China’s Development Policy and the West: Convergence or Parallel Play?

The launch of the Asian Infrastructure Investment Bank (AIIB), and China’s increasingly muscular profile in international development, have aroused curiosity and some anxiety among Western analysts and development organizations. With the world’s second largest economy, China clearly has the resources to make a difference, and as China’s unique approach to development cooperation becomes clearer, observers are considering just what that difference might prove to be. On June 9 and 10 in Bangkok, The Asia Foundation brought together leading Chinese researchers and policy makers with international development experts for China’s Overseas Development Policy in a World “Beyond Aid,” the latest in its Asian Approaches to Development Cooperation dialogue series.

On what was perhaps the central question – will Chinese and Western approaches to development cooperation remain competitive or eventually converge – the experts were divided. Several prominent Chinese scholars noted that significant differences separate Western development practices from China’s, differences that they attributed to the influence of Western colonialism on the concept of “development.” Western aid has traditionally come with conditions, they observed, while Chinese aid comes with no strings attached. China focuses on productive sectors, while the West tends to prioritize governance, and the Chinese paradigm is based on mutual benefit rather than philanthropy.

But Gu Jing of the Centre for Rising Powers at the Institute of Development Studies, University of Sussex, suggested that a process of convergence has already begun. Aid and trade are no longer viewed as discrete domains in the West, she said, but as part of a single fabric of bilateral cooperation, and mutual benefit is increasingly accepted as a core principle of development partnerships. Following this line, it was also argued that China’s influence was causing an evolution in aid discourse, from “aid effectiveness,” with its hierarchical connotations and narrow concept of “aid,” to the broader notion of “development effectiveness,” providing a bridge from traditional Western approaches to new forms of development cooperation.

The delegates also considered the thorny problem of measuring Chinese aid. Naohiro Kitana of the Japan International Cooperation Agency Research Institute estimated Chinese foreign aid at $7.1 billion in 2013, making China the world’s sixth largest bilateral donor, just after France. Austin Strange, using AidData’s Tracking Underreported Financial Flows (TUFF) methodology, which tracks over 2,500 Chinese projects and activities in Africa, documented China’s dominance in the productive sector, particularly in energy and in transport and storage. Between 2000 and 2013, China committed $39 billion to projects in these sectors. In the Pacific, noted Philippa Brant of the Lowy Institute, China is now the third largest aid provider, following Australia and the U.S., but it is number one in Fiji, investing $332.96 million from 2006 to 2013. Eighty percent of Chinese assistance in the Pacific is in the form of concessional loans, mostly in the transport sector.

While the question remains what exactly counts as “aid” in this new paradigm, the challenge of quantifying China’s foreign assistance has pushed the discussion of development finance in a new, recipient-centered direction. Thomas Beloe of the United Nations Development Programme described development finance today as a collage of different sources, just one of which is “aid” in a narrow sense. A new concept, “total official support for sustainable development” (TOSSD), which includes other sources such as remittances, concessional loans, and private finance, may complement and even replace the current narrow parameters of “official development assistance.”

The hottest topics of discussion at the Roundtable were China’s ambitious One Belt, One Road (OBOR) initiative and the launch of AIIB. Despite the fact that China has contributed $30 trillion to development over the past 30 years, Asia still has an infrastructure deficit of $8 trillion. OBOR aspires to develop connectivity and cooperation among countries in Asia, Africa, and Europe through an elaborate network of land and sea infrastructure known as the Silk Road Economic Belt and the Maritime Silk Road. Shantanu Mitra of the UK’s Department for International Development estimated that OBOR would benefit 63 percent of the global population and contribute $2.1 trillion to global GDP.

The AIIB will be one of several sources of financing for OBOR. With 57 countries signed up, notably including the UK and Australia, but not the U.S. and Japan, the AIIB is expected to transform multilateral engagement. Unlike the World Bank and the Asia Development Bank, which have concentrated on poverty reduction in Asia, the AIIB will focus on infrastructure and connectivity. AIIB will commit itself to be “lean, clean, and green,” according to the Chinese expert in the meeting.

Participants also discussed triangular cooperation (TrC) – partnerships involving a traditional donor, non-traditional provider, and a recipient country – as a potential path to convergence of Chinese and Western development approaches. While there have been some successes, such as the China-Australia-Cambodia partnership on irrigation, participants felt that transaction costs are high, the evidence of added value is weak, and that more rigorous evaluation of TrC is needed.

With China charting its own path, the roundtable concluded with speculation on the future of the Global Partnership for Effective Development Cooperation. Debapriya Bhattacharya, of Southern Voice on Post-MDG International Development Goals, offered three scenarios. In the first, traditional and non-traditional providers pursue separate parallel tracks that never meet. In the second, the two approaches, traditional aid and South-South cooperation, come together, but one is subsumed by the other. In the third, a new partnership emerges from a convergence of the two. When participants were asked to predict which scenario would prevail in the next five years, they narrowly chose the two track-approach: China and the West, for now, will continue to engage in parallel play.

Anthea Mulakala is director of The Asia Foundation’s International Development Cooperation program, based in Malaysia. She can be reached at [email protected]. The views and opinions expressed here are those of the author and not those of the Asia Foundation.