Understanding Chinese International Engagement by Ben Segall

US-China competition is defined by disparities in military, economic, and international power. While the US maintains a significant lead on Chinese military operability and economic clout, Chinese “soft-power” trends are strengthening relationships and developing business with the international community in ways the US has been unwilling or incapable of replicating.  The Chinese Communist Party (CCP) has developed a robust system for developing clients and relationships abroad at an astonishing rate. US policy makers must understand how Chinese soft power operates, and how it contrasts with Western aid and diplomacy.

Understanding CIDCA

Since 2018, China’s International Development Cooperation Agency (CIDCA) has formulated the majority of strategies, projects, and relationships between China, and nations seeking Official Development Assistance (ODA).  In its three years of networked operations, CIDCA has signed development cooperation agreements with twenty-nine nations.  CIDCA differs from USAID in that it is not a self-contained agency which implements projects under a proprietary budget.  CIDCA formulates operations under the Chinese Ministry of Commerce, which answers to China’s State Council (executive leadership), and operates using funds from the Export-Import Bank of China (EximBank).  Other Chinese ministries also cooperate on projects depending on the nature of development e.g. ministries of education, environment, agriculture, and health.  CIDCA and the Ministry of Commerce oversee initial contracts, and the dispersal of three types of financial aid. The general “types” of financial aid include grants or “donations,” interest-free loans, and concessional (low interest) loans, though the dispersal of aid is rarely just one of the above. Development projects are often divided by phases, for example, stage-1 may be covered under an interest-free loan where stage-2 proceeds under a concessional loan.  There is significant ambiguity, even within recipient countries, as to the exact nature of Chinese aid per-project or project phase.

In Africa, China annually provides $3-4 billion in ODA to each: The Ivory Coast, Ethiopia, Zimbabwe, Cameroon, and Nigeria.  China is also considered the primary donor of ODA to Burma, Cambodia, and Laos while also providing significant aid to the Philippines and Indonesia. The nature and benefits of Chinese ODA vary widely. Basic programs include hospital construction and medical training.  More significant projects most commonly involve energy production and storage systems such as hydroelectric dams, essential transport infrastructure, or recreational facilities like sports stadiums.

Educational opportunities in the form of schools and cultural exchanges are also a large part of China’s aid structure. China has made itself significantly more accessible as a source of education for Africans and East Asians. China hosts hundreds of thousands of African and East Asian students each year. Foreign students cited the inaccessibility and exclusivity of US programs as primary motivators for their move to study in China. Schools that train Africans and East Asians in journalism have also been shown to pipeline trained employees directly into China’s numerous foreign news and radio outlets.

Prior Navanti research indicates that African preference for aid partners varies widely.  In Benin, Kenya, and Tunisia, citizens now prefer China as a partner for development and aid. In Guinea, the Ivory Coast, Ghana, Nigeria, and Burkina Faso, however, respondents view the US more favorably. Despite the US advantage in international reputation, many nations view China with increasing favorability as a provider of infrastructure and COVID-19 aid. In many cases, the margin of preference for aid provision between the US and China has thinned. Aside from developing increased favor among select populations, China has employed hundreds of thousands of domestic contractors, entangled their export market in numerous nations, and bolstered their own economy greatly through ostensibly magnanimous foreign aid. China has also gained major inroads into media and entertainment abroad, which have been profitable as state-promoted capital ventures.

Belt and Road Initiative

The Belt and Road Initiative (BRI) is a comprehensive project to facilitate transit, and develop infrastructure around the globe. The BRI is significantly larger in scale than the ODA work. Compared to the several dozen countries which receive Chinese development aid, the BRI is focused more on developed nations interested in expanding trade.  Since the project’s inception by Xi Xinping in 2013, China has developed agreements with 140 countries to undertake BRI related work developing infrastructure which would affect roughly 2/3 of the world’s population. Only 20% of BRI funding is considered ODA, and the project should be viewed primarily as “mutually beneficial development cooperation” with countries typically requiring no Chinese ODA. World Bank estimates indicate that if all of China’s current BRI projects were completed, overland and maritime trade would both increase globally by between 2.7% and 9.7% respectively.  Subsequent to increases in trade, as many as 7.6 million people could be lifted out of poverty. The insistence on Chinese firms being used to construct BRI projects has been highly lucrative for companies earmarked by the CCP. Chinese construction companies in Africa alone receive gross annual revenues regularly exceeding $45-billion, easily justifying the cost of concessional Chinese loans to subsidize their expansion abroad.

In developing the BRI, China has the opportunity to enrich companies and contractors domestically, while generating diplomatic engagement abroad, similar to its aid operations with developing nations.  Additionally, by constructing major projects now, using high-density, low-skill labor, China will be in a prime position to maintain and capitalize on completed projects before the effects of population-stasis and decline begin to effect national employment dynamics, expected between 2030 and 2050.

Key Observations

Over 92% of US official finance abroad is considered ODA. Comparatively, just 22% of China’s overall foreign expenditure is development assistance, where the rest is for commercially oriented projects which benefit Chinese firms directly. Compared with the US, Chinese financial ventures abroad are significantly less focused on humanitarianism than the US, who’s engagement paradigms are overwhelmingly focused on assisting developing nations. An alternative perspective suggests the US is not nearly as focused as China, in utilizing domestic businesses to push its agenda or develop lucrative projects abroad.  It is notable that Chinese civil-government divides, or the lack thereof, have been critical in China’s push to use businesses in support of government goals, and vice versa.

The CCP is highly capable of engineering and marketing its soft-power projects to nations both rich and poor.  While some of the expansive boons China claims to receive from its international outreach are ambiguous or experimental, capital benefit for Chinese companies and increased diplomatic clout for the CCP, are among China’s more consistent aims through advancing foreign engagement. By creating situations abroad in which harsh actions against China could be economically disadvantageous, China has made dozens of nations around the world significantly warier of rising to challenge it’s interests on the world stage.