Abstract

In 1946, Mao Zedong began to elaborate his theory of the Third World from the perception that there would be an ‘intermediate zone’ of countries between the two superpowers. From there, he concluded that Africa, Latin America, and Asia, except for Japan, would compose the revolutionary forces capable of defeating imperialism, colonialism, and hegemonism. The start of international aid from the People’s Republic of China to developing countries dates back to the period immediately after the Bandung Conference of 1955, extending to the present. Through a bibliographical and documentary analysis, the article starts with the following research question: What role did domestic and international factors play in China’s foreign aid drivers over the years? To answer the question, the evolution of Chinese international assistance was studied from Mao to the Belt and Road Initiative, which is the complete expression of the country’s ‘quaternity’ model of co-operation, combining aid, trade, investment, and technical assistance.

Keywords
China; international co-operation; international aid; Belt and Road Initiative; Asia; Africa

Resumo

Em 1946, Mao Zedong começou a elaborar sua teoria do Terceiro Mundo a partir da percepção de que haveria uma “uma zona intermediária” de países entre as duas superpotências, concluindo que África, América Latina e Ásia, a exclusão do Japão, comporiam as forças revolucionárias capazes de derrotar o imperialismo, o colonialismo e o hegemonismo. O início da ajuda internacional da República Popular da China aos países em desenvolvimento remonta a um período imediatamente posterior à Conferência de Bandung, de 1955, estendendo-se até o presente. Por meio de uma análise bibliográfica e documental, o artigo parte da seguinte pergunta de pesquisa: Qual o papel desempenhado pela conjuntura doméstica e internacional na motivação chinesa para promover ajuda internacional ao longo dos anos? Para responder a pergunta, o artigo estuda a evolução da assistência internacional chinesa desde Mao até a Iniciativa Cinturão e Rota, considerando esta a mais completa expressão do modelo de “quaternidade” de cooperação do país, conjugando ajuda, comércio, investimento e assistência técnica.

Palavras-chave
China; cooperação internacional; ajuda internacional; Iniciativa Cinturão e Rota; Ásia; África

Introduction

Reaffirmed since Xi Jinping’s first diplomatic engagement after taking the presidency of China at the 18th National Congress of the Communist Party of China (CPC), the principle of win-win co-operation took centre stage in Chinese diplomatic discourse. The origin of the CPC’s exploitation of the term can be traced from the beginning of Chinese aid¹ 1 The reader may find the concepts of international co-operation and international aid treated as synonyms on the next pages. The explanation for it is that the CPC itself changes the narrative throughout time, choosing the idea that better adapts to its foreign policy on the occasion. to African countries when, during his visit to the continent, Zhou EnlaiZhou Enlai. 1989. Selected Works of Zhou Enlai: Volume II. Beijing: Foreign Language Press. established the ‘Eight Principles for Economic and Technical Assistance to Other Countries’ for equality and mutual benefit (Zhou 1989).

Nonetheless, in spite of China’s historic international aid, dating back to even before its promotion by some members of the Organisation for Economic Co-operation and Development (OECD), many works neglect its efforts by analysing its co-operation as incipient. Others, curious about the volume of international aid promoted by China to countries lacking infrastructure under the banner of economic co-operation of mutual gains, are divided between detractors and admirers (ShimomuraShimomura, Yasutami and Hideo Ohashi (eds). 2013. A Study of China’s Foreign Aid: An Asian Perspective. Hampshire: Palgrave Macmillan. and Ohashi 2013).

For the former, Chinese investment can be justified by its grand strategy focused on access to resources, while the second group idealised co-operation with China as a form of international aid different from that practised by traditional donors, which presents new opportunities to receptor countries. The purpose of this article is to understand the origins and transformations that Chinese international aid has undergone since the founding of the People’s Republic of China (PRC), based on the following research question: What role did domestic and international factors play in China’s foreign aid drivers over the years?

The article is divided into five parts, the first two dedicated to the embryonic period of Chinese international aid, when Mao Zedong defined his Third World theory, and to the presentation of two cases in which the co-operation was used strategically by China: Tanzania in Africa and Pakistan in Asia. The third section begins with the establishment of Deng Xiaoping’s ‘Four Modernisations’ policy, which led to a reorientation of Chinese international co-operation, directly related to the economic growth objectives established by the CPC.

The definition of the co-operation model followed by Beijing to date is addressed in the fourth segment, which will discuss the influence of the Japanese expertise in the design of the Chinese standard, supplemented with elements of the national experience, a result of the specificities of the country. It addresses the active role of state-owned enterprises and Chinese skilled labour in the conduct of projects, and the policy of ‘Going Out,’ for the internationalisation of private companies considered national champions, as determinant factors of the Chinese international ‘quaternity’ aid, composed of aid, trade, investment, and technical assistance.

Lastly, the final section addresses the Belt and Road Initiative (BRI), a project of infrastructure investment across the Eurasian continent unveiled in 2013 which unfolds in land and maritime plans. The proposition reveals the most comprehensive strategy proposed by the PRC for international co-operation, integrating infrastructure projects with trade and reflecting all the experiences that China has gone through to shape the project, while it reflects the new Chinese foreign policy attitude of assuming a position of leadership envisioned since the Mao era.

The argument of this article is that the CPC was able to adapt its international aid according to the international and domestic environment through which the country was facing, and thus outlined its co-operation based on the principle of mutual benefits. Throughout this transition, China kept its commitment to the foundations of the ‘Five Principles of Peaceful Coexistence,’ ‘Eight Principles for Economic and Technical Assistance for Other Countries,’ and the ‘ Four Principles for Sino-African Economic and Technical Co-operation,’ reaffirming the influence of the thought of Chinese leaders of the previous generations in its contemporary foreign aid.

A foreign policy for the Third World in Mao’s China

Despite a track record of more than 60 years of international aid, China is treated by a part of the academy as an emerging donor. Nevertheless, the inception of Chinese co-operation with periphery states goes back to a time following the founding of the PRC, considered essential for the recognition of the new government, to the detriment of the Guomindang, and to avoid its isolation from the American initiatives in its surroundings. The arrival of the CPC to power was not immediately recognised by the international system, so that the seat destined for China in international organisations, especially the United Nations, remained occupied by the Republic of China (Taiwan), a challenge for the party’s claim of legitimate government of China.

The ‘One China’ policy precluded international recognition of the legitimacy of both governments, and the mainland needed to gain international support to reclaim the country’s position in international institutions. In the early 1950s, Prime Minister Zhou Enlai played a crucial role in leading the country closer to neighbours such as the People’s Republic of Mongolia, the Democratic People’s Republic of Korea (North Korea), the newly independent India and Burma, and the Vietnamese revolutionaries. This initiative was a fundamental move to avoid Chinese isolation in the context of the creation of the Southeast Asia Treaty Organization (SEATO), sponsored by the USA in the aftermath of the Korean War (MitchellMitchell, Derek J. 2018. ‘Expanding the “strategic periphery”: A history of China’s interaction with the developing world.’ In Joshua Eisenman and Eric Heginbotham (eds), China Steps Out: Beijing’s Major Power Engagement with the Developing World. New York: Routledge, pp. 23-46. 2018).

The 1955 Bandung Conference established a framework for relations between Asian and African states, especially regarding the fight against colonialism and imperialism. For China, the conference served to test its anti-American policy focused on the periphery, concerned mainly with South and Southeast Asia. Even though the neighbours’ attitude towards the USA did not meet Chinese expectations (YuYu, George T. 1977. ‘China and the Third World.’ Asian Survey 17 (11): 1036-1048. 1977), PRC played a leading role in the development of the ‘Ten Principles of Bandung,’ based on the ‘Five Principles of Peaceful Coexistence,’² 2 Elaborated jointly by Chinese Premier Zhou Enlai and Indian Prime Minister Jawaharlal Nehru in 1953, the ‘Five Principles of Peaceful Coexistence’ include: (1) mutual respect for territorial integrity and sovereignty; (2) mutual non-aggression; (3) mutual non-interference in internal affairs; (4) equality and co-operation for mutual benefit; and (5) peaceful coexistence (Zhou 1989). The ‘Ten Principles of Bandung’ included: (1) respect for fundamental human rights and the purposes and principles of the Charter of the United Nations; (2) respect for the sovereignty and territorial integrity of all nations; (3) recognition of the equality of all races and the equality of all nations, great or small; (4) abstention from intervention or interference in the internal affairs of another country; (5) respect for the right of each nation to defend itself individually or collectively, in accordance with the Charter of the United Nations; (6) abstention from the use of collective defence arrangements that serve the particular interest of any of the great powers, abstention by any country from exerting pressures on other countries; (7) refraining from acts or threats of aggression or the use of force against the territorial integrity or political independence of any country; (8) settlement of all international disputes by peaceful means, such as negotiation, conciliation, arbitration or judicial settlement, as well as other peaceful means of the parties’ own choice, in conformity with the Charter of the United Nations; (9) promotion of mutual interests and cooperation; and (10) respect for justice and international obligations (Ministry of Foreign Affairs [Indonesia] 1955). fundamental to its foreign policy.

The Sino-Soviet split of the late 1950s imposed a new challenge on Chinese foreign policy. Khrushchev’s 1956 revision of the Stalinist heritage was met with surprise by the Chinese representatives. Combined with the successive changes in Soviet positioning, it boosted Mao’s suspicions at a time when the country depended on Moscow’s investments to carry out the Great Leap Forward while facing tensions in Tibet, problems in its surroundings, and a more significant American presence in Asia.

Besides this, the withdrawal of the 1390 Soviet specialists and consultants from China, the Soviet support for India in the border disputes with Beijing,³ 3 This dispute will be the object of analysis later because of its importance for the Chinese foreign policy concerning the approach with Pakistan. and the complaints on Albania, a Chinese ally, fuelled China’s mistrust of Khrushchev. The suspicions did not harm Prime Minister Zhou Enlai’s attendance at the 1961 Communist Party Congress of the Soviet Union, at which attacks on the memory of Stalin and addressed to Albania provoked the Chinese representative to the point of leaving the event and returning to China (SpenceSpence, Jonathan D. 1995. Em busca da China moderna: Quatro séculos de história. São Paulo: Companhia das Letras. 1995). The split between the two former allies triggered a Third World strategy into Chinese foreign policy, which now came to confront the two great powers.

In this context, Zhou Enlai organised his visit to thirteen countries in Asia and Africa between 1963 and 1964 with the aim of displaying the PRC leadership and gathering allies, in which he presented the ‘Eight Principles for Economic and Technical Assistance to Other Countries’⁴ 4 It is relevant to highlight among the principles listed by Zhou Enlai the principles of equality and mutual benefit; respect for sovereignty and non-requirement of conditionalities or privileges; and building self-reliance and independent economic development in recipient countries (Zhou 1989). in Ghana, a postulate that would guide Chinese aid to foreign countries. During the visit, Zhou promised a total of nearly US$120m in aid to Congo, Ghana, Mali, Kenya and Tanzania (BräutigamBräutigam, Deborah. 2011. The Dragon’s Gift: The Real Story of China in Africa. Oxford: Oxford University Press. 2011), as well as providing material support to various revolutionary movements in Angola, Indonesia, Malaysia, Mozambique, Philippines, Rhodesia (now Zimbabwe), Thailand, Uganda and Vietnam, the latter having received nearly US$20b in aid from China (Mitchell 2018).

China became the first developing country to offer international aid, with non-conditional, interest-free or low-interest loans with easy reschedule. Applying high-quality materials to the projects it leads, the PRC promoted knowledge transfer, achieving fast results, increasing self-sufficiency, and adapting its aid to the local standard of living (Bräutigam 2011). After the split with the Union of Soviet Socialist Republics (USSR), the CPC came to realise the need not only to assume legitimacy as China’s representative but also to establish itself as a leader among periphery states opposing the two powers, accused of being both imperialist and hegemonic.

The development of a theory focused on the periphery by Mao Zedong dates back to a period immediately after World War II, in the mid-1940s (Jiang 2013). The argument first introduced the idea of an ‘intermediate zone’ between two superpowers in 1946. Later it was perfected in the 1960s, giving rise to the ‘two intermediate zones’ theory, in which Mao began to differentiate countries from the intermediate zone into two groups, even though he argued that both were against imperialism and the hegemony of either of the two superpowers⁵ 5 At the time of the communist revolution and, to some extent, after the Sino-Soviet split, Mao claimed that it was not possible to follow an independent path without association with either of the two superpowers. He went on to state that ‘The 40 years’ experience of Sun Yat-sen and the 28 years’ experience of the Communist Party have taught us to lean to one side, and we are firmly convinced that in order to win victory and consolidate it we must lean to one side. In the light of the experiences accumulated in these 40 years and these 28 years, all Chinese without exception must lean either to the side of imperialism or to the side of socialism. Sitting on the fence will not do, nor is there a third road. We oppose the Chiang Kai-shek reactionaries who lean to the side of imperialism, and we also oppose the illusions about a third road’ (Mao 1998: 73). :

This speech, focused on the union of the periphery states, is highlighted in the words of Lin BiaoLin Biao. 1965. ‘The international significance of Comrade Mao-Tse Tung’s Theory of People’s War. In Lin Biao, Long Live the Victory of People’s War: In Commemoration of the 20th Anniversary of Victory in the Chinese People’s War of Resistance Against Japan. Beijing: Foreign Languages Press, pp. 42-53., Defence Minister at the time, in September 1965. He emphasised the struggles of all oppressed peoples against the domination and enslavement perpetrated by the imperialist powers in a period characterised by African decolonisation and which offered China an opportunity to exercise leadership among those countries. Lin concludes that:

Domestic political events that triggered the Cultural Revolution would lead to a foreign policy paralysis on the efforts directed at the periphery, resumed only in the 1970s. A revision in Mao’s theory of the ‘two intermediate zones’ triggered a new foreign policy towards periphery states. In a conversation with Zambian President Kenneth David Kaunda, Mao began to defend an organisational division of the countries into three worlds, a First World composed of the USA and the Soviet Union, a Second World composed of the countries of Europe, Japan, Australia, and Canada, and a Third World, including Asian countries (except Japan), Africa, and Latin America (Mao 1998).

Between 1953 and 1985, China became the largest donor of international aid outside the Organization of Petroleum Exporting Countries (OPEC), a strategy based on the goal of consolidating itself as a leader among the periphery (Mitchell 2018). Zhou Enlai’s speech to the deputies of the first session of the Fourth People’s Congress of the PRC praised the importance of China in leading the Third World countries against the influences of the USA and the USSR:

This policy towards the periphery was central to China taking over the position in the UN Security Council, replacing Taiwan in 1971, obtaining a victory of 76 votes in favour, 35 against, and 17 abstentions. It would not have been possible without the support of 26 African countries that voted in favour of the Chinese plea, as recognised in the words of Mao Zedong: ‘We were brought back into the United Nations by our black African friends’ (Li 2007: 78). Through its international aid to the Third World countries, Mao reached his most significant political goal of reclaiming the UN Security Council seat, an achievement accomplished by the influence of Mao’s ideology in Chinese foreign policy.

The Third World presented itself as the source of the support that Beijing needed to consolidate itself as leader of the resistance against the superpowers and of the demand for restructuring the international political and economic system (Yu 1977). In 1978, 74 countries received Chinese aid, a number superior to that of the USA (Bräutigam 2011). On the African continent alone, it is possible to count 33 countries that had their first aid agreements signed with China between 1958 and 1979 (see Table 1). Notwithstanding, two states stand out as significant recipients of Chinese international aid in this period: Tanzania and Pakistan.

Tanzania and Pakistan, strategic relationships in Africa and Asia

The Chinese support for the revolution in Zanzibar on 12 January 1964, including economic and military aid, and the response to Tanganyika President Julius Nyerere’s request for military assistance for the restructuring of his armed forces after a riot that started on 20 January 1964, were instrumental in the development of co-operation with Tanzania after the unification of the two countries in April 1964 (BaileyBailey, Martin. 1975. ‘Tanzania and China.’ African Affairs 74 (294): 39-50. 1975). Bilateral relations between them remained even with the Cultural Revolution, proceeding with the construction of the 1860-kilometre railway connecting Tanzania to Zambia with a total investment of US$500m in the most significant Chinese project in the Third World (Moyo 2009).

The Tanzania–Zambia railway was completed in 1975, becoming the third most expensive project on the African continent to that date, behind only the Aswan Dam in Egypt and the Volta Dam in Ghana (Bailey 1975). George Yu (1977) identifies four reasons for China’s interest in Tanzania, as an outcome of Beijing’s goals. The first, as presented earlier, was to cement itself as a member of the Third World, which, as defined by Mao’s theory, is the source of revolutionary struggles capable of leading the world revolution. The second was to reinforce Chinese support in the fight against imperialism, colonialism, and hegemony of the great powers, supporting liberation struggles in the Third World. The third was related to China’s aspiration to promote its development model from the countryside. The fourth was to define a new model of co-operation between periphery states that would be capable of producing positive economic and social outcomes without causing dependence.

Pakistan was another state whose relations with the PRC were not affected by the Cultural Revolution, an approach that began following the Bandung Conference. Still, a specific event catalysed the two countries’ closer ties: the border dispute between China and India, followed by Soviet support for the latter as part of the strategy to isolate the former. It was the 1962 Sino-Indian conflict over the border that made possible a rapprochement with Islamabad, a signal of Beijing’s correct judgement of Indo-Pakistani hostilities and a mature position regarding Pakistan’s membership in the SEATO,⁶ 6 The Pakistan entry into the SEATO was due to the expectation that its participation in a military organisation with the USA would guarantee support in the event of a dispute with India over control of Kashmir. However, US support for India in the conflict with China frustrated Pakistani expectations and brought it closer to China. The PRC was able to invoke the principle of self-determination of peoples to support Pakistan’s bid to control the region after the signing of the Sino-Pakistani Frontier Agreement, even if considering that the same argument could raise questions about the Chinese resistance to the Taiwanese plebiscite on independence (Cheema 1986). contrasting the Soviet reaction (CheemaCheema, Pervaiz I. 1986. ‘Significance of Pakistan-China Border Agreement of 1963.’ Pakistan Horizon 39 (4): 41-52. 1986).

Negotiations between the two countries for the definition of their border had already begun in 1961, but it was the dispute between India and China that accelerated the signing of the Sino-Pakistani Frontier Agreement on 2 March 1963. The following Chinese support to Pakistan in the conflict with India in 1965 deepened the bonds between the two countries and built a sense of trust between them. In 1970, Islamabad became one of the main articulators of the meetings between Washington and Beijing at a time when Chinese foreign policy came to perceive Moscow as its main threat (KhanKhan, Riaz M. 2011. ‘Pakistan–China relations: An overview.’ Pakistan Horizon 64 (4): 11-28. 2011; Spence 1995).

In 1974, Chinese economic aid to Pakistan reached the amount of US$391m (Yu 1977), reinforcing the perception that relations with the country would be a priority for China’s foreign policy focused on the periphery. Another threat perceived by the CPC addressed by its alliance with Pakistan was the Soviet advance in its surroundings, especially after its naval exercises in the Indian Ocean and its military co-operation with India in the context of the border dispute with China. Both countries, Tanzania and Pakistan, can be defined as essential cases for the analysis of Chinese international aid in the period.

By selecting strategic partners in Africa and Asia, China was able to meet its political goals, solidifying itself as a leader between countries in the Third World, supporting revolutionary struggles, exporting its development model based on the countryside, especially in Africa, and redefining co-operation between periphery states. Even though Chinese international aid had brought triumphs for the CPC, relations between Beijing and its developing partners went through a profound adjustment with the 1978 Deng Xiaoping’s ‘Four Modernisations’ policy, which led to intense transformation in the entire economic structure of the PRC.

Later, in the 1980s, China became one of the largest recipients of international aid. Joining the International Monetary Fund and the World Bank in 1980, both previously criticised as instruments of imperialist domination, enabled China to receive from the World Bank alone loans totalling US$5.5b for fifty-two projects during the first decade of association (Mitchell 2018). Nonetheless, the adoption of a new strategy to attract foreign capital and the reconciliation with the United States did not mean a complete abandonment of the Third World and the non-alignment rhetoric. Instead, this change of tack happened in the fundaments of Chinese aid, replacing the political discourse with the economic.

National economic development as the engine of Chinese international aid

The return of Deng Xiaoping to the centrality of national policy in 1977 triggered profound changes in China: His different political philosophy, when compared to Hua Guofeng, Chairman of the CPC from 1976 to 1981, impacted both domestic and foreign policies. The ‘reform and opening-up’ policy, necessary for the ‘four modernisations’ – a programme of reform directed to improving agriculture, industry, national defence, and science and technology – proposed initially by Zhou EnlaiZhou Enlai. 1975. Documents of the First Session of the Fourth National People’s Congress of the People’s Republic of China. At https://www.marxists.org/reference/archive/zhou-enlai/1975/01/13.htm [Accessed on 4 August 2018].
https://www.marxists.org/reference/archi... in 1975 – brought the PRC closer to Japan after the ratification of the Sino-Japanese Treaty of Peace and Friendship in 23 October 1978.

Marked by remorse for its inhuman assault on the country in the 1930s and 1940s, Tokyo became a significant donor to China as a form of compensation (Mitchell 2018). In addition to Japan, other western countries and international financial institutions started financing China. The focus on national economic development gave rise to doubt from a section of the political elite over whether the government should maintain its donor policy. The argument for the absence of budgetary surpluses supported the discourse of those who advocated a more timid performance of Chinese foreign policy.

The twelfth National Congress of the CPC in 1982 made clear a transition in the ideological discourse from ‘war and revolution’ to ‘peace and development,’ as well as changing the political perception of the economy, which was formerly viewed as a servant of diplomacy and from this time on as its master, becoming the major goal of state policies. The Congress also prescribed the new guiding principles of political relations with other states: ‘Independence, Complete Equality, Mutual Respect, Non-interference in Others’ Internal Affairs’ (Li 2007: 72). Also in 1982, on a trip to Africa in December, Premier Zhao Ziyang established through ‘Four Principles for Sino-African Economic and Technical Cooperation’ the ‘equality and mutual benefit, stress on practical results, diversity in form, and common progress’ (BräutigamBräutigam, Deborah. 1998. Chinese Aid and African Development: Exporting Green Revolution. New York: Palgrave Macmillan. 1998: 49), as drivers of Chinese international aid.

China began to seek co-operation that would bring clear economic gains, as advocated in the fourth precept of Zhao Ziyang: ‘The purpose of China’s economic and technological cooperation with African countries is to contribute to the enhancement of the self-reliant capabilities of both sides and promote the growth of the respective national economies by complementing and helping each other’ (Bräutigam 1998: 50). Although the principle of mutual benefits is a constant between the ‘Eight Principles for Economic and Technical Assistance to Other Countries’ of 1964 and the ‘Four Principles on Sino-African Economic and Technical Cooperation’ of 1982, between the two it is possible to observe a shift in the understanding of the kind of benefit that the CPC desired.

In 1964 the focus was on building a narrative for the Third World led by China – based on the struggle against imperialism, colonialism, and hegemonism – and on diffusing the CPC’s claim for its international recognition within the doctrine of ‘One China.’ In 1982, the economic development promised by the ‘reform and opening-up’ and as proposed by the ‘Four Modernisations’ came to occupy the core of Chinese foreign policy. The economic assistance provided by China included preferential and discounted loans to African countries that were expected to learn to manage investments effectively and to propose co-operatives and joint ventures for projects that required management practices and new technologies for Africa (Li 2007).

The emergence of an exponential number of state-owned enterprises (SOEs) throughout the 1980s that were converted from pre-existing ministries would cause state bureaucratic structures to be transformed into companies responsible for projects in recipient countries, mixing CPC interests with those of the SOEs. Some examples are the Ministry of State for Farm and Land Recovery, which gave rise to the State Corporation of Joint Ventures of Industry and Commerce of Agriculture Farms in 1980 and to the Corporate Group of the Chinese State of Agribusiness Farms in 1994, a crucial SOE in the agribusiness sector (JohnstonJohnston, Lauren and Marina Rudyak. 2017. ‘China’s “innovative and pragmatic” foreign aid: Shaped by and now shaping globalisation.’ In Ligang Song, Ross Garnaut, Cai Fang and Lauren Johnston (eds), China’s New Sources of Economic Growth. Canberra: ANU Press, pp. 431-451. and Rudyak 2017).

The entire process of how the project was conducted is painstakingly described by Li Ke, a representative of the Ministry of Foreign Economic Relations and Commerce, in the official government magazine, Beijing Review:

At the end of the article, he concludes that ‘the South-South co-operation is a two-way endeavour. [...] [E]conomic co-operation between poor countries cannot be sustained or popularized if it is limited to one-way aid’ (Li 1983: 18). In this way, the term ‘aid’ was abandoned from the Chinese diplomatic vocabulary and replaced with ‘co-operation,’ precisely to represent the mutual benefit that should be the basis of China’s relations with developing countries.

Chinese international aid has changed its structure, monitoring closely the projects financed with the help of SOEs and promoting training of the local labour force. However, the main innovation of Chinese co-operation in this period, which would become a recurrent practice continuing to date, was the expansion of forms of countervailing trade, or exchange, as a counterpart to Chinese investments, giving rise to what some authors call Chinese international ‘quaternity’ aid.

Chinese international ‘quaternity’ aid, an infrastructure swap by resources

Just as the Chinese international aid of the 1960s and 1970s was profoundly influenced by the Soviet co-operation model based on political objectives, from the 1980s, Japanese investment, essential for Chinese economic development, shaped the way China would relate in subsequent years. The trinity of Japanese co-operation was now adapted to the PRC agreements, combining aid, trade, and investment (Johnston and Rudyak 2017), but also including in its agreements the provision of services by companies and specialised Chinese labour in a model that would be called Chinese ‘quaternity’ aid (InadaInada, Juichi. 2013. ‘Evaluating China’s “quaternity” aid: The case of Angola.’ In Yasutami Shimomura and Hideo Ohashi (eds), A Study of China’s Foreign Aid: An Asian Perspective. New York: Palgrave Macmillan, pp. 104-121. 2013).

While the reflection of the Japanese trinity model observed since the 1980s, as emphasised by Don Wagner (2003), conditioned about 50% of international aid agreements to formal trade, the Chinese ‘quaternity’ model not only promoted national exportations but also put the co-operation in close association with the interests of the state, sponsored by SOEs. This pattern did not match those defined by the OECD Development Assistance Committee (DAC) in 1969 and enhanced in 1972 for official development assistance (ODA), which comprises:

China has developed its own concept of international assistance, as defined in China’s White Paper on International Aid as ‘foreign aid is mutual help between developing countries, focuses on practical effects, accommodates recipient countries’ interests, and strives to promote friendly bilateral relations and mutual benefit through economic and technical co-operation with other developing countries’ (Information Office of the State Council [China] 2011a). This does not impose limits on the application of conditionalities to aid, nor does it establish a donation rate, which are present in the concept of ODA, although it maintains the validity of the 1964 ‘Eight Principles for Economic Aid and Technical Assistance to Other Countries’ and the 1982 ‘Four Principles on Sino-African Economic and Technical Cooperation,’ based on mutual benefit.

However, this does not mean that there are no different aid modalities provided by the Chinese government. As outlined in the 2011 China White Paper on International Aid, the financial resources offered are divided into three types: ‘grants (aid gratis), interest-free loans and concessional loans. The first two come from China’s state finances, while concessional loans are provided by the Export-Import Bank of China as designated by the Chinese government’ (Information Office of the State Council [China] 2011a). Grants aim at small and medium-sized social welfare projects, and can be used to build hospitals, schools, popular residences, excavation projects or water supply, among others, and coincide with the ODA concept.

Addressed to developing countries with better economic performance, interest-free loans are focused on improving the quality of subsistence of the population and on the construction of public facilities, with 20 years of ownership, being five of use, five of grace and ten for the refund. Concessional loans are assumed by the Export-Import Bank of China with interest subsidised by the state, between 2% and 3% per annum, with repayment of 15 to 20 years, and are intended to finance productive projects, large and medium-sized infrastructure projects, or for the elaboration of plants, supplies of mechanical and electrical products, technical services and other materials (Information Office of the State Council [China] 2011a).

In practice, what is witnessed in the case of concessional loans is the condition that at least 50% of the invested funds must return in the acquisition of materials and expertise of Chinese construction companies. Therefore, even though the Export-Import Bank of China provides loans to states that are struggling to adapt to the conditionalities imposed by the major international investment banks at lower rates subsidised by the Chinese government, China needs the assurance of repayment of the loans made. As a result, China’s lending is tied to the sovereign guarantee of States or, in the case of resource-rich and low-credibility states, investments are secured in exchange for long-term supply contracts (AlvesAlves, Ana Cristina. 2013. ‘China’s “win–win” cooperation: Unpacking the impact of infrastructure-for-resources deals in Africa.’ South African Journal of International Affairs 20 (2): 207-226. 2013; Bräutigam 2011).

Beijing tied its international aid to a contract to attend the demand of Chinese SOEs regarding specific commodities, usually oil and mineral resources, with fluctuating prices according to the market oscillation. Although the international aid-resource swap model is not a Chinese innovation, Japan itself has extensively used this strategy since the 1970s from its trinity aid; it stands out for the geographical range, the financial volumes involved in the agreements and for the predominant role played by the state in all stages of co-operation:

The last element of the ‘quaternity’ to be restructured was the maintenance of skilled labour in the recipient country in a period following the completion of the project to coordinate long-term management in order to enable its viability. The principle of non-interference in internal affairs of other countries, advocated by China since the 1953 ‘Five Principles of Peaceful Coexistence,’ imposed on the Chinese technicians that, once the construction of the project was completed, its operation should be the responsibility of the receiving country. In fact, however, many technicians were required to return later to provide new training by demand of countries unable to resolve technical issues endogenously.

To solve the ‘sovereignty trap,’⁷ 7 According to Ai Ping (1999: 198), the ‘sovereignty trap’ limited Chinese perception of the world in a way that ‘the world as a collective of sovereign states, and feel that people from outside should not try to interfere in their internal affairs. Each country alone is responsible for the welfare of its citizens. To achieve this, every country, particularly the bigger ones, should rely mainly on their own efforts while seeking external assistance at a subsidiary level. During the pre-reform period, management of the enterprises was regarded as “internal affairs” which should not be interfered with. It was not wrong to be sensitive to others’ “national feelings,” but it was wrong to participate in the management. This respect for non-interference became a real trap in Chinese aid to Tanzania.’ which restricted Chinese interference in the receptors’ internal affairs, Zhao Ziyang introduced the idea that maintaining technical and administrative co-operation after the conclusion of projects should be interpreted as ‘helping them to build self-reliance,’ and not as ‘interfering in internal affairs’ (Bräutigam 2011: 57). The export of Chinese technicians and administrators to conduct long-term projects was now allowed. Soon, more and more Chinese workers began to take positions in the old Beijing-funded projects. China’s co-operation model was complete, combining Chinese aid, trade, investment and technical assistance, whether from SOEs or workers.

Focused on aid, trade, investment and technical assistance, the Chinese ‘quaternity’ aid contrasts with the pattern of development aid promoted by western countries, with conditionalities directed to humanitarian aid or economic and social policies. Furthermore, the merge of governmental aid policies with private investment and trade is crucial to understanding the ‘quaternity.’ The focus on infrastructure projects combines aid, direct investments and trade, once it boosts the recipient’s international competitiveness, raising its exports capacity and leaving an open door for future foreign investors (Shimomura and Ohashi 2013).

The international condemnation of the state crackdown on student protests in Tiananmen Square on 4 June 1989 would revive the beacon of alertness in China’s foreign policy towards the USA and rearrange its interest in addressing developing countries. China began advocating for the concept of a multipolar world, expanding its interest in Africa, Latin America, Central, South, and Southeast Asia and the Middle East, and pushing international organisations towards reform. Between 1989 and 1992, Foreign Minister Qian Qichen visited 14 African countries to strengthen relations, especially after some countries demonstrated understanding or even support for the government’s attitude in 1989 (TaylorTaylor, Ian. 1998. ‘China’s foreign policy towards Africa in the 1990s.’ The Journal of Modern African Studies 36 (3): 443-460. 1998).

While western pressure in 1989 posed a challenge to Chinese leaders, political and economic issues compelled Beijing to pursue long-term relations with developing partners, especially in Africa. First, this was associated with rapid Chinese economic growth, which demanded natural resources far beyond what Chinese territory was capable of supplying. Second, this related to developing countries’ expectations of China, which was that it should ensure its growth would not follow the same path as the western powers, but that it would be a ‘responsible power’ with ‘peaceful development,’ working for the construction of a ‘harmonious world’ (Information Office of the State Council [China] 2011b). Finally, the concern about the possibility of Taiwan’s independence would fuel a perception of the need to internationalise its companies, expanding its market (Bräutigam 2011).

Several changes occurred throughout the 1990s to address these challenges, the first of them being the untying of state-run economic co-operation and trading companies from the ministries to which they were affiliated. From then on, these companies would be responsible themselves for their budget, dismissing the support of ministries that previously covered their losses. The result was the closure or merger of many large SOEs throughout the 2000s, at the same time forcing smaller companies to privatise (Bräutigam 2011).

It was also in this context that the Export–Import Bank of China was founded in 1995, which, as discussed above, introduced a new form of Chinese international aid. Also in 1995, the Chinese State Council demanded the Ministry of Commerce establish a strategy a ‘Great (or ‘Mega’) Economic and Trade Strategy,’ aligning ‘aid to Africa, mutual cooperation, and trade together’ (Bräutigam 2011: 80). The effect was an exponential increase in investments for the establishment of joint ventures, automakers and the exploitation of natural and mineral resources.

Chinese private enterprises also received a sizeable state-sponsored investment through the Export-Import Bank of China and the National Development and Reform Commission, after the launching of the ‘Going Out’ internationalisation strategy in 1999. The purpose was to enable the growth of selected companies as national champions to become global brands (Johnston and Rudyak 2017).

From the 2000s, the foundations for Chinese economic and social development policy were redefined from ‘enriching first’ to ‘common prosperity,’ synthesised in the 11th Five-Year Plan of 2006 (FanFan, C Cindy. 2006. ‘China’s Eleventh Five-Year Plan (2006–2010): From “Getting Rich First” to “Common Prosperity.”’ Eurasian Geography and Economics 47 (6): 708-723. 2006). At the 17th CPC National Congress, Hu JintaoHu Jintao. 2007. Hold High the Great Banner of Socialism with Chinese Characteristics and Strive for New Victories in Building a Moderately Prosperous Society in all. At http://www.china.org.cn/english/congress/229611.htm [Accessed on 27 May 2018].
http://www.china.org.cn/english/congress... reinforced mutual benefit co-operation as one of the central tenets of Chinese ‘Pacific Development’ (Hu 2007), matching China’s interests with the ‘common prosperity’ of other countries, as expressed in the ‘Pacific Development’ White Book:

Early in the decade, various regional organisations and programmes emerged aiming at the promotion of aid and economic co-operation. Some examples are the Forum on China-Africa Cooperation (established in 2000), the China-Caribbean Economic and Trade Cooperation Forum (2003), the Forum for Economic and Trade Cooperation between China and Portuguese-Speaking Countries (2003), the China-Arab States Cooperation Forum (2004), and the China-Pacific Island Countries Economic Development (2006). In May 2007, the China-Africa Development Fund was created under the auspices of the China Development Bank, providing US$5bn for Chinese state-owned or private enterprises to design joint projects with companies active in Africa (Bräutigam 2011).

A study by RAND Corporation (WolfWolf, Charles, Xiao Wang and Eric Warner. 2013. China’s Foreign Aid and Government-Sponsored Investment Activities: Scale, Content, Destinations, and Implications. Santa Monica: RAND Corporation., Xiao and Warner 2013) found an average increase in China’s aid pledges of US$19b a year, rising from US$1.7b in 2001 to US$124.8b in 2009, US$168.6b in 2010 and US$189.3b in 2011, and reaching a cumulative total in promised aid of US$671.1b between 2001 and 2011. In terms of comparison, the US Agency for International Development provided US$8b in 2011 for development assistance (excluding Iraq and Afghanistan), and the US Export and Import Bank provided US$6.3b in international loans.

When considering destinations of Chinese investments, the same research identifies that for the period between 2001 and 2011, 42% of them were labelled as projects aiming at securing natural resources, especially in the areas of energy and mining, 40% for the area of infrastructure, which is primarily directed to public goods whose benefits are realised collectively by the people, and 18% for all other purposes (Wolf, Xiao and Warner 2013). Nevertheless, although the calculation of the total of projects focused on infrastructure construction was below those focused on natural resources development, following the evolution over time, an increase in the importance of this type of project can be noticed across the years, as observed in Figure 1.

Figure 1
Total international aid and government investment divided by category in US$ billion between 2001 and 2011

The figure shows how infrastructure projects and natural resource projects can be complementary, in a way that the former can provide the logistics demanded for the development of the later, as both areas grow together and keep a close proportion in the investment total. This trend is driven primarily by investments in Asia, South and West Asia, regions where infrastructure projects have been the most well-funded. These data show a trend in Chinese international co-operation that would be confirmed two years later with the presentation of the most massive infrastructure project ever planned. The proposal is to re-establish the idea of the ancient Silk Road, a trade and exchange route linking China to the Middle East and Europe more than two thousand years ago in the Han Dynasty.

Belt and Road Initiative, the definitive infrastructure project

If under Mao Zedong China’s aid was driven by political imperatives – meaning a competition with the Soviet Union, the plea for recognition as the legitimate representative of China in the United Nations, and the desire for leadership over the developing countries – from Deng Xiaoping onwards, international aid followed domestic modernisation and economic growth objectives. Regarding the international context, Japanese investment in China exerted a vital influence in shaping its ’quaternity’ aid from the experience acquired as a receiver. Another conjectural event that had a significant impact on Chinese investments abroad was the 2008 crisis, after which the PRC became self-confident in its economy, which reflected in its foreign policy.

The year 2013 marked the announcement of three major projects that would reshape China’s international co-operation. The first took place in May in Islamabad, Pakistan, when Premier Li Keqiang announced the intention to build a ‘China-Pakistan Economic Corridor’ (CPEC); the second in September in Astana, Kazakhstan, where Xi Jinping introduced the ‘Silk Road Economic Belt’ (SREB); and the third in October in Jakarta, Indonesia, when the ‘Maritime Silk Road of the 21st Century’ (MSR) was made public by Xi. No project of the PRC has been so ambitious so far, and together, these three projects would give rise to the Belt and Road Initiative (BRI),一带一路 or yi dai yi lu (One Belt One Road in Chinese).

The proposal, which includes two dimensions, one terrestrial and one maritime, aims to finance a series of infrastructure and trade projects, connecting markets that today are no longer limited to Asia, Europe and Africa. With hundreds of projects divided between ports, airports, highways, railways, power stations, transmission lines, and oil and gas pipelines, just the land section of BRI in Eurasia includes six economic corridors: the ‘New Eurasia Land Bridge Economic Corridor,’ the Bangladesh-China-India-Myanmar Economic Corridor, the China-Central Asia-Western Asia Economic Corridor, the China-Mongolia-Russia Economic Corridor, the CPEC and the China-Indochina Peninsula Economic Corridor (Ministry of Commerce [China] 2015).

From the BRI on, China abandoned the ‘Tao Guang Yang Hui’ (韬光养晦) foreign policy, according to which the country should keep a low profile waiting for a future of greatness, and embraced the ‘You Suo Zuo Wei’ (有所作为) approach, to make the difference in its acts a means to inspire others. As a progression of the policies adopted throughout the years for the internationalisation of Chinese enterprises, the BRI blends political and economic goals for leadership.

The investment model focused on the Export-Import Bank of China and the China Development Bank, which finance the internationalisation of enterprises and workers, from now on included new sources of funding such as the Silk Road Fund and the Asian Infrastructure Investment Bank. Despite the inexistence of an official map presented by the Chinese government detailing all the ramifications of the project, it is clear that much of the infrastructure needed to consolidate these corridors already exists and will integrate the new projects, the objective is that of deepening co-operation through infrastructure development and trade (PantucciPantucci, Raffaello and Sarah Lain. 2016. ‘I. China’s grand strategy: The Belt and Road Initiative.’ Whitehall Papers 88 (1): 7-16. and Lain 2016).

China’s performance facing the 2008 crisis over the West’s inability to overcome the economic difficulties imposed on it gave the CPC the approval it needed for its state-led economic model against the deregulation and free market advocated by Washington. From then on, China’s foreign policy would undergo a reformulation, abandoning the timid speech of ‘Pacific Development’ to project itself as a great power, it was the ‘Chinese Dream’ of national rejuvenation, addressed by Xi Jinping. As stated by Johnston and Rudyak (2017: 439), ‘if we could say that Chinese aid was shaped by globalisation, from 2011 it began to transition to shaping globalisation.’

While the axis of China’s economic growth between 1980 and 2011 was led by investments in and exports of low value-added manufactures, the 2008 crisis signalled the beginning of an era of low growth and review of priorities, shifting its focus to consumption, innovation, services and foreign investment. In fact, sectors of the Chinese economy have experienced overcapacity since 2006, and through the BRI, the domestic industry and production can be exported to Asian and European markets avoiding an internal economic crisis.

It is precisely in this context that the BRI consolidates itself as the leading Chinese project, in line with the strategies established in the past for Chinese economic development, as affirmed by Xi Jinping in his speech at the 19th CPC Congress:

In May 2017, Xi Jinping announced a new contribution of US$14.61b (¥100bn) to the Silk Road Fund, due to the Belt and Road Forum for International Cooperation, with delegates from 130 countries. With the new contribution, the fund reached a total of almost US$55b available for project financing. Differentiated loan plans of US$32.52b (¥250bn) were also offered by the China Development Bank and US$19b (¥130bn) by the Export-Import Bank of China for co-operation within the BRI (Xi 2017b).

To stimulate innovation and technological co-operation, it conceived the Belt and Road Science, Technology and Innovation Cooperation Action Plan, proposing the interchange of scientists and the establishment of joint laboratories. In order to deepen co-operation, it created coordination mechanisms and announced a US$8.77b (¥60bn) assistance to developing countries and international organisations of the BRI to launch projects focused on improving the quality of life of the population (Xi 2017b).

Therefore, the BRI summarises all the efforts made by the PRC over the years for the promotion of international aid. The Chinese leadership role pursued since the times of Mao Zedong’s Third World theory remains present, although the reasons for action have changed. Deng Xiaoping’s ‘Four Modernisations,’ which turned international co-operation into an instrument of its economic growth, unleashed a model inspired by the Japanese trinity experience of aid, trade and investment.

Finally, the Chinese ‘Going Out’ strategy to internationalise private corporations and the review of the interpretation given to the principle of non-interference in the internal affairs of other countries changed the Chinese style of international aid. It allowed Chinese state and private companies to play a more active role abroad and Chinese technicians to begin remaining in receiving countries for periods beyond necessary for the execution of the project financed. Thus, the Chinese ‘quaternity’ of international aid, composed of aid, trade, investment and technical assistance was built up in the BRI project.

Conclusion

Mao Zedong’s Third World theory, the product of the theoretical evolution whose beginning can be traced back to an immediate post-World War II period, when the founding of the PRC was still a dream, defined Africa, Latin America and Asia (excluding Japan) as the main revolutionary forces against imperialism, colonialism and hegemonism. In the early 1950s, the establishment of China’s ‘Five Principles of Peaceful Coexistence’ would form the basis of its foreign policy and would inspire the 1955 ‘Ten Principles of Bandung,’ which should underpin all relations between periphery countries.

The split with the Soviet Union imposed on China the need to take a leading role among the Third World countries to avoid its isolation. Relations with Africa and Asia were essential in this endeavour, including the construction of the railway linking Tanzania to Zambia and economic and military assistance with Pakistan. The latter was strategically executed at a time when the USSR expanded its co-operation with India and increased its naval presence in the Indian Ocean. The approximation with the USA and Deng Xiaoping’s ‘Four Modernisations’ policy would shift the focus of China’s foreign policy from China being primarily a donor to becoming a recipient of international aid.

The focus on national economic development began to reorient Chinese international aid. If the principle of mutual benefit was previously geared to national political objectives, the intention was now to turn them into economical ones. The formation of various SOEs in China departing from ministries made the interests of the Chinese state involved in the whole process of aid. The model promoted by Beijing was then replicating that of Tokyo, its major investor in the 1980s.

Incorporating the aid pattern associated with trade and investment characteristic of Japan launched the trade of infrastructure projects for natural, mineral and energy resources. With the proviso that 50% of the concessional lending provided by the Export-Import Bank of China at government-subsidised interest returned for the purchase of products and services from Chinese enterprises, China introduced a new layer to its international aid, Chinese technical assistance, provided by SOEs or specialised technicians, setting the Chinese ‘quaternity’ international aid.

In 1999, the Export-Import Bank of China and the National Development and Reform Commission started to finance Chinese private enterprises selected as national champions in a strategy for their internationalisation called ‘Going Out.’ From then on, domestic private enterprises started to play a more active role in Chinese investments abroad, as was the case of the telecommunications company Huawei, for example, which became one of the largest companies in the sector. At the beginning of the new millennium, China began an effort to institutionalise its co-operation, creating several forums whose objective is coordination with the different regions.

However, the recent decline in commodity prices, especially after 2015, and the persistence of the effects of the 2008 economic crisis have had a direct impact on the Chinese growth prospect, presenting two different challenges to China. The first is related to the compliance capacity of the states that have received Chinese aid and whose natural resources and minerals have suffered deep devaluations in the international market, making it difficult to settle debts. The second is linked to the reduction in demand from international markets for Chinese high added-value products, especially considering the large loans granted by state-owned banks to domestic companies for international leverage.

The BRI advances the trend observed in the Chinese ‘quaternity’ international aid, with investments in infrastructure sponsored by Chinese banks for projects carried out by Chinese companies and employing Chinese workers. With investments in high-risk countries like Pakistan, Venezuela or Sri Lanka, adversities are almost guaranteed, and Beijing appears to be willing to take the risk. At a time that the USA embraces protectionist policies and wages trade war against China, both reflections of Donald Trump’s ‘America First,’ the PRC rises as the primary sponsor of multilateralism.

The slowdown of Chinese economic growth combined with the opportunities presented to China with the 2008 crisis for a more proactive role internationally paved the path for the announcement of the BRI in 2013. Throughout time, Chinese aid was an instrument for the PRC to adapt for domestic and international factors, and even though the CPC does not label the BRI as foreign aid, the article argues that it is a natural evolution of the policies adopted since the first elaboration of the Third World theory.

That does not mean that the BRI is a policy that aims to fight against imperialism, colonialism and hegemonism, but that it is a result of all the transformations the country passed through. This comprehensive strategy represents the merge of political and economic interests in a project that responds to both domestic and international constraints. Perhaps it is time to question whether the economy should retain its predominance over diplomacy. It might be the time to attest a balance of forces, answers that will only be possible to gauge from a temporal distance from the present events.

Notes

References

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