Researching China’s Overseas Finance and Aid: What, Why, How, Where and How Much?

The SAIS China Africa Research Initiative (SAIS-CARI) held its second public conference on Friday, April 10, 2015 with an invitation-only, private researchers’ workshop on April 11, 2015, in Washington, DC at Johns Hopkins University’s School of Advanced International Studies (SAIS).

The theme of the conference was Researching China’s Overseas Finance and Aid: What, Why, How, Where and How Much? The goal was to achieve a deeper, comparative understanding of the rise of China’s state-supplied overseas finance, including grants, foreign aid loans, commercial loans, export credits and special investment funds. Papers examined the motives and modalities, trends, sectors, and impacts using a variety of methods from quantitative analysis to case studies.

View video recordings from the 2015 conference:

• Watch Session 1 »

• Watch Session 2 »

Session 3A

Session 4

Session 3B

The event was co-sponsored by the SAIS International Development (IDEV), China Studies, and African Studies Departments.

Conference Summary:

In recent years, China’s overseas finance has grown significantly, but uncertainties on the exact quantity, geographical destination, and nature of impact still persist. SAIS-CARI held its second public conference on April 10, 2015 with a private researchers’ workshop on April 11, 2015, in Washington, D.C. at Johns Hopkins University’s School of Advanced International Studies (SAIS) in Kenney Auditorium (1740 Massachusetts Ave.) and Rome Auditorium (1619 Massachusetts Ave.). The theme of the conference was Researching China’s Overseas Finance and Aid: What, Why, How, Where and How Much?

The goal was to achieve a deeper, comparative understanding of the rise of China’s state-supplied overseas finance, including grants, foreign aid loans, commercial loans, export credits and special investment funds. Papers examined the motives and modalities, trends, sectors, and impacts using a variety of methods from quantitative analysis to case studies. The event was co-sponsored by the SAIS International Development (IDEV), China Studies, and African Studies Departments. Vali Nasr, SAIS Dean, and Deborah Brautigam, SAIS-CARI Director, provided introductory remarks.

The first panel, China’s Global Finance: Quantities, Actors, Modalities was chaired by Richard Carey, Chair of the International Advisory Committee of the China International Development Research Network (CIDRN). Naohiro Kitano, Deputy Director of the Japan International Cooperation Agency (JICA) Research Institute, provided findings on estimating China’s foreign aid, using the Official Development Assistance (ODA) methodology established by the OECD’s Development Assistance Committee (DAC). Enrique Galan of CEsA/University of Lisbon and the Ministry of Finance of Portugal, presented on China’s role in the Asian Infrastructure Investment Bank (AIIB). He stated that the AIIB may be interpreted as China’s attempt to match the US on global financial statecraft. Havard Halland, Natural Resource Economist at the World Bank, and James A. Schmidt, Counsel with Hunton & Williams, explored ways to reconcile gaps between the models of traditional resource development and traditional infrastructure development in developing countries. They explained the Resource Financed Infrastructure (RFI) model as a new approach that can fill gaps of precursor models. Annalisa Prizzon, Research Fellow at the Overseas Development Institute (ODI), explored the role of choice in developing countries managing the new aid landscape. She concluded that non-traditional development assistance (such as that from China) is sizeable compared to traditional assistance, countries welcome choice, and traditional donors may find their aid less popular and conditionality less effective in the future.

The second panel, Sectors For Finance, was chaired by Dr. Yoon Jung Park, Coordinator of the Chinese in Africa/Africans in China (CA/AC) Research Network. Tom de Bruyn of Leuven Katholieke Universiteit presented on the influence of China and other rising powers in agriculture and food security in Malawi. He noted that although emerging economies are playing a bigger role, monitoring and evaluation may be lacking and the role of the Malawian government is not yet clear. Kenneth King, Professor Emeritus at the School of Social and Political Science at the University of Edinburgh, discussed China’s support to education, training and human resource development in Africa. After noting an increase in China’s education and training pledges, he stated that much better data is needed at the country level and on individual projects along with better analysis of the data. Gordon Shen, Postdoctoral Fellow in the School of Public Health at Yale University, provided a look at China’s role as a global health donor in Africa. He concluded that Chinese health-related development finance is large, with a focus on health system projects and human resources for health rather than on disease-specific programs. Frances Pontemayor of Tsinghua University presented on the complementarities of the International Finance Corporation (IFC) and China Development Bank (CDB) in Sub-Saharan Africa. The CDB, via the CCP’s political and economic leverage, can finance large scale projects such as Huawei’s contract to build broadband in Nigeria. The IFC, with its advisory services and prioritization on capacity building, can engage the private sector as a means to reach poverty reduction. She concluded that since the IFC and CDB reflect their own comparative advantages and different contributions to the region, African governments have access to alternative development partners.

Two parallel afternoon panels addressed country case studies and comparisons of projects and activities.

Jennifer Adams, Deputy Assistant Administrator in the Bureau for Global Health at the United States Agency for International Development (USAID), chaired the exploration on country case studies. James Reilly, University of Sydney, discussed China’s aid to North Korea. He concluded that despite criticisms of its engagement with North Korea, China will likely not change its current aid system towards the country. Zhu Xiao’Ou, Graduate Research Assistant at the Monterey Institute of International Studies, presented on the role of Chinese commercial actors in determining foreign assistance by looking at post-war Sri Lanka. Among other recommendations, she determined that Chinese commercial actors should engage both the host country and other private sector actors so that projects are aligned with the most pressing needs. J. R. Mailey, Research Associate at the Africa Center for Strategic Studies, provided findings on Chinese lending in post-war Angola. He found that regardless of international standards, corrupt companies easily thrive in countries without strong oversight structures or accountable government officials. Shi Xuefei, Ph.D. Candidate in International Development at the Radboud University Nijmegen, discussed going out trends by mapping Sichuan Province’s economic footprint in Uganda. After focusing on pairings between Chinese provinces and African countries, he emphasized the importance of guanxi, kinship networks, and home governments’ support in the execution of Chinese aid and investment in Africa.

Mao Xiaojing of the Chinese Academy of International Trade and Economic Cooperation and the Ministry of Commerce of China chaired a discussion comparing various types of projects related to Chinese finance. Yukinori Harada, Research Assistant at the Japan International Cooperation Agency (JICA) Research Institute, presented case studies of China’s development finance in Cambodia and Sri Lanka, focusing on concessions. He found that as ODA, China’s development finance is not highly concessional compared to that of OECD-DAC countries, resulting in some developing countries claiming that China’s conditions should be more concessional compared to that of OECD-DAC countries. Therefore, there is a risk that OECD-DAC countries and China will compete for the most favorable concessional conditions rather than quality of projects for poverty reduction. Huang Meibo, Professor of Economics at Xiamen University, discussed how government loans promote FDI through a study of Japanese yen loans and Chinese government preferential loans. Among other findings, she found that compared to the mature management mechanism of the yen loan, the Chinese government loan is still at an early stage of development. Jiang Xiaoxiao, Research Associate at the Harvard T.H. Chan School of Public Health, compared China’s medical team and Médecins Sans Frontières in the Democratic Republic of Congo. She provided recommendations for China’s medical team program, including the establishment of a Health Counselor position in China’s Embassy to the DRC and increasing the level of cooperation with the DRC government on health issues. Austin Strange, Ph.D. student in the Department of Government at Harvard University, presented field evidence from South Africa and Uganda to test methods of studying Chinese development finance in Africa. He found that open source data collection method Tracking Underreported Financial Flows (TUFF) is a mostly robust tracking mechanism of Chinese development finance when better project-level data is not available, and ground-truthing can face selection bias and other limitations.

The last panel, Statecraft, was chaired by Dr. Peter Lewis, SAIS Africa Studies Director. Kevin Gallagher, Associate Professor of Global Development Policy at Boston University, discussed the extent and motivations of China’s outward foreign direct investment finance. He concluded with a presentation of an online tracking database of Chinese finance in Latin America. Jonas Bunte, Assistant Professor for Public Policy and Political Economy at the University of Texas-Dallas, presented on how developing countries choose their creditors. He concluded that governments have an incentive to cater to the dominant coalition by selecting loans that will benefit that group. Brad Parks, Co-Executive Director of AidData and Research Faculty at the College of William and Mary’s Institute for the Theory and Practice of International Relations, presented on the determinants of aid and other forms of state financing from China to Africa. .” He concluded that ODA and grants are used to promote political goals while less concessional flows are driven by China’s economic interests. In addition, he found that less concessional finance favors countries with strong institutions while more concessional finance is not as responsive to institutional quality in recipient countries. Paulina Durango de Wattel of Arizaga & Co presented case studies of China’s finance of infrastructure projects in Ecuador. In the context of Ecuador’s energy policies since 2007, she discussed projects spanning a hydroelectric dam and the role of China’s infrastructure loan agreements.

In conclusion, researchers found that despite the increase in Chinese overseas finance, there are still challenges in accurately mapping and analyzing the data. As the landscape for development finance changes, developing countries, especially in Africa, are finding new sources of finance and models for assistance, paving the way for greater choice and alternative development partners. Through country case studies and comparative studies, researchers underscored the variety of actors involved in Chinese finance and how they influence projects, beginning with their selection and continuing through their execution. Chinese overseas finance will continue to play an important role in China-Africa relations into the future, and the conference acted as a platform for combining recent findings on this timely topic.

Conference Agenda for April 10, 2015:

• 8:30 – 9:00 – Sign-in and coffee (Kenney Auditorium, 1740 Mass. Ave)

• 9:00 – 9:05 – Welcome: Vali Nasr, SAIS Dean

• 9:05 – 9:15 – Introduction: Deborah Brautigam, SAIS-CARI Director

• 9:15 – 10:45 – PANEL 1: CHINA’S GLOBAL FINANCE: QUANTITIES, ACTORS, MODALITIES

  • Chair: Richard Carey, China International Development Research Network

  • Panelists:

    • Naohiro Kitano, Japan International Cooperation Agency, Estimating China’s Foreign Aid

    • Enrique Galan, CEsA/ISEG-University of Lisbon, Ministry of Finance of Portugal, The Asian Infrastructure Investment Bank: China’s Financial Statecraft?

    • Havard Halland, The World Bank Group, and 

    • James A. Schmidt, Hunton & Williams, Meeting the Infrastructure Challenge in Africa: Resource Financed Infrastructure

    • Annalisa Prizzon, Overseas Development Institute, The Age of Choice: How are developing countries managing the new aid landscape?

• 10:45 – 11:00 – Coffee Break (Kenney Auditorium, 1740 Mass. Ave)

• 11:00 – 12:30 – PANEL 2: SECTORS FOR FINANCE (Kenney Auditorium, 1740 Mass. Ave)

  • Chair: Yoon Jung Park, Chinese in Africa/Africans in China Research Network

  • Panelists:

    • Tom de Bruyn, Leuven Katholieke Universiteit, The influence of China and other Rising Powers in Agriculture and Food Security in Malawi

    • Kenneth King, University of Edinburgh, China’s Support to Education, Training and Human Resource Development in Africa, with a Note on Japan

    • Gordon Shen, Yale University, China’s role as a Global Health Donor in Africa: What can we Learn from Studying Under-reported Resource Flows?

    • Frances Pontemayor, Tsinghua University, Phones and Loans: the Complementarities of the IFC and CDB in Sub- Saharan Africa

• 12:30 – 1:30 – Lunch (Kenney Auditorium, 1740 Mass. Ave)

• 1:30 – 3:00 – Breakout Panels

• PANEL 3A: COUNTRY CASE STUDIES (Kenney Auditorium, 1740 Mass. Ave)

  • Chair: Jennifer Adams, United States Agency for International Development

  • Panelists:

    • James Reilly, University of Sydney, The Curious Case of China’s Aid to North Korea

    • Zhu Xiao’Ou, Monterey Institute of International Studies, Demystifying the Role of Chinese Commercial Actors in the Decision-Making Process of Foreign Assistance: The Case of Post-war Sri Lanka

    • J. R. Mailey, Africa Center for Strategic Studies, So-called ‘Angola Model’ Revisited: Looking at Chinese Lending in Post-War Angola

    • Shi Xuefei, Radboud University Nijmegen, A ‘Going Out’ Cluster? Mapping Sichuan Province’s Economic Footprint in Uganda

• PANEL 3B: COMPARISONS (Rome Auditorium, 1619 Mass. Ave.)

  • Chair: Mao Xiaojing, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce of China

  • Panelists:

    • Yukinori Harada, Japan International Cooperation Agency, China’s Development Finance: the Cases of Cambodia and Sri Lanka

    • Huang Meibo, Xiamen University, How Government Loans Promote FDI: Japanese Yen Loans and Chinese Government Preferential Loans

    • Jiang Xiaoxiao, Harvard University, China’s Medical Team and Médecins Sans Frontières in the Democratic Republic of Congo

    • Austin Strange, Harvard University, ‘Ground-Truthing’ Chinese Development Finance in Africa: Field Evidence from South Africa and Uganda

• 3:00 – 3:30 – Coffee Break (Rome Auditorium, 1619 Mass. Ave.)

• 3:30 – 5:00 – PANEL 4: STATECRAFT (Rome Auditorium, 1619 Mass. Ave)

  • Chair: Peter Lewis, SAIS Africa Studies Director

  • Panelists:

    • Kevin Gallagher, Boston University, Exporting National Champions

    • Jonas Bunte, University of Texas-Dallas, How Developing Countries Choose their Creditors

    • Brad Parks, AidData, Apples and Dragonfruits: The Determinants of Aid and Other Forms of State Financing from China to Africa

    • Paulina Durango de Wattel, Arizaga & Co, Banks and Competition in China’s Finance of Infrastructure Projects in Ecuador: Case Studies