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China and the BRICS Development Bank: Legitimacy and Multilateralism View metadata, citation and similar papers at core.ac.uk brought to you by CORE in South–South Cooperation provided by IDS OpenDocs
Adriana Erthal Abdenur*
Abstract In 2013 the BRICS (Brazil, Russia, India, China and South Africa) grouping agreed to undertake what will, when implemented, become its most concrete project yet: the BRICS Development Bank (BDB). From the perspective of the Chinese government, which already leads a vast and far-reaching cooperation programme, the bank will not represent a significant addition to its cooperation portfolio. What, then, motivates China’s participation in the initiative, and what can it bring to the table? This article analyses China’s interests in the BDB in the light of its past experiences with development, at home and abroad. I argue that China’s interests in backing the bank project are primarily political. In addition to offering a concrete opportunity to legitimise China’s multilateralism strategy – burnishing China’s image as a responsible yet pro-reform global player – the bank project also allows China to influence international development norms. At the same time, the project also poses challenges for China, especially in terms of promoting poverty alleviation without resorting to trickle-down assumptions about an infrastructure-focused approach to development.
IDS Bulletin Volume 45 Number 4 July 2014 © 2014 The Author. IDS Bulletin © 2014 Institute of Development Studies Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
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1 Introduction1 to learn about the practices and principles adopted In 2013 the BRICS (Brazil, Russia, India, China by other providers of South–South cooperation. and South Africa) grouping agreed to undertake what will, when implemented, become its most Politically, in pursuing these interests, China has concrete project yet: a fully-fledged development to strike a careful balance. Precisely because bank. The initiative – part of the coalition’s China’s economic weight and cooperation far efforts to press for reform of global governance surpass those of its fellow BRICS states – its in international development – seeks to provide a GDP is larger than all of the other BRICS multilateral institution that can offer developing combined – boosting the legitimacy of the countries access to capital for infrastructure and grouping as a multilateral platform requires industrialisation projects without resorting to China to maintain a somewhat discreet position. traditional institutions such as the World Bank. China’s interests are likely to influence the bank The BRICS also argue that the new organisation through incremental negotiations rather than as would better reflect the principles and practices an aggressive strategy, which could come across of contemporary South–South cooperation. In as off-putting to its fellow members and thus addition to these joint objectives, in each of the undermine the grouping’s demands for a more individual BRICS, policy elites have their own set horizontal global governance architecture. of motivations for backing the initiative. Analysing these diverse interests is essential to In addition, in shaping the bank’s orientation, understanding the key political struggles and China must work to create innovative linkages alignments bound to emerge as the bank’s design between two goals it has long championed: is negotiated and implemented. infrastructure and poverty alleviation. Rather than relying uncritically on trickle-down For China, which already has a vast and far- economics assumptions that infrastructure reaching cooperation programme, the BRICS automatically begets broader economic and Development Bank (here shortened to BDB) will social benefits, China – and more broadly, the not represent a significant addition to its BRICS – must find innovative ways to mitigate cooperation portfolio, including in Africa, where negative impacts and spread the benefits of China has been investing heavily for decades. infrastructure more broadly. In other words, What factors, then, drive China’s participation in China must apply the lessons it has learned the BDB? And what substantive ideas and about the drawbacks of excessively focusing on experiences does China bring to the initiative? economic growth as a proxy for development. This article analyses Chinese policymakers’ key motivations and potential contributions by The article is structured as follows. After considering China’s experiences in trying to providing an overview of the BRICS and the foster development, both at home and abroad, development bank project, the text offers an and its cooperation diplomacy. analysis of China’s experience and interests in the field of international development as they relate My main argument is that China’s interests, in to the BDB. The last part of the article examines backing the BDB project, are primarily political. the implications of China’s involvement in the First, the bank project represents a concrete project, as well as some of the initiative’s broader opportunity to legitimise China’s multilateralism repercussions for norms-setting within the field of strategy, burnishing the image that the Chinese development cooperation. government has sought to convey of a responsible global player bent on reshaping rather than 2 The BRICS and the Development Bank project upending established institutions. Second, the 2.1 The BRICS grouping initiative offers China a chance to influence the The post-Cold War era has witnessed a norms-setting process within the field of proliferation of coalitions and informal development, contesting efforts by the multilateral platforms – some, like the G20, Development Assistance Committee (DAC) of the bringing together advanced and developing Organisation for Economic Co-operation and countries, and others geared specifically at Development (OECD) to codify and promote the South–South cooperation. Among the latter, the principles claimed by Northern donors. Finally, the BRICS grouping is arguably the most visible bank project represents an opportunity for China initiative. The initially four-state coalition,
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bringing together Brazil, Russia, India and China grouping’s formation – a point that tends to under the acronym BRIC, emerged in 2006 at underestimate the BRICS’ political dimension. the initiative of Russian Foreign Minister Sergey Conversely, other analysts have declared the Lavrov, and the first summit was held in BRICS initiative as a fait accompli. According to Yekaterinburg, Russia on 16 June 2009. Since this view, the BRICS represent a concrete, then, the heads of state have been meeting positive alternative to the current global system, annually (with the 2011 entry of South Africa), pressing for much-needed reform and with subsequent summits held in Brasília (2010), effectiveness while offering an alternative path Sanya (2011), New Delhi (2012), and Durban to development that relies more heavily on state (2013). The 2014 meeting is scheduled to take intervention. At the other end of the spectrum, place in Fortaleza, Brazil. alarmists portray the BRICS as a real menace to the existing order – a coalition bent on emptying The main impetus for the group’s formation was the established regimes in favour of questionable a common interest in reforming (though not practices and norms, including – within necessarily overhauling) the global governance international development – the provision of architecture. At that juncture, the geographic ‘rogue aid’ (Naím 2007). spread and relative dynamism of these economies gave them unique leverage in pushing Instead, here the BRICS grouping is treated as a for change at a time when the international loose coalition embedded within networks of system was perceived to be in flux, with US organisations of varying degrees of hegemony cast into doubt. Policy elites in the institutionalisation. In other words, in addition BRICS have argued that, although certain to being active members of the United Nations developing economies had become key drivers of and the Bretton Woods Institutions, those five regional or global growth, the main organisations states participate concurrently in less formal involved in global governance remain dominated platforms such as the G20, the India Brazil by the few countries that set the rules after the South Africa Dialogue Forum (IBSA) and the Second World War. Despite the BRICS’ BRICS. The BRICS grouping is also a dynamic economic, political, geographic and cultural entity: within its short history, it has changed in heterogeneity, their leaderships share the desire both composition (with the entry of South Africa) to make the architecture more representative, at and agenda. This dynamism contrasts with the least in the sense of opening up more space for inflexibility of established organisations and themselves. During the first two summits (2009 confers certain advantages to its members, and 2010), the grouping focused heavily on the because it allows them to engage in topic-specific global economic crisis, which presented dialogues and to cement ties informally – additional motivation for the coordination of including by meeting at the margins of major efforts and resources. Over time, the coalition international events – without committing to a expanded its agenda, launching discussions in rigid alliance. While the BRICS are a loose fields as disparate as development cooperation, coalition, they are not improvised, addressing technology, and political cooperation. areas as disparate as collective security, financial governance and climate change as windows of Despite the BRICS’ combined economic and opportunity emerge. demographic relevance, the initiative has often been met with scepticism, particularly from the In addition to this flexibility, the grouping serves advanced economies, with some critics arguing two key purposes for its members. First, that the five states are too heterogeneous to coordinated positions within the grouping can be coordinate in any significant manner. This transposed to other multilateral settings, pessimism is fuelled in part by the BRICS’ low whether other loose coalitions or formal level of institutionalisation: the grouping has no institutions. The 2013 eThekwini Declaration, for headquarters, no charter, no flag and no instance, states that the five members will join governance structure beyond the cycle of forces in implementing the International summits and meetings (Kahler 2013). Scepticism Monetary Fund (IMF) Governance and Quota is also perpetuated by a tendency (by media and Reform: ‘We urge all members to take all academics alike) to overemphasise the role of necessary steps to achieve an agreement on the Goldman Sachs’ economic projections in the quota formula and complete the next general
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quota review by January 2014’ (BRICS 2013). of writing, however, there are counterproposals Second, the BRICS can serve as a platform for that the amount depends on the size of each concrete initiatives, especially in areas considered country’s economy. Loans will most likely be to be the ‘paths of least resistance’ – topics in offered at market rate, diminishing the influence which the member states are likeliest to find of political considerations on the way in which common ground, maximising their chances of the capital is used.4 Given the high visibility of coordinated action. Where there are clear Africa within the BRICS agenda so far – African division lines – such as Security Council reform, development featured prominently at the where the BRICS are split between two P52 Durban Summit – the bank is also intended to countries (Russia and China) and three members foster socioeconomic development on the that aspire to hold permanent seats – such continent, although its operations will not be coordination remains a mid- to long-term project. exclusive to Africa.
2.2 The BRICS Development Bank project The bank’s institutional design and operations Among the perceived ‘paths of least resistance’, will depend on ongoing discussions among development financing is an area where the member states regarding credit lines, BRICS can realistically deepen cooperation: all headquarters location, capital structure, five states want to expand South–South ties, governance, the bank’s rating, and the criteria for both among themselves and with other determining which projects the bank will fund. developing countries. In addition, the BRICS Governance design covers not only how leadership states have backed this discourse with concrete is chosen, but also the institution’s hiring resources, having substantially increased intra- practices and career tracks. Given how strongly BRICS trade and investment over the past five the BRICS emphasise respect for national years.3 More broadly, all five wish to reduce the sovereignty, the bank is unlikely to impose dominance of the US dollar as the anchor political conditionalities on the loans it provides. currency for the global economy, although its exact replacement is not yet clear. Due to the complexity of establishing the decision-making processes, it is unclear when the These common interests became evident by the bank will become fully operational. In September fourth BRICS Summit, held in Durban in 2013, 2013, at the G20 meeting in St Petersburg, as the five heads of state agreed on a new Russian Deputy Finance Minister Sergei Storchak development bank, a contingency reserve stated that ‘we must assume that the bank will arrangement, a business council and a thinktank not start functioning as fast as one could imagine’ council. According to the eThekwini Declaration, (Caulderwood 2014). ‘These discussions will be the five countries’ Ministers of Finance had been shaped by the interests of the BRICS countries, tasked in March 2012 with ‘examin[ing] the as well as their individual cooperation styles and feasibility and viability of setting up a New priorities. While providing a full account of all Development Bank […] to supplement the five states’ development cooperation programmes existing efforts of multilateral and regional lies beyond the scope of this article (for a financial institutions for global growth and comparative analysis, see Mawdsley (2012)), it is development’ (BRICS 2013). Since then, the worth noting some key characteristics that are initiative has moved forward through a BRICS relevant to the BDB project. meeting held on the sidelines of the G20 meeting in Saint Petersburg, Russia and meetings of Although the Soviet Union was a major provider sherpas and ministerial representatives. of development cooperation, after its 1991 collapse the Soviet programme was suddenly The bank, which is still being designed, is meant abandoned, and Russia was redefined as a to address capital deficits for long-term financing recipient of aid. It was only in 2007, with the for infrastructure and industrial projects in adoption of the ‘Concept of Russia’s Participation developing countries – including, as needed, the in International Development Assistance’, that BRICS themselves. Russia has proposed a Moscow signalled its intention to become a net US$100 billion equity base, with member states provider of cooperation. Russia’s bilateral making equal initial contributions and having development cooperation is relatively limited, equal voting rights within the bank; at the time focusing on agriculture, energy, social
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programmes and disaster assistance within Development Partnership Administration (DPA) former Soviet states. However, as part of its and new financing mechanisms for development foreign policy efforts to project Russia as a cooperation (Raghavan 2013). The Indian re-emerging state, the Russian government has Technical and Economic Cooperation (ITEC) worked to expand its initiatives abroad, including programme, created in 1964, has decades of through expanded debt relief and a growing focus experience in capacity-building, and the India on Africa (Arkhangelskaya and Shubin 2013). Development Initiative (IDI), established in Russia has also cooperated with international 2003, has cancelled the debts of several heavily organisations in designing its cooperation indebted partners. Geographically, India’s policies, for instance aligning its accounting official cooperation focuses on its geographic procedures with DAC standards and reporting its vicinity, where not only does it have important aid volumes to the OECD in 2011 (so far, the only economic interests, but also faces significant BRICS to do so) (Bakalova and Spanger 2013). To security concerns and geopolitical competition. Russia, whose cooperation is fragmented and While India has participated in OECD-led marked by low institutionalisation, the BDB discussions about aid and cooperation, its offers an opportunity to regain its footing in government has expressed reservations about international cooperation. the DAC’s use of political conditionalities. Indian official development cooperation has expanded To Brazil, South–South cooperation has served over the past decade, but its own access to both to diversify the country’s economic foreign capital sources is limited, meaning partnerships and to project influence abroad, India’s interest in providing finance may waiver particularly in South America and Africa. By depending on the domestic political situation building up expertise niches in areas like tropical (parliamentary elections are scheduled for 2014). agriculture, public health and education, Brazil has both expanded and institutionalised its During apartheid, South Africa’s development official development cooperation, much of which assistance was allocated to its nominally is coordinated through the Brazilian Cooperation autonomous homelands. Since 1994, South Agency (ABC), a division of the Ministry of African cooperation abroad has expanded, External Relations. Brazil’s largest construction especially in Africa. South African firms, companies undertake infrastructure projects especially in telecommunications and retail, have abroad, often with financial backing from the driven economic cooperation, while the state’s Brazilian Development Bank (BNDES) (Cabral role has concentrated in peacekeeping, electoral and Weinstock 2010). Non-state actors, including reform and post-conflict reconstruction (Vickers non-governmental organisations (NGOs) and 2012). Despite relying on a more restricted labour unions, also carry out cooperation, either budget than fellow BRICS states, the South through or outside of official channels. To the African government has worked to formalise and Brazilian government, the BDB would serve to coordinate the country’s cooperation through the both project and legitimise Brazilian cooperation creation of the South African International within a multilateral setting while boosting Development Agency (SAIDA), later renamed Brazil’s calls for reform of global governance – a the South African Development Partnership topic that has been particularly salient in Agency (SAPDA). There is some concern that Brazilian foreign policy since Luiz Inácio Lula da South African firms operating elsewhere in Silva’s leftist presidency (2003–11). In addition, Africa will suffer with increasing competition the bank would also help to enhance the reach of from other cooperation providers, including the Brazilian cooperation at a time when the other BRICS (Besharati 2013). On the other economy has slowed down and Brazil’s hand, the BDB would allow South Africa to South–South development initiatives suffer from strengthen its position as a gateway to African scaled-back funding. development.
India’s development cooperation has been led by As for China, its cooperation-related interests non-state actors such as private firms and both align and compete with those of fellow community organisations, but lately the Indian BRICS. The speed of China’s expansion abroad government has taken steps to increase the means that it increasingly operates in the same state’s role. In 2012, it launched the countries – sometimes, the same sectors – as
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other South–South cooperation providers. For China to boost its multilateralism, participating instance, in 2013 China recently announced a in a wider variety of debates of global reach. US$125 million fund, the China–Lusophone Second, the BRICS provides China with the Africa Development Fund, meant to help Chinese chance to reinforce its claim that it is a companies enter Portuguese-speaking markets in responsible, solitary global player. Third, the Africa (Ventures Africa 2013). The fund also BRICS allows China to strengthen its dual boosts competition for Brazilian oil and identity as both a developing country dedicated construction companies operating in countries to South–South cooperation, and a rising power like Angola and Mozambique. In addition, China striving for governance reform. Finally, because occasionally vies for the same projects as fellow intra-BRICS relations have deepened, the BRICS countries, with the capacity to outbid grouping is a way for China to increase trade and them. In South Africa, Russia and China are vying investment ties to other regional powers and to for a massive nuclear energy tender. Although become a more influential player in global there are other dynamics of competition among debates about how international development the BRICS, the size and agility of Chinese ought to be tackled. cooperation means that the other BRICS countries view it as a source of growing Although, as a permanent seat holder at the UN competition. While Chinese companies are Security Council (UNSC), China – like Russia – interested in enhancing their competitiveness, as has behaved more conservatively than the analysed in greater detail in the next section of remaining BRICS where matters of security this article, the government has tried to attenuate architecture reform are concerned, in other the perception of China as an aggressive player – areas of global governance China has long called for which collaborative action through the BDB for greater inclusiveness, often claiming to can prove extremely useful. advocate on behalf of other developing countries. Through the BRICS, China can reinforce these At any rate, inter-member competition does not calls for change without coming across as overly necessarily pose a significant hurdle to the aggressive. The balance that China tries to strike creation of the BRICS Development Bank. The between change and status quo maintenance on major contributors to the World Bank, after all, issues of development is reflected in a 2012 also compete among themselves, as do those of speech by Hu Jintao: regional banks such as the Asian Development Bank. In addition, the bank initiative serves In their co-operation, BRICS countries have common political goals. By creating a committed to promoting South–South development bank from scratch, the BRICS can cooperation and North–South dialogue, pressure existing institutions for faster reform endeavouring to implement the United while offering a concrete alternative to the Nations Millennium Development Goals, Bretton Woods Institutions. As one BRICS working for early realisation of the goals set diplomat put it, ‘If the World Bank doesn’t want out in the mandate for the Doha development to reform in earnest, we’ll just go ahead and round negotiations, striving to secure a create our own bank.’ Finally, the bank greater say for developing countries in global legitimises the grouping by allowing member economic governance, and fighting all forms states to prove their (frequently questioned) of protectionism (Radebe 2012). capacity to launch concrete initiatives. All of the BRICS have resisted (albeit to different degrees) From a geopolitical point of view, the BRICS efforts by the DAC to promote principles dear to helps China to counter US hegemony without Northern donors, and the bank potentially direct confrontation. In addition, the grouping represents a platform through which to establish allows China to learn more about, and deepen a new normative framework. ties with other rising powers – a particularly important goal given the global reach of Chinese 2.3 China and the BRICS interests. The desire to strengthen alignments For China, the BRICS grouping offers a series of and relations with such states helps to explain benefits and potential opportunities, many of China’s concerted efforts to bring South Africa which overlap with those of the other member into the grouping – a move reflective of China’s states. First, this trans-regional initiative allows strong interests in Africa and its view of South
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Africa as a gateway to the rest of the continent 3.1 Chinese development: a shifting model (He 2011). By boosting the BRICS, China has In the 1950s, despite the generally inward policy also been able to deflate the IBSA, a orientation of Mao Zedong, the People’s South–South initiative that, because it is Republic of China (PRC) began providing premised on the common identity of its three development cooperation: it transferred goods to members as diverse, democratic rising powers, Pyongyang after the Korean War and offered excludes the possibility of Chinese membership. development finance to socialist countries along its border. Shortly afterwards, at the initiative of To help consolidate the BRICS, China has Premier Zhou Enlai, China also began assisting remained active at summits, ministerial liberation movements in Africa, increasing this reunions, and sherpa meetings. The importance cooperation as African colonies became attached by China to the BRICS within its independent states. In the 1960s, Zhou led multilateral strategy is reflected in the 2012 efforts to lay out the basic principles of the work report of the 18th Chinese Communist Chinese development cooperation. In 1964, he Party congress, which set guidelines for China’s introduced the ‘Eight Principles of Economic and grand strategy in the coming years. Within the Technical Assistance’, which included mutual document, only the UN, the G20, the BRICS and benefit, respect for national sovereignty, and the Shanghai Cooperation Organisation (SCO) helping partner countries to become more self- are mentioned among China’s institutional sufficient. By 1973, China was providing priorities (Zhao 2013). China has also shown development assistance to 30 nations in Africa some initiative in proposing ways to increase the alone (Strange, Parks, Tierney, Fuchs, Dreher grouping’s degree of institutionalisation. For and Ramachandran 2013) – a diversification that instance, one of China’s top diplomats has helped the PRC to replace Taiwan in the United recently suggested the creation of a common Nations, obtaining a permanent seat at the BRICS secretariat (Wright 2013). At the same Security Council. However, with the notable time, in order to reap the benefits of its exception of the TAZARA railway, built in the membership in the grouping, China has so far 1970s to link the Tanzanian port of Dar es consciously adopted a strategy of relative Salaam to Zambia’s Central Province, China’s discretion within the BRICS, avoiding a stance initiatives during this period were mostly that could be interpreted as domineering. scattered or small-scale.
China’s discreet behaviour within the BRICS, Under Deng Xiaoping, economic liberalisation however, does not mean that it will refrain from began in the countryside and then accelerated influencing the bank’s design. Like the other with the establishment of special economic zones BRICS states, China has appointed a task force (SEZs) designed to gradually foment investment led by a senior official with substantial experience and technology transfer. Investment in large- to lead its work on the BDB: Chen Yuan, who in scale infrastructure, including dams, roads and April 2013 stepped down as Chairman of the railways, ports, industrial complexes and urban China Development Bank (CDB). Under Yuan, equipment, helped to fuel the growth of state- the CDB reduced its non-performing loan ratio owned enterprises (SOEs), but later the and depoliticised the CDB’s lending process by government also sought to expand the private creating a system that increases autonomy sector (Naughton 2007). These policies yielded between credit risk assessments and loan approval high and sustained economic growth – China (Provaggi 2013). The government’s appointment attained double-digit GDP growth rates for over of Yuan to lead its BDB task force reflects the 15 years – and they strengthened the PRC’s level of importance attached to the initiative. poverty alleviation capacity, lifting an estimated 600 million citizens out of poverty (Gallagher 3 Chinese development and its institutions 2013). Political liberalisation, in contrast, was What kinds of ideas is China likely to bring to put on hold after the 1989 Tiananmen the BDB? In this section, I provide an overview of crackdown in Beijing. Since then, China’s rapid how China’s development model has changed growth has brought about new challenges, across time, as well as how its experiences at home including deep cultural shifts, serious are linked with its initiatives in international environmental degradation and new forms of cooperation. social inequality, including a large ‘floating’
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migrant population alongside emerging pockets internationally). Through high-level visits and of prosperity in urban areas. other exchanges, as well as the expansion of China’s diplomatic representations abroad, the China’s rapid transformation also caused government deepened ties with other developing significant shifts in China’s role in international countries, prioritising providers of minerals, development cooperation. According to Chin timber and other commodities. China’s energy (2012: 584), China went from being a net donor security policy, which has sought to diversify and receiving virtually no official development sources beyond the Gulf suppliers, has also assistance (ODA) from the DAC countries to provided impetus for expanded South–South ties. being the world’s largest ODA recipient just a few years later. In 1999 China graduated to the These efforts have been accompanied by a International Development Association (IDA), discourse stressing horizontality, mutual benefit then reverted to zero net ODA as net loan and lack of conditionalities (save for the repayments offset ongoing grant transfers before requirement that partners refuse to recognise attaining net donor status. Taiwan, in keeping with Beijing’s One China policy). The State Council’s 2013 White Paper Against this dynamic backdrop, China’s China–Africa Economic and Trade Cooperation reaffirms experience with development financing begins Zhou Enlai’s Eight Principles (Office of the State with the state institutions created to foment Council 2013). China has also leveraged its domestic investment, including key policy banks identity as a developing country, framing its like the CDB and the China EximBank (CEB). cooperation as unburdened by the colonial legacy The CDB, created through the 1994 Policy Banks of Northern aid. Finally, to counter perceptions of Law to provide loans for major infrastructure China as a threat, the Chinese government projects, became responsible for much of the stressed the idea of a ‘peaceful rise’, later changed financing for several mega-projects, including to ‘peaceful development’, according to which the Three Gorges Dam and Shanghai Pudong China’s fundamental interests are international International Airport, China’s busiest peace and prosperity, both essential to its international hub. The CDB, which describes paramount goal of socioeconomic development. itself as ‘the engine that powers the national This discourse is coupled with a soft power government’s economic development policies’ strategy anchored in diplomatic, cultural and (China Development Bank n.d.), maintains deep education exchanges, as well as strategic grants ties to the state, as reflected in the bank’s and soft-loans, meant to mitigate frictions. As part governance structure: it is led by a cabinet of this effort, in 2012 the Chinese government minister level governor, under the direct urged Chinese civil society entities to forge closer jurisdiction of China’s State Council. The ties to their African counterparts (Meng and Sun ensuing projects have fomented considerable 2013). However, beyond thinktank meetings the prosperity in China, but they have also entailed scope and substance of these initiatives are unclear major population dislocation, environmental and Chinese cooperation remains heavily state and degradation, and in many cases, social protests. company-led.
China’s development financing institutions have In financially backing the internationalisation of changed across time as China’s development Chinese firms, the state has relied on the same model was modified and as Chinese interests institutions that guided its domestic investments. abroad expanded. The country’s fast-paced Many Chinese projects abroad – often in markets economic growth demanded raw inputs for its long overlooked by Northern countries – have manufacturing sector and for the changing generated strong profits for SOEs and private lifestyle of its swelling, increasingly urbanised sector firms, encouraging even more Chinese middle classes. The Chinese government played companies to go abroad. Over the past decade, an active role in opening doors abroad, backing the Chinese government has continued to the internationalisation of Chinese companies – emphasise the intersection of aid, trade, and especially SOEs – and fomenting international investment, while complementing market-rate trade and investment (immediately after the loans with concessionary loans, grants and debt Tiananmen crackdown, it also sought to overcome forgiveness. In Africa, China has also promoted the relative isolation in which China found itself the creation of SEZs, thus adapting components
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of its pioneering experiments at home to other 2009). The Ministry of Commerce (MOFCOM) contexts (without trying to replicate its is in charge of most overseas grants and interest- development model wholesale). free loans, while CEB and CDB provide concessional and non-concessional loans and This intensifying cooperation has taken place export credits. The Ministry of Finance (MOF) within the broader context of deep changes within carries out debt relief and channels contributions the field of international development as to multilateral institutions. Finally, the Ministry South–South cooperation providers gained of Foreign Affairs (MOFA) reviews project influence relative to OECD donors. While, like requests from partner countries and coordinates China, most of the developing countries have been related diplomatic efforts. The complexity of this offering cooperation for decades, after the arrangement, the differences in categorical millennium, in part due to the commodities boom, definitions, and the scarcity of official data make they gained the economic leverage to significantly it difficult to ascertain the true scope of Chinese expand their cooperation initiatives. This development cooperation. Chin (2012) estimates diversification of actors within international that China is somewhere between the first and development accelerated after the 2008 onset of third provider of bilateral assistance. The the global economic crisis, when many advanced perceived opacity of Chinese cooperation has countries scaled back their aid programmes. In triggered debates about China’s level of contrast, some rising powers proved resilient to the transparency, particularly in the light of the initial shock of the crisis and were able to deepen OECD ‘aid effectiveness’ agenda. Grimm, Rank, their South–South ties, including in countries McDonald and Schickerling (2011) argue that, where Northern aid shrank (OECD 2012). Within although the Chinese government tends to this shifting landscape, China has played a highly publish less data and statistics than OECD visible role due to the size and visibility of its donors, it has been moving towards greater cooperation, the pace of its expansion, its transparency – as reflected in the issuing of unwillingness to adhere to the DAC’s norm-setting cooperation policy white papers.5 efforts, and its reluctance, when compared to other South–South providers, to engage in trilateral In January 2007, Prime Minister Wen Jiabao cooperation with Northern donors. announced that the CBD and CEB – along with the Agricultural Development Bank of China – Key Chinese banks have also gained visibility for would become commercial entities. The transition helping to finance much of this expansion. In has been slow, partly because these banks played a 1995, aid reform allowed those institutions to key role in expanding the domestic economy after develop a variety of credit lines and grants, as the onset of the global crisis, making the well as a resource-credit swap model in which government more hesitant to increase these loans are repaid in local products and primary institutions’ autonomy. Nevertheless, over the goods. Just as they financed major infrastructure past few years CDB has expanded its cooperation and industrial policy projects in China, abroad portfolio to encompass partnerships with these mechanisms are used for the same kinds of governments and companies from over 140 initiatives. Compared with other providers of countries. It currently has 38 branches and three development financing, Chinese banks and offices abroad (Cairo, Moscow and Rio de Janeiro) companies actively sought out sectors with and has become, by some measures, the world’s promising rather than proven growth potential, largest development bank. The CEB provides showing greater willingness to accept risks than more financing to developing countries than the their Western counterparts (Provaggi 2013). World Bank. In Africa alone, China has invested over US$2.4 billion in infrastructure and Rather than being organised under a single commercial projects, mineral resources, coordinating agency, those institutions are part machinery manufacturing, power generation and of a wide array of ministries, divisions and agricultural projects. Through the Forum on agencies involved in different (and sometimes China–Africa Cooperation (FOCAC), established overlapping) aspects of cooperation. The State in 2000, China has doubled its pledges of Council sets government policy for cooperation, cooperation to African partners at each meeting: determines the annual development assistance from US$5 billion in 2005, to US$10 billion in budget and reviews large grants (Brautigam 2009, to US$20 billion in 2012.
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Although China often provides highly visible Chinese companies have adapted or pulled out of projects, including stadiums, hospitals, and projects altogether, either by choice or due to government buildings as part of its soft power local resistance. The China National Petroleum strategy, the bulk of its loans is channelled into Corporation (CNPC), China’s largest oil large-scale infrastructure such as roads, ports, company, revised an oil project in the eastern and dams. This focus evokes the Bretton Woods jungle of Peru after its plans raised Institutions’ early years, when the World Bank environmental and social controversies (Matisoff and the IMF financed heavy infrastructure; and 2012). Although far from universal, the case it contrasts with Northern donors’ current reflects a degree of institutional learning by prioritisation of social programmes and meeting Chinese cooperation entities, as well as the statistical objectives such as the Millennium institutions and societies with which they Development Goals. In addition, whereas interact. Although the Chinese government may Northern aid has been closely associated with not always have the capacity or political trade liberalisation and financial deregulation, willpower to curb excesses committed by Chinese China’s cooperation is heavily influenced by the companies (even those backed by state efforts), it close interlinking of state and market that has seems keenly aware that funding major characterised Chinese development at home, infrastructure and industrialisation projects including regulated trade and financial markets abroad brings the risk of triggering social (Mwase and Yang 2012). discontent and political backlash.
China’s trade and investment relations with other 3.2 Moving beyond bilateralism developing countries have increased dramatically, Although China has carried out its development with China mostly importing raw materials and cooperation primarily through bilateral exporting finished goods. For commodities channels, over the past decade China has also exporting countries, these exchanges have contributed to multilateral efforts, seeking to boosted local economies. In addition, Chinese become a more active and legitimate investment has become an essential source of multilateral participant as part of a shift towards capital, particularly in the light of widespread a more flexible, varied diplomacy. Pessimists disillusionment regarding Northern aid models view China’s multilateralism as a mere façade, and lingering bitterness at the structural whereas optimists see it as reflecting China’s adjustment packages imposed in the 1980s and commitment to international organisations and 90s (Moyo 2009). As part of a broader wave of peaceful development – arguing that, the more South–South cooperation, China has contributed China is incorporated into pre-existing to the advent of an ‘age of choice’ in which low- institutions, the easier it will be to ‘socialise’ income countries that once depended heavily on Chinese political elites into Northern norms of Northern aid can now choose among a variety of cooperation (Guogang and Landsdowne 2008). options (Greenhill, Prizzon and Rogerson 2013; Whereas China exhibited a purposeful yet Mohan and Lampert 2013). tentative experimentation with multilateralism in the 1970s and 80s – captured by the Chinese Critics of Chinese cooperation sometimes argue phrase ‘crossing the river by feeling for stones’6 – that partners are incurring an unhealthy more recently Chinese political elites made dependency on China, and that the exchange significant strides towards enhancing China’s patterns bear an uncanny resemblance to those multilateralism. At any rate, the idea that China established during colonial times. Others can be ‘socialised’ into existing norms bemoan the impact of Chinese cooperation on presupposes a one-way process and human rights, the environment and labour underestimates the extent to which China itself conditions. Both ends of the spectrum – romantic influences the multilateral forums in which it and doomsday visions of Chinese cooperation – participates (Woods 2008). tend to overlook its variability: the dynamics and impact of Chinese cooperation have neither been Although China joined the United Nations in uniform across contexts, nor constant across 1971, for the next few decades China remained a time (Alden 2008). Although some large-scale largely passive player; for instance, it rarely infrastructure projects have generated political exercised its veto power within the UNSC. After tensions and social unrest, at other times the start of economic reforms, China has become
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a more visible actor in institutions and regimes, in Central Asia, but China has assumed a in sectors as varied as financial governance, leadership position in deepening and broadening development and security. By 2007, China the SCO’s mandate towards economic and expanded its membership from a single development cooperation initiatives (Jia 2007). intergovernmental organisation (IGO) and 58 China was also instrumental in the creation of NGOs to 49 IGOs and 1,568 NGOs. In addition, the Boao Forum for Asia (BFA), an NGO it joined a variety of forums and ad hoc modelled on the World Economic Forum and negotiations in areas including arms control and designed to bring together business, government climate change (Kent 2007). China’s 2011 and academic leaders for strategic discussions. accession to the World Trade Organization (WTO) was a major turning point in its Aside from these regional initiatives, China has multilateralism: China was inducted only after been an active participant and/or founding the government proved willing to impose member of coalitions such as the G20 and (as significant changes to the Chinese economy, examined in greater detail in Section 3.3) the including industrial policies and tariff BRICS. Through these platforms, Chinese reductions. Although, as a P5 country, China is diplomats now regularly meet with their hesitant to reform certain aspects of the global counterparts on the sidelines of major governance system, China’s highly variable international meetings, including those of the behaviour within multilateral institutions is not UN General Assembly and the IMF. China has easily captured by dichotomies between ‘status been hosting more high-level meetings, such as quo’ and ‘revisionist’ (Wuthnow, Li and Qi 2012). the 2011 BRICS Summit, held in Sanya. Through this burgeoning multilateralism – the result of China has drawn on a variety of strategies to incremental changes rather than a conscious boost its multilateral diplomacy. First, it has policy – China has honed its diplomatic skills, increased its contributions towards, and its acquiring the knowledge and negotiation styles activism within, UN agencies and other needed to manage multilateral cooperation. From established organisations. In some instances, a mere follower of rules, in many areas China has these contributions have translated into begun to play a proactive role in the setting of enhanced influence within organisations. For global agendas and in multilateral institution- instance, in April 2010, the World Bank agreed building (Shen 2008). Through these strategies, to expand China’s voting power above those of China works to legitimise itself as a global player, several Western powers, including Germany, including – as the next section shows – in the France and Britain, elevating China to behind field of international development. only the USA and Japan in the 186-nation lending organisation. In terms of voting power, 3.3 China’s role in multilateral development banks China’s stake in the World Bank increased from China’s participation in the BDB project would be 2.78 per cent to 4.42 per cent (the USA has 15.85 far from its first engagement with a multilateral per cent, and Japan has 6.84 per cent) (RTHK development financing institution. China joined 2010). Second, more Chinese citizens began the World Bank in 1980 (Bretton Woods Project occupying senior positions in major institutions, 2011), although for a decade it remained a minor including the United Nations, the World Health player, borrowing from the bank’s low-income Organization, the WTO and the World Bank. country branch. Nowadays, China is classified by Taiwan-born Justin Yifu Lin, who defected to the World Bank as a middle-income country, and mainland China and became an economics the Chinese government essentially uses the professor at Peking University, served as chief institution’s loans only for small-scale projects. economist and senior vice president of the World However, China has begun participating in the Bank from June 2008 to June 2012. bank’s policy debates; in 2012, for instance, the Development Research Centre (DRC) of the PRC In addition, China has begun spearheading or State Council teamed up with the World Bank to co-launching new multilateral initiatives. Over produce a 468-page report, titled ‘China 2030’, the past decade, it has helped to consolidate the that establishes a wide range of policy measures to Shanghai Cooperation Organisation (SCO), prevent China from falling into the ‘middle- originally started in 1996. The SCO originally income trap’ (The Economist 2012). In 2013, focused on its member states’ security concerns Premier Li Keqiang stated that China was willing
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to collaborate more closely with the World Bank, may prove relevant to the BDB. China is a and he called upon the institution to ‘play a bigger member of the Inter-American Development role in assisting developing countries and in Bank (IADB), contributing US$250 million to poverty reduction’ (Xinhua 2013). various programmes since 2009. In 2013 the People’s Bank of China (PBC) announced it China has also joined a variety of regional would provide $2 billion to a Co-financing Fund development banks. In Asia, it has been a part of for projects related to poverty alleviation, the Asian Development Bank (ADB) since 1986 inequality reduction, private sector investment, and currently holds the third largest proportion social welfare, climate change and gender of shares (after the USA and Japan). China’s equality (IADB 2013). This type of joint geopolitical interests have occasionally shaped financing, reaching far beyond China’s typical ADB initiatives. In 2009, after the bank investments in heavy infrastructure, may be a announced US$2.9 billion for projects in India, way to channel Chinese capital to sectors China’s MOFA strongly condemned the move, prioritised by regional institutions, provided that voicing concern over a US$60 million watershed the BDB has mechanisms for such arrangements protection project in the Arunachal Pradesh in the future. region, where part of the China–India territorial dispute is located (SINA 2009). Although in As for the normative aspect of development 2010, when Premier Wen Jiabao visited India, the multilateralism, China’s engagement with the two sides signed an agreement on India–China OECD and particularly the DAC has been Border Affairs, recurring territorial tensions led marked by a pronounced ambivalence. Like the the Indian government to announce in 2013, other BRICS, China is not a member of the unilateral plans to develop the region without OECD and has largely rejected the DAC’s loans from the ADB (Wu 2013; African attempt to codify the norms and practices of Development Bank n.d.). The case illustrates international aid. In 2011, for the first time, some of the conflicts of interest that may emerge Chinese representatives (along with those from within a BDB, particularly where geopolitical Brazil, India, Indonesia and South Africa) rivals China and India are concerned. attended the DAC senior-level meeting of directors-general (Eyben 2012). During the Over the past decade, as its interests have Fourth High Level Forum on Aid Effectiveness, expanded beyond Asia, China has significantly held in Busan, South Korea, negotiators from the stepped up its activism within multilateral DAC member states argued that countries like development initiatives beyond Asia. In the mid- China, Brazil and India should make 1980s, China joined the African Development commitments to making their cooperation more Bank (AfDB) and the African Development Fund measurable, transparent and efficient. DAC (ADF). Since then, China has signed agreements donors made persistent efforts to engage with in areas including environment, agriculture, China and refined the final document water and health, and both CEB and the CDB specifically in order to persuade China to sign, signed new Memoranda of Understanding with adding the option of voluntary standards for non- the AfDB. China’s contribution to the AfDB alone DAC members (Barder 2011; Mawdsley, Savage has increased from an initial US$14.59 million to and Kim 2012). Several non-DAC members a total of US$486 million. More recently, China ended up agreeing to voluntary standards while has been discussing a new co-financing mechanism insisting that South–South cooperation should to fund infrastructure and private sector not be subject to the same expectations as initiatives in Africa (African Development Bank Western aid (Strange et al. 2013). Overall, the n.d.). Given the BDB’s probable initial focus on BRICS countries did not adopt a coordinated Africa, these precedents mean that Chinese bank approach: while Brazil was content to sign the officials have acquired considerable knowledge document, India proved reluctant, and Russian and experience interfacing with the region’s representatives distanced themselves from both major development institutions, as well as China and Brazil (Eyben and Savage 2012). individual state governments. Other than the China–DAC Study Group, which brings together Chinese and foreign cooperation China’s engagement with development financing and aid experts for discussions on development abroad has also generated some innovations that issues, China has little interface with the DAC.
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China’s resistance to DAC-led efforts, shared to within the grouping (Russkyi Mir Foundation some degree by the other BRICS, seems to carry 2013). Moreover, China’s cooperation with other over into its role in post-2015 development goals. developing countries outpaces that of any of the Within these discussions, China has stressed the other BRICS. This asymmetry has led some importance of poverty alleviation and the need to critics to argue that the BRICS is nothing more address development in Africa, and it has than a platform for China’s rise. This view tends insisted that the new agenda must accommodate to underestimate the extent to which Chinese different models of development – in essence, policy elites endeavour to transform China into a suggesting it will resist the formulation of rigid legitimate multilateral player aligned with other normative frameworks. As China’s role in the rising powers. Becoming hegemonic within the post-2015 debates shifts from a mostly reactive grouping would in fact run counter to China’s stance to a more proactive position (Wheeler long-term interests. 2013), these viewpoints will no doubt influence the practices and normative stances established This does not mean that, when experts sit down by the BDB. While China’s stress on poverty to hammer out credit lines and loan conditions, alleviation will ensure that the objective features China’s interests will fade into the background. prominently among the bank’s overarching goals, The characteristics of Chinese development the institution is unlikely to adopt norms cooperation – including its vast experience regarding transparency, impact evaluation and abroad, its agility, and its claim to successful efficacy as defined by the DAC. Insofar as the implementation of infrastructure and bank constitutes a concrete application of the industrialisation projects – may incrementally BRICS’ positions on development, including pressure the BDB towards certain directions. In China’s steadfast positions, the institution is the long term, the degree of the tilt will depend bound to feature prominently in global debates on how well the decision-making structures built about development norms. Accordingly, into the bank’s design reflect an equitable contestation of the BDB, already voiced by a distribution of influence (for instance, through number of scholars and civil society entities (see equal voting rights and/or, in the case of China, a Yu 2013; Dossani 2014), is likely to sharpen. cap on contributions).
4 Conclusion As for how China will approach the negotiating Although China does not need the BDB as a way table during the bank’s design process, a of boosting its cooperation portfolio (massive by representative from one of China’s key any measure) its participation in the initiative development financing institutions affirms that generates a series of benefits for China, most of China’s practice of providing loans based on them political. In the light of the Chinese projects must be maintained, even when there is government’s drive to boost its multilateral regime change: ‘A project is a project. So long as diplomacy and to project the image of a that project is commercially viable and eventually responsible, peace-loving country, the bank proves beneficial to the social wellbeing of that initiative offers an opportunity for China to engage country, then we will go ahead [with the loan]. with other rising powers on a concrete initiative This new institution has to work along the same of high visibility. Although China already lines.’ Given how strongly other BRICS states’ cooperates with development finance institutions foreign policies have emphasised the concept of around the world, the bank will mark the first national sovereignty, this preference is unlikely time that China becomes a founding member of to meet with resistance even from democratic an organisation dedicated exclusively to boosting Brazil, India and South Africa. South–South development cooperation. As for its substantive contribution to the bank At the same time, the size of China’s economy project, China’s discourse regarding poverty and its global projection have prompted anxiety alleviation must reach beyond generic about China dominating the BRICS. statements about the economic benefits of heavy Economically, after all, the grouping is not one of infrastructure. In the 1960s and 70s, when the equal parties; the volume of trade and financial Bretton Woods Institutions focused on heavy transactions between each country and China far infrastructure, its leaders relied on a vague exceeds any other bilateral cooperation tie trickle-down economics to justify medium and
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large projects: the idea was that building a it is unlikely that the BDB will grant them space dam/road/port would increase output, generate for participation or contestation, in part due to jobs and foster growth that would benefit the Chinese (and Russian) fears of political population more broadly. The impact of such contestation. Finally, from the perspective of the projects, including on local and regional patterns bank’s potential loan recipients, the bank will of poverty, turned out to be more complicated, probably bring a mixed bag of benefits and risks. with population displacement and social tensions BDB loans will further broaden the range of emerging alongside pockets of prosperity. The financing options available to low-income same has been true of many projects financed by countries, contributing to the so-called ‘age of the individual BRICS. Within the BDB, China choice’, but it may also end up subjecting them must therefore join forces with fellow member to new norms and practices altogether. The states to find innovative ways to link Busan meeting showed quite clearly that – far infrastructure and industrialisation with poverty from China being passively ‘socialised’ into DAC alleviation. Otherwise, the bank runs the risk of norms, global debates and practices are throwing back cooperation to the era when themselves also influenced by China’s rejection economic growth was used as a narrow proxy for of Western normative frameworks. development – an outlook that would do tremendous disservice to low-income countries. While the BRICS have not yet offered a coherent set of development cooperation norms, the bank China’s impact on the BDB may be felt just as project may present those five countries with an much by what is kept off the table as what is occasion to find common ground, precisely at a maintained on the bank’s agenda: concern for time when the post-2015 development human and labour rights, environmental discussions is reshaping the global development conditions, and other dimensions of social agenda. China should apply its experiences with wellbeing. Another missing element will be civil development – both at home and through the society entities. Although NGOs, professional lessons learned financing projects abroad – to organisations and diaspora community the BDB without losing sight of overarching institutions have become key participants in goals such as poverty alleviation and contributing some of the BRICS states’ individual cooperation to the wellbeing of populations in low-income programmes, especially those of Brazil and India, countries.
Notes see itself as a Northern donor. In addition, * Institute of International Relations of the Russia is not part of the OECD. Pontifical Catholic University of Rio de 4 The grouping has also agreed upon a reserve Janeiro, PUC-Rio/BRICS Policy Center. pooling arrangement, with US$100 billion set 1 The author wishes to thank the Fundação de aside to counter crises, as well as the impact Amparo à Pesquisa no Estado do Rio de of withdrawal of stimulus by the US Federal Janeiro (FAPERJ), the Jovem Cientista Reserve. programme, CAPES and DFID for supporting 5 Key documents include: China’s African Policy this research. (January 2006), China–Africa Economic and Trade 2 P5 refers to the five members of the UN Cooperation (December 2010), China’s Foreign Security Council: China, France, Russia, the Aid (April 2011) and China–Africa Economic and UK and the USA. Trade Cooperation (August 2013). 3 Russia does not adopt the language of 6 Pinyin: Mozhe shitou guohe. ‘developing country’, although neither does it
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