China's Role in Global Development Finance: China Challenge or Business as Usual?

Abstract

China's economic success has prompted both academic political economists and applied policy analysts to speculate about the implications of a new 'China model' of economic development and global economic governance. A particular issue is the degree to which the China model involves developing in opposition to or in cooperation with the pre-existing norms of global economic governance. Recognizing the ambiguity of the China model, we consider two alternative interpretations of China's role in global economic governance: China Challenge (CC) and Business as Usual (BaU). We flesh out these contrasting interpretations using evidence from the lending behavior of four major development finance institutions in which China plays a leading or determinative role: the Asian Infrastructure Investment Bank (AIIB), the New Development Bank (NDB), the Silk Road Fund (SRF), and the China-Africa Development Fund (CADF) of the China Development Bank. We find that (at least in the restricted domain of international development finance) China's role in global economic governance is largely characterized by BaU behavior, and although on a regional level this does represent a challenge to the historical role of Japan, it nonetheless suggests that the China model is not so revolutionary as many analysts suppose. Policy Implications• International development finance institutions should seek greater cooperation with China-linked organizations like the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).• China's Belt and Road Initiative (BRI) should be welcomed as an additional source of development finance that generally works with, not against, established development finance institutions.• Countries should not reorient their foreign policies around cooperation with the BRI, because there is in fact relatively little money on offer from China-linked development finance institutions.• If China is serious about creating a new Silk Road, it should focus its development aid more narrowly around achieving BRI targets.

The Asian Infrastructure Investment Bank: A Qualified Success for Beijing's Economic Statecraft

“…The AIIB can also be useful in integrating targeted countries economically, culturally, and ideologically (Muni, 2019). Some also perceive the AIIB as an instrument for China to counter the hegemonic intrusion of the United States in the Asia-Pacific region and American dominance of international finance (Chan, 2017), and also to displace Japan as the natural "bloc leader" of Asia (Babones et al, 2020). Gu (2017), however, argues that "Chinese multilateralism for the AIIB is different from American multilateralism, which is embedded in the Bretton Woods institutions and has enabled the USA as a hegemon to strengthen its leadership in the world economy" (p. 137).…”

Geopolitical shift at a time of Covid-19 and the Asian Infrastructure Investment Bank: A case study of Chinese innovation in multilateralism

“…While some of the early literature raised fears the AIIB was part of China's apparent geopolitical project to build a "parallel order" and sphere of influence to ultimately challenge the prevailing international rules (Hodzi -Chen 2017), a closer examination of the operations of the AIIB allows preliminary assessment of how China will wield its growing influence, when it combines with others in multilateralism. So far, rather than posing a geopolitical threat, even if raising normative challenges, the AIIB and even Chinese development finance channelled through its China Development Bank or other multilateral funds appear not to pose a revolutionary threat, and might even be described in practice as "business as usual" (Babones et al 2020).…”

Introduction to the Special Issue: Strategic Deployment of the China Model in Africa

“…How and why some countries are deploying the China model is still underresearched. The focus of existing research is on its varying components and its implications for the United States' global interests (Ang 2018;Beeson and Li 2015;Halper 2010;Weiss 2019). This Special Issue focuses on how African countries, often neglected in international relations and global politics scholarship, are exercising agency (Brown 2012; Mohan and Lampert 2013; Odoom and Andrews 2017) in deploying the China model, and examines how multiple variants of the China model are emerging in Africa.…”

“…China is becoming a key actor in international development (Babones, Åberg, and Hodzi 2020). From trade and investment projects like the Belt and Road Initiative, which Xi Jinping has dubbed the “project of the century,” to infrastructure‐ and development‐oriented financial institutions such as the Asia Infrastructure Investment Bank, China is carving a niche for itself as financier and champion of development in the Global South.…”