative foundations.

Working with international fora

In addition to speaking the international language, China has also been working closely with international organizations, in particular United Nations (UN) agencies. The 3 billion USD South-South Cooperation Assistance Fund China set up in 2015 was specifically established to support the UN’s sustainable development agenda by funding international organizations, social organizations, and think tanks. It marks an innovation in China’s foreign aid that used to support exclusively sovereign entities. Not only does China work with the UN system, which has traditionally championed South-South Cooperation, it also actively supports institutions of the Bretton Woods system, including the World Bank and the IMF, institutions which are in fact often accused of entrenching the North-South divide and promoting neoliberal dogmas. As Yunnan Chen with the Overseas Development Institute points out, China has also injected funds into several regional multilateral development banks.

We get a glimpse of China’s rationale in an argument made by Yu Zirong, a senior official with the Chinese Academy of International Trade and Economic Cooperation (the main think tank affiliated with the Ministry of Commerce, whose responsibilities include advising China’s aid policies): “bilateral [mechanisms] are the foundation, while multilateral [mechanisms] control the discursive power” (双边是基础、话语权在多边). China sees participation in multilateral development cooperation as a means to achieve greater legitimacy and claim the moral high ground. It is happy to adopt the mechanisms and agenda of the multilateral institutions as long as they do not interfere with China’s decision-making autonomy. It is also in the interest of the multilateral institutions to work with China both to maintain relevance and for financial support.

A moral doctrine

Compared to the previous White Papers in 2011 and 2014, the 2021 document begins with a whole section on the philosophical underpinnings of China’s IDC, citing both Maoist legacy and notably, Confucian concepts. Clearly, policymakers see the need to restore the moral orientation in China’s IDC, after pragmatism has dominated the field for so long. As alluded to earlier, aid has been approached as part of international economic cooperation since the 1980s, correcting the over-generous aid provision in the Maoist era motivated by ideological and geopolitical purposes. But it is widely agreed among researchers of Chinese aid that the 1980s saw an overcorrection of aid practices, becoming overly commercial-oriented. Aid has been used explicitly to facilitate the internationalization of China’s construction industry, for example.

Clearly, policymakers see the need to restore the moral orientation in China’s IDC, after pragmatism has dominated the field for so long.

China cannot achieve the legitimacy as a leader in global development that it aspires to if this continues to be its image. The political leadership has therefore sought to provide a new moral doctrine. One concept highlighted in the White Paper is “the correct view on Yi and Li” (正确的义利观, or as stated more plainly in the English version, “the greater good and shared interests, with higher priority given to the former”). The concepts of 义(Yi, greater good) and 利 (Li, interests) come from classical Confucian texts. While some intellectuals and policy scholars had tried to re-appropriate these terms to guide Chinese moral life in modernity at least since the 2000s, they were only incorporated into the official discourse after Xi Jinping came into office. This reflects Xi’s tendency of referring to Chinese traditional values in his attempt to restore the Chinese Communist Party’s moral legitimacy. “The correct view on Yi and Li” was coined in the summer of 2013, a few months into Xi’s presidency, and has since featured in China’s foreign policy discourse toward its neighboring countries and developing countries more broadly.

Recognizing the tension between China’s self-interest and the “greater good” its IDC is supposed to contribute to, this doctrine calls for “making the greater good and self-interests compatible.” With the typical vagueness of China’s political instruction, it will be left to the implementers of China’s aid policies to interpret how to balance these two concepts, but a recent article by CIDCA provides some hint. China’s IDC is to play a positive role in the “new landscape of development” (新发展格局), it suggests, which China envisages as “the mutual promotion of internal circulation and international circulation, otherwise known as “dual circulation.” This interpretation of the White Paper indicates that IDC will continue to be guided by utilitarianism—projects are expected to eventually contribute to China’s domestic economy through the ties being built with the partner countries. The new moral doctrine is therefore more about framing than substantive changes to the guidelines.

Knowing also that any appearance of irrational foreign aid largess would be controversial for the domestic audience, the White Paper stresses that China will not “do things beyond its stage of development” and will only “meet international obligations in line with national capacity.” This signals that China will not accept any externally imposed level of aid provision (such as the 0.7% ODA/GDP target for the traditional donors), and will define its own capability in terms of how much resource it is to contribute to international development goals.

Something new: “untied” aid and non-state actor engagement

That said, there are indeed some interesting changes to Chinese IDC taking place. One potentially significant change is in the way turnkey aid projects are managed. In the past, the Chinese government has overseen the design, tendering, and supervision of turn-key aid projects, leaving recipient governments little say in the process. China is now allowing recipient governments to manage the process, on the condition that they have the relevant laws and regulations in place to govern the tendering, and the capacity to complete the prospecting and design, while accepting external supervision from China. By default, the companies contracted to build the projects will still be recommended by China, but recipient countries can negotiate that and select their local contractors. This is potentially significant because it opens the door for Chinese aid money to be “untied”, removing it from the obligation to contract Chinese companies and procure from China, the previous norm. We shall see how much freedom China will allow recipient countries to select local contractors, and how the weighing of greater good versus interests will be manifested.

Going forward, China may also begin working more with non-governmental entities. China’s “non-interference in domestic affairs” principle has long meant that China worked exclusively with host governments, seeing them as the only legitimate counterparts. But as Yu Zirong suggests, the “non-interference” principle needs to be re-interpreted, and “respecting the sovereignty of the recipient countries” should be understood as putting the people of the recipient countries at the center, and therefore legitimate counterparts should include also non-ruling political parties, social organizations and communities.

China has in fact already started to work with non-governmental entities. A number of Chinese state-affiliated non-governmental organizations are increasingly active overseas, most notably the China Foundation for Poverty Alleviation, which has programs in several Asian and African countries and works directly at the community level. It is possible that China may increasingly use such organizations to implement service-type aid projects, similar to how Western aid agencies contract aid projects to NGOs. China is likely to work only with state-affiliated NGOs or groups that have established close relations with the government, however, and it is unlikely that such opportunities will be open to international NGOs.  In addition, in recent years, the Chinese Communist Party’s International Liaison Department has also been increasingly active in building relationships with non-ruling parties in other countries. For example, it established a Joint Consultation Mechanism with political parties in Pakistan for the advancement of the China-Pakistan Economic Corridor, a flagship project in China’s BRI.

China celebrated the 70th anniversary of its foreign aid in 2020. As if marking the moment, the new White Paper strikes a far more confident tone than its previous iterations. It depicts a system that it has built up over the decades, framing it with Chinese concepts while describing it in the international language of development cooperation, and making clear that China feels ready to take on a leadership role in global development. This is consistent with the overall more assertive foreign policy of the Xi Jinping administration. In a sense, it may be more appropriate to read the 2021 document as a sequel to another White Paper published in 2019 that was titled “China and the World in the New Era.” It speaks about the vision of a “risen China” and how it wants to see its relations with the rest of the world develop.

The 2021 White Paper articulates China’s approaches to IDC, which China sees as one of its most important sources of global soft power. These approaches have gradually crystalized after decades of experimentation and evolution, building on China’s long engagement with the Global South, and now backed by the relatively abundant resources the Chinese state can mobilize. By both adopting the international lexicon and supplying a moral doctrine sourced from Chinese traditional culture, policymakers seek to impress both international and domestic audiences with this new aspiration to become a leader in global development. On the one hand, China’s rise in this space may bring some welcome resources and practical innovations; on the other hand, it should be understood that the impetus for China’s IDC reforms is still more top-down than bottom-up. In other words, the reforms are aimed more at better aligning IDC with China’s overall foreign policy agenda than they are driven by the need to improve development outcomes.

Hong (Stella) Zhang is a PhD candidate at George Mason University. Her research interests include the political impact of China’s overseas development assistance and the global expansion of Chinese SOEs. She had worked for five years as an overseas correspondent with China’s Caixin Media in London and Washington D.C.

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