Commentary on Political Economy

Friday 8 December 2023


Rat land  China Isn’t Winning the War for Hearts and Minds

The country isn’t anywhere near as generous as its Western rivals and the shine is quickly wearing off its success story. 

China offers more loans than grants to countries such as Laos. 
China offers more loans than grants to countries such as Laos.  Photographer: Aidan Jones/AFP/Getty Images


China likes to portray itself as the champion of the global south — developing countries that make up the majority of the world’s population. On the surface, the narrative is an easy sell. China’s journey from an impoverished nation to economic superpower in four decades is a compelling story. In recent years, China’s trade and investment in developing countries have grown by leaps and bounds. President Xi Jinping’s signature trillion-dollar Belt and Road Initiative (BRI) has made China the largest funder of infrastructure projects in the global south.

Look more closely, however, and it’s clear China is nowhere near as magnanimous a benefactor as it claims. In the battle for hearts and minds in the developing world, its victory is far from assured.

Despite China’s economic success at home and growing commercial footprint abroad, the actual amount of development aid Beijing provides the global south is actually quite modest.

The most recent example of China’s tight-fistedness is its refusal to contribute to a United Nations “loss and damage fund” to help the developing countries most vulnerable to climate change. At the COP28 climate conference in Dubai, rich nations have pledged $700 million to the fund (though the US has offered only $17.5 million). Even though it is the world’s largest emitter of CO2, China did not put up any money, in keeping with its long-held position that, as a developing country itself, it is under no obligation to provide such support.

Moreover, China is hardly surpassing the West in development assistance, as many assume. The country provides a fraction of the grants (aid requiring no repayment) that the US and EU offer the global south. In 2021, China gave an estimated $3.1 billion in bilateral aid to developing countries. By comparison, the US provided $41 billion and the EU doled out €70 billion (about $80 billion).

Instead, the bulk of China’s so-called aid comes in the form of loans made at either reduced or market interest rates. In recent years, China has gone on a lending binge overseas. According to latest estimates, it has shelled out $1.34 trillion to fund infrastructure and other commercial projects overseas. The share of grants is unknown but is most likely very small.

A glance at the main recipients of Chinese funds also shows that geopolitical considerations drive Beijing’s economic agenda abroad far more than generosity.

Russia, China’s most vital strategic partner, tops the list with $169 billion in Chinese loans and investments. Venezuela, a major source of oil and an ideological ally, is a close second ($112 billion). Pakistan ($70 billion) is number three, as China keeps pouring resources into the country as a counterweight against India, despite chronic economic mismanagement.

Kazakhstan, due to its critical strategic location in Central Asia, has received $64 billion. While Cuba does little trade with China (only $1 billion in 2021), its government has been showered with $7.8 billion in Chinese aid, loans, and investments. A staggering $17.7 billion of Chinese aid and loans have flowed into Cambodia, a virtual client state. If China is perceived as lavish benefactor, it’s largely because the West seems consumed by “aid fatigue.”

Nor is China’s narrative necessarily winning converts. Ideologically, the sputtering Chinese economy has raised doubts about the country’s autocratic development model. Financially, Beijing has made many costly mistakes in providing credit to the global south. It has had to write off or restructure $78 billion in BRI loans in the last three years. Its reluctance to provide debt relief to developing countries has further dented its image.

Tactically, Beijing’s playbook of wooing ruling elites by funding their prestige projects — and giving presidential palaces as gifts to autocratic leaders — could alienate citizens who are frustrated with their leaders and who see few direct benefits from China’s largesse.

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Going forward, China is unlikely to sustain the same level of aid and lending as it needs financial resources to deal with its mounting economic woes at home. Politically, foreign aid is unpopular in China, where 200 million people still live on less than $5 a day (the poverty line for a country of China’s income level). The strangest thing about China’s generosity to other countries is how little the government advertises it to Chinese citizens.

Far from losing the global south to China, the West is in a much stronger competitive position than its leaders and media think. Its real challenge is dealing with the widespread perception of Western double standards in international affairs. That’s a problem money cannot solve.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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