China s Foreign Aid and Investment Diplomacy, Volume III

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1 China s Foreign Aid and Investment Diplomacy, Volume III

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3 China s Foreign Aid and Investment Diplomacy, Volume III Strategy Beyond Asia and Challenges to the United States and the International Order John F. C oppe r

4 CHINA S FOREIGN AID AND INVESTMENT DIPLOMACY, VOLUME III Copyright John F. Copper 2016 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission. In accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 2016 by PALGRAVE MACMILLAN The author has asserted their right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire, RG21 6XS. Palgrave Macmillan in the US is a division of Nature America, Inc., One New York Plaza, Suite 4500, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. ISBN: E-PDF ISBN: DOI: / Distribution in the UK, Europe and the rest of the world is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Library of Congress Cataloging-in-Publication Data Names: Copper, John Franklin. Title: China s foreign aid and investment diplomacy / John F. Copper. Description: New York City : Palgrave Macmillan, 2015 Includes bibliographical references and index. Identifiers: LCCN ISBN (v. 1 : hardback) ISBN (v. 2 : hardback) (v. 3 : hardback) Subjects: LCSH: Economic assistance, Chinese Developing countries. Investments, Chinese Developing countries. BISAC: POLITICAL SCIENCE / History & Theory. POLITICAL SCIENCE / International Relations / General. POLITICAL SCIENCE / International Relations / Diplomacy. POLITICAL SCIENCE / Public Policy / Economic Policy. POLITICAL SCIENCE / Government / General. Classification: LCC HC60.C DDC 33.91/ dc23 LC record available at A catalogue record for the book is available from the British Library.

5 To my beloved son Royce Wellington Copper, to whom I entrust the future

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7 Contents P r e fa c e Preface to Volume III ix xi Chapter 1 Chapter 2 Chapter 3 China s Foreign Aid and Investment Diplomacy to African Nations I 1 China s Foreign Aid and Investment Diplomacy to A f r ic a n Nat ion s I I 4 3 China s Foreign Aid and Investment Diplomacy in Other Regions Europe, the Middle East, Latin America, and Oceania 91 Chapter 4 Summary and Conclusions 143 Not e s 207 Selected Bibliography for Volume III 281 In d e x 295

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9 Preface The People s Republic of China began giving foreign aid as soon as its government was established in China helped finance two wars. They were the wars that had the greatest impact of any in the post World War II period: the Korean War and the Vietnam War. China also financed wars of national liberation in a host of Third World countries. Meanwhile foreign aid helped Beijing negotiate establishing diplomatic ties with a number of developing countries and win support for important tenets of its foreign policy. To some, China became a model for aid giving: a poor country that generously helped other poor countries and a country that gave assistance expeditiously, efficiently, and without conditions. Some observers said that China made it necessary to reexamine the meaning of the term foreign aid. In the 1970s and 1980s, notwithstanding impressive successes in its foreign aid diplomacy, Chinese leaders noted that China s aid program had experienced serious setbacks; more important, they felt China needed capital for its own economic development. China thus became a major recipient of financial aid from international lending institutions while it attracted large amounts of investment money from Western countries and from Overseas Chinese. Giving foreign assistance in this context did not make much sense and China drastically reduced its aid giving. But China s economy soon boomed, and in the 1990s after it began to accumulate large stores of foreign exchange, Chinese leaders resurrected China s foreign aid giving and increased it several fold calling much of it foreign investments. Investments served many of the same purposes as aid and sounded better. In any event, China transferred large amounts of its newly acquired foreign exchange to poor countries. This provided succor for their development. It also expanded China s external influence. Not by accident China s external financial help became a major factor in its global rise.

10 x Preface Providing aid and investment funds to developing or Third World countries, China also hoped to realize strategic military objectives, acquire energy and natural resources to fuel its continued rapid economic boom, and, like capitalist nations before it, find or expand markets for its goods to keep its workers employed. It succeeded in all of these objectives. Meanwhile Beijing improved its global image and its global influence. China s aid and investments also created a backlash. From the beginning China s policies shaping its aid and investments to poor nations differed from the norms. In the name of not interfering in the domestic affairs of other countries while extending financial help to developing countries, China virtually disregarded local governance; it did not pursue democratic aims, and Beijing did not generally take human rights conditions into account. Moreover, China paid less attention to environmental standards than Western countries. Some countries, especially the United States and in Europe, did not like these policies. Developing countries leaders, however, approved of China s mode of providing financial help while observers noted that China greatly improved economic conditions in recipient countries. In any case, China s aid and investments presented a serious challenge to the West and to some international financial organizations. In the last decade, while fast increasing the level of its aid and investments, China has suddenly become a big player in helping Third World countries, often surpassing Western countries aid and investments and frequently eclipsing the financial help extended by international aid-giving organizations. As a result China presented an existential aid and investment threat. This study will not focus as much as most analysts on the economic aspects of China s foreign aid. Nor will it examine in any depth the decision process in China that involves extending foreign aid or making foreign investment decisions. Rather the author s primary goal is to assess aid and investments as tools of China s foreign policy, its successes and failures, and its political impact as China seeks world power status. The author wishes to thank the Smith-Richardson Foundation for financial support to work on this book. John F. Copper

11 Preface to Volume III This volume of China s Foreign Aid and Investment Diplomacy includes two chapters on African countries; one chapter covers the early period or the years up to 1980 and the other the years since then. Both the nature of the aid and China s motives for giving foreign assistance to African countries differed markedly from those offered to Asian countries. Also China had almost ceased providing financial assistance to African countries in the late 1970s. Beijing subsequently restored its financial help to countries on the continent in a big way, which has attracted more attention than its activities elsewhere. Finally, China has given vast financial help to African countries through regional organizations. Another chapter analyzes China s aid and investments to countries in areas not covered in the regional chapters: Europe, the Middle East, Latin America, and Oceania. In some cases the amounts were large and their impact very significant. Most of China s financial help to these countries consisted of investments; but many of these investments differed little if any from foreign aid. China s assistance in this category of recipients varied more in terms of amounts, risks, and purposes than its help to nations in the core regions. China s help also appears in certain ways to be more generous and more ambitious. In the concluding chapter, chapter 4, the author argues that China s financial assistance to developing countries is currently one of the most salient events or trends in international politics. China helped Third World countries grow economically. China s aid and investments have been a boon to relieving global poverty and advancing the cause of globalism. China has linked its economy to the rest of the world, providing China the key to expanding its status as a world power while forcing many to accept a redefinition of the terms foreign aid and foreign investments. Meanwhile China s huge quantities of aid and investments have made it a challenge to the United States, Europe, and Japan. Beijing has proven to be

12 xii Preface to Volume III a formidable competitor in these realms. Many nations now rely on China. China is currently seen as a large-cum-dominant player in global economic relations. Its financial help to other countries may prove to be its means to become the world s foremost power as it was in the past. Chinese leaders prefer economic, including foreign and and investment, tools of diplomacy to military power. John F. Copper