EAF editors
It’s the golden rule of commentary on politics that you shouldn’t
attribute to conspiracy what can just as easily be attributed to
incompetence.
To adapt that axiom to the analysis of China’s interactions with the
world, it might be said that you shouldn’t attribute to a geopolitical
masterplan what can readily be explained by the clash among domestic
economic and political interests.
Even after more than a decade of Xi Jinping’s efforts to reassert the Communist Party’s top-down control over the state and the economy (while hobbling the ability of anyone to check his own power over the Party), the legacies of the ‘fragmented authoritarianism’ that reached its apotheosis towards the end of the reform era live on.
China’s policymaking landscape is still deeply coloured by sectional
and regional interests at every level of government, Xi’s efforts to
discipline them notwithstanding. When carefully studied, China’s
engagements with its neighbours and the world bear the signs of a
complex domestic political economy.
As Shahar Hameiri writes in this week’s lead article,
‘[a]s China’s economy has globalised, many domestically focused
agencies at multiple levels have internationalised. Central ministries,
provincial governments, state-owned enterprises, regulators, banks and
law enforcement agencies now operate across borders regularly with
varying degrees of coordination and control from the centre. As a
result, China’s international engagements are often incoherent or even
downright contradictory’.
One result of the boom in Belt and Road Initiative (BRI) financing
has been that China has now emerged as the biggest provider of loans to
the developing world. Even if there remains a big gap between
promises and delivery on BRI-branded megaprojects, Western and
multilateral donors are still being left in the dust by China in
financing infrastructure in developing Asia.
Now, in the wake of the COVID-19 pandemic and with the surge in
global interest rates, the developing world is facing a sovereign debt
crisis not seen in decades — and the thesis that China will use its
position as a major creditor to opportunistically claim geopolitical
advantage abroad is being stress-tested.
In his analysis of how China is responding to this crisis, a longer
version of which will appear in the forthcoming edition of the East Asia Forum Quarterly, Hameiri
skewers the geopolitical interpretation. He argues that China’s
reticence to offer concessions in negotiations with financially stressed
sovereign debtors is rooted in the incentives provided by the Chinese
system to the country’s policy banks — structurally significant
state-owned lenders that dominate China’s overseas lending — encouraging
them to avoid accepting losses on overseas loans.
Whatever strategies these banks decide upon, Hameiri says,
‘effectively becomes China’s official negotiating position’ — and in
this case it has resulted in an insistence on loans being repaid in
full, while bailing out debtor countries with loans that do little to
address their underlying solvency problems.
In offering a critical analysis of China’s conduct as a creditor
while pushing back against the ubiquitous ‘debt trap diplomacy’ zombie
narrative that refuses to die no matter how many times it’s been
disproved, Hameiri’s analysis illustrates the value in more nuanced
interpretations of the interests and incentives that are driving a
globalised China’s engagement with the world than usually appear in
Western commentary.
Analytical accuracy is foregone when analysts ‘black box’ the PRC,
attributing behaviour and policy — whether it be a port in Melanesia or
the intimidation of a dissident in Canada — to a monolithic ‘China’. It
is ironic that it’s China hawks in the West who are prone to this
analytical fallacy, one which unduly validates party-state elites’
claims of having disciplined a vast array of public and private
institutions towards coherent national goals.
A greater understanding of the complexities of China’s domestic
institutional landscape — not least the important role its subnational
governments play in its increasingly globalised state capitalism — will
be an asset to Western governments, academia and media as they try to
comprehend the origins and impacts of China’s emergence as a source of
private investment and state aid.
This requires an ongoing pipeline of expertise on China’s government
and politics and political economy. This is something countries like
Australia — where the China-as-monolith fallacy infects much of the
public discussion of the PRC’s global role — face challenges maintaining in a context of chronic underinvestment in, and increased corralling of, the study of China at
universities, which are the main channel through which its national
conversation will have to be infused with China expertise into the
future.
The EAF Editorial Board is located in the Crawford School of
Public Policy, College of Asia and the Pacific, The Australian National
University.
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