The Intel

Australia would do well to understand three things behind China’s development program in the Pacific.

First, its magnitude. Australia’s aid program complies with standards established by the OECD Development Assistance Committee, one of which is transparency. To better monitor, assess, report and promote the provision of resources that support sustainable development, partners regularly publish their aid flows. China doesn’t. Its aid program doesn’t fit within this model, which makes it difficult to quantify.

Secondly, its functioning. In Australia, the government select projects that would generally both fit a recipient country’s development needs and Canberra strategic interests. Those projects would later generally be implemented by private organizations. For China’s development however, it seems the mechanism is inversed, with private Chinese companies first looking for lucrative development projects on the ground that might appeal to the host country and then seeking support from Beijing.

Thirdly, its intent. Chinese foreign aid is often referred to as having "no political strings attached" and is therefore a more attractive option than that of traditional development partners. But some analysts argue that many China-funded projects are not particularly beneficial for local people and are merely a way for China to access a country's market and resources, while advancing its strategic interests.

Much of what Australians read and hear about China’s engagements in the Asia Pacific is mired in controversy and suspicion.  This dominant narrative overshadows the lesser-known details of China’s development cooperation.  China is not a donor like Australia or the US.  When it comes to Chinese overseas lending it’s more helpful to think of China as a commercially oriented, east Asian development state which uses blended finance, private capital, commercial and subsidized loans, and Chinese companies to support infrastructure development in partner countries.

However, China also has a compelling development cooperation narrative, articulated through its three white papers (2011, 2014, 2021) and most recently the Global Development Initiative. The narrative anchors China’s approach in South-South Cooperation, which has broader parameters than Official Development Assistance, and includes investments, diplomacy, and other modalities such as those implemented through the Belt and Road Initiative (BRI). China’s narrative prioritizes multilateralism and seeks collaborative partnerships.    

There is evidence. China is vocal in its commitment to the SDGs and backs this with resources and leadership in the UN. Though not without controversy, and (mis)conceptions about hidden debt, China ranks among the top countries awarded MDB contracts. China contributes significantly to vertical funds, like GAVI. China also creates new multilateral institutions like the Asian Infrastructure Investment Bank, which serve its interests and vision of global governance.  Cognizant that its South-South Cooperation is complex, hard to count, and contentious, China is improving its use of feasibility studies, tendering rules, and performance appraisals and introducing standards such as the Guidelines for Ecological and Environmental Protection of Foreign Investment Cooperation and Construction Projects, and the Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative. Such reforms may improve the effectiveness of China’s overseas aid and investment and answer some of the calls for China to conform to international standards of development cooperation. China pursues triangular partnerships and recently Chinese Foreign Minister Wang Yi expressed China’s willingness to collaborate with the G7 countries on B3W.

The key to understanding China’s approach to development cooperation is to first not compare it with traditional aid, and second to recognize that as it evolves in both in narrative and practice, it increasingly serves China’s vision of global governance.

Despite popular opinion, Chinese aid and development methods are not static. China has introduced significant changes to its development program since it was first created. For example, it is devoting growing attention to ‘small but beautiful’ projects such as well drilling and water supply in addition to its flagship infrastructure investments and finance. This change represents an effort to increase China’s engagement with local communities. The ten highlights by the China International Development Cooperation Agency for 2021 is a worthy read.

Another big change relates to China’s increased Government-to-Government policy cooperation. The Xi Jinping administration has been more proactive in sharing China’s experience with developing countries on policy planning and governance, which covers a wide array of sectors such as agriculture, trade, environmental protection and even law-based governance. This could compromise the impact of traditional donors’ aid.

Equally important, China is continuing the experimentation of trilateral aid cooperation. Its current focus is on UN agencies and European countries like Germany and the United Kingdom. The growing geostrategic competition between traditional powers and China is likely to add uncertainty to this new modality.