China’s international development finance: Past, present, and future

Abstract

China is emerging as perhaps the most globally significant development finance provider, going far beyond concessional foreign aid. With China's initiatives to create and foster new multi-lateral finance institutions, and to work in terms of large economic landscapes in Africa, Eurasia, and Latin America, it becomes important to understand how China's own experience with rapid industrialization/urbanization processes and regional development is influencing its visions and financial instruments for development across the world. This paper examines how China's domestic development experiences have informed its approach to development finance abroad and explores what kinds of challenges and opportunities China will bring as it moves to the centre stage of international development finance.

The governance of China's foreign aid system: Evolution and path dependence

“…They, however, failed to elaborate the central–provincial relationship in the providing of development finance though they briefly mentioned “the provision of finance is usually carried out, not by CDB's main office in Beijing, but by its provincial branches.” Thus we attempt to disentangle the intergovernmental arrangements of development finance as a case to gauge the existence of path dependence. Aid‐like development finance is now considered one of the most important components of China's international development cooperation (Dollar, ; Dreher, Fuchs, Parks, Strange, & Tierney, ; Lakatos, Maliszewska, Osorio‐Rodarte, & Go, ; Xu & Carey, ). Development finance is provided mainly through China Import and Export Bank (Chexim) and China Development Bank (CDB), two official “policy banks,” with the former one providing mostly concessional loans and the latter providing more economic‐driven loans.…”

“…CDB is the largest development bank in the World, with its total assets more than 10 times of that of the World Bank (Xu & Carey, ). Development finance of CDB has mainly been executed through its provincial branches through the twining assistance.…”

“…The second strand of research investigates the impacts of Chinese aid on recipient countries, focusing particularly on difference to traditional donor (Bräutigam, ; Brazys, Elkink, & Kelly, ; Breslin, ; Diamond, ; Dollar, ; Foster, Butterfield, & Chen, ; Isaksson & Kotsadam, ; Lancaster, ; Naim, ; Reilly, ). The third strand of research to which this study intends to contribute focuses on the domestic motivations and arrangement of Chinese aid by looking at aid policy process and the interagency relations of various involved government agencies interact (Cheung, De Haan, Qian, & Yu, ; Xu & Carey, ; Varrall, ; Zhang & Smith, ).…”

Development and Poverty Reduction

“…In particular, more micro-level empirical studies focusing on outcomes for aid recipients are required. Xu and Carey (2015) are among researchers who argue that greater transparency concerning the way China provides assistance to foreign countries is needed. In addition, more micro-level empirical studies focusing on outcomes for aid recipients are required.…”

The Sino–African Relationship

“…Moreover, much of China's official financing is inherently more commercial than developmental, and not categorizable as "foreign aid" as defined by Western donors. It is, however, an important resource for many developing countries, albeit critics note its lack of transparency ( Xu and Carey, 2015 ).…”