1. Evolution and transformation of the People’s Republic of China foreign economic diplomacy: The rise of Western fears from the emergence of a new international donor Nayia Pyridi Ph.D. Candidate on EU-China Relations Faculty of Law, Aristotle University of Thessaloniki, Greece Hong Kong Political Science Association Centre on China’s Transnational Relations «Inside/Outside: 60 Years of Chinese Politics»

2. 2 I. The rise of China as a new lender and actor within the international development aid regime

3. 3 A. Aid forms a constituent part of China’s Foreign Economic Diplomacy - Aid is part of an overall foreign economic policy strategy and “a package deal” that China is offering to beneficiary countries, mainly developing and low-income countries - Aid is strongly supported by investment and trade policies, being part of a win-win deal that secures access to trade concessions in return for providing industrial and infrastructure support to aid- recipient countries - Aid consists of a mix of grants, preferential export credits, concessional loans and debt write-offs and is embedded in the Ministry of Commerce

4. 4 B. Goals and basic principles of the “Beijing Consensus” on development cooperation - mutual benefit, reciprocity and common prosperity - mutual support and close coordination - learning from each other and seeking common development - strengthening the voice of developing countries and exchanging ideas between partners - forging alliances by enhancing negotiation and dialogue with aid-recipient countries

5. 5 C. Underlying Policies of the “Beijing consensus” on development cooperation - no economic conditionality, meaning no demands that receiving governments adopt specific economic policies and targets - no political strings attached - no interference in the domestic affairs and involvement in the politics of aid-recipient countries - gradual development starting from the needs of the country

6. 6 II. The emergence of Western concerns from China’s aid activities

7. 7 A. Perceptions and misperceptions of China’s lending activities The rise of China as a new lender is perceived as: - an opportunity by Chinese officials and aid-recipient poor countries - a threat by traditional creditors and lenders - a challenge by the policy-making bodies/actors of the existing multilateral development assistance regime

8. 8 a. China’s aid as an opportunity The rise of China as an emerging donor is seen as an opportunity and a useful tool of promoting and implementing a new framework of South-South cooperation due to: - the distinct decolonized characteristics and features of the Chinese aid - the sharing of common experiences with other southern countries - the respect of common values and principles, such as sincerity, friendship, equality, reciprocity and common prosperity, respect of sovereignty - the fostering of a genuine local ownership of economic policies

9. 9 b. China’s aid as a threat China’s presence as an emerging donor introduces a competitive threat and spurs concerns expressed mainly by the existing lenders relating to the: - Renewed indebtedness by means of offering new loans to low-income countries that have just been granted debt relief, thus pushing them into debt unsustainability - Free-riding on the established donors’ debt relief programme - Weakening of the bargaining position and questioning of the monopoly status and the hegemony of traditional creditors in the eyes of aid-recipient countries - Maneuvering of non-transparent lending techniques and other means leading to phenomena of bribery and corruption and raising the issue of “odious creditor” - Bypassing of good governance and environmental standards leading to the weakening of hard-won progress made by the World Bank and other regional development banks

10. 10 c. China’s aid as a challenge The emergence of China as a new donor poses a challenge to the system governing the international cooperation for development and raises the following questions: - will China reshape the rules of development finance? - what is the impact of China’s foreign aid programme on the existing disbursement patterns, aid policies and motives? - what is the impact on the ethical codes and moral standards of responsible financing (with regards to the safeguarding of the environment, indigenous peoples and natural habitats, and human rights)? - is China ultimately jeopardizing hard-fought-for gains in health, safety and environmental standards and the fight against corruption?

11. 11 B. China’s prospective engagement in the process of formulation of principles on responsible financing or The imperative for engaging China in the process of formulating principles and rules on responsible financing The rise of China as an emerging donor is not a black and white issue, rather it is more complex and multifaceted issue that must take into consideration the following facts and projections:

12. 12 a.China’s massive economic expansion is the main underlying reason that has prompted huge search and competition of raw materials and resources and, on the other hand, it constitutes a defining and motivating factor that stigmatizes its foreign economic policy decisions in terms of providing foreign aid. b.All donors’ bilateral aid programmes are subject to nationally determined interests, standards and policies which are often at odds with standards that those same countries promulgate in multilateral institutions.

13. 13 c. Raising standards for responsible financing is a much more subtle and long-term process which require: - engagement at the global level, as well as at the local and national levels, with the involvement of a range of stakeholders including governments, companies, the media and civil society and - the formulation and development of inclusive processes for setting standards for credible lending, so as to ensure that emerging donor governments, such as China, private sector companies, media and civil society groups are all engaged in generating standards that countries and communities are in a position to implement.

14. 14 Nayia Pyridi Hong Kong, 20-21 August 2009