Chinese Foreign Assistance - Chinese Economic Statecraft

3.1. Chinese Economic Statecraft

3.1.3. Chinese Foreign Assistance

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from 15 to 5 percent in 2010-2015. On the other hand, let’s look at Vietnam. As we know this country is the biggest source of tourists for Cambodia. In addition to that, Vietnam recorded almost fivefold increase from around 9 thousand businessmen in 2010 to 45 thousand in 2015.That is still twice less than China, however it was enough to become the only country, which share of business community visiting Cambodia rose, though difference makes just 3%.

To conclude, in my opinion regarding the Cambodia’s dependence on tourism sector, the most important fact is that China is the second most significant source of tourists, not to mention that considerably big part of these people does not hesitate to come also for business, which is certainly beneficial for both sides.

To sum up, China has been an extraordinary source of human capital and tourists, who can, in comparison with trade relations, possibly challenge the better position of Vietnam and Thailand.

Unlike China’s export to Cambodia, the inflow of tourists positively influences the Cambodia’s current account, which has been negative throughout the last decade and even longer. That definitely rings the Cambodia’s bell with regards to the common urban stories of Chinese tourists with their pockets full of money, which they are very keen to spend wherever they go. In my point of view, China is obviously trying to find its way to get more involved in Cambodia’s trade, however it is a difficult task to compete with Thailand and Vietnam, and as we will see in the following part, China rather focuses on different ways of economic involvement. Question is to what extent Beijing can deploy the state propaganda in order to control the destination trends among Chinese population. Hypothetically speaking, if it was possible, China would be able to use tourism as an important leverage on Cambodia, since tourism revenues are essential for Phnom Penh.

3.1.3. Chinese Foreign Assistance

Chinese foreign aid is the very important first step in building the foundations of the future economic cooperation. China’s official aid represents the direct induction, leading to the outflow of foreign direct investments (OFDI) from China to other countries. Therefore, OFDI is often presented as cohesive outcome of the Chinese form of foreign economic assistance. Yoshimatsu (2010, 77) states that despite of liberal-oriented objective to enhance socio-economic conditions, foreign development assistance is an essential diplomatic tool to influence the decision-making process of targeted countries. China’s foreign aid is an essential tool in ‘Peaceful Raise 2.0.’ to achieve the aligned preferences with Chinese partners. Unfortunately, it is almost impossible to find the official data from Beijing regarding the foreign help, which would directly say how much aid Beijing deploys by time, where it ends up, and in what form. On the other hand, China publishes annual OFDI yearbook, and for two times Beijing released the White Paper, which describes the system of China’s official assistance, though, without any concrete figures. In the following part I will firstly introduce the foreign assistance system, then I will have look into

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project data connected to Cambodia. Afterwards, I will present the unpleasant situation around of rising Cambodia’s indebtedness toward China, and last but not least, the situation around OFDI will be also tackled.

In order to comprehend the China’s system of assistance, it is good to note that Official Development Assistance (ODA) does not equal the Chinese one. China has its own regulations and prefers to stay out of the club of OECD’s Development Assistance Committee (DAC)¹⁷. As I mentioned above, China follows its own agenda and own interests in providing aid to other countries, like any other donor in the world. The difference is that China does not reveal these interests and sells pigs in a poke by saying that their aid is without any strings attached. Looking at the DAC club rules, the conditions of getting such assistance are pretty clear. Given state must comply to follow the path of liberal democracy, transparency, rule of law, human rights, regulation, and privatization etc. (Trinidad 2013, 24), or at least to pretend that it tries to improve those qualities of the good governance. For instance, budget is also regularly provided information, since it is the matter of seconds to find out how much, where and how the money was allocated. As for China, countries’ leaders must certainly feel that the Chinese ‘Eight Principles of Aid’¹⁸ will not be the whole part of the story. Rule of mutual non-interference into each other’s concerns, or non-conditionality sounds good indeed, especially for countries like Cambodia; however, does it really reflect the reality? Inada (2013, 106) in his work points out that “[…] Chinese aid is called tied aid, since it is conditional on orders being placed with Chinese companies and are furnished for Chinese own benefit, rather than for purposes of the developing countries.” Taiwan-issue might be a very good example. It is a public secret that Chinese assistance cannot be even considered without signing an official acknowledgment which denies any political support of R.O.C.

According to definition used in Ear’s book (2013, 10), foreign aid means “[…] a voluntary transfer of resources from one country to another, given at least partly with objective of benefiting the recipient country.” In addition, ODA has to include also a grant element at least 25% (Trinidad 2013, 25). Albeit, Ear (2013) questions the real benefits of any kind of aid for Cambodia, since to his observation aid actually sabotages any hopes of improving its living conditions and quality of life of ordinary citizens. However, in this thesis the purpose is more important than efficiency. So, where do these two systems of foreign help differ? In the table below we can see the main differences in approach of providing the foreign aid, as it was defined in Trinidad’s (2013, 36-42) study. In the term of purpose of aid itself, China focuses more on laying down the foundations of future development in the given country, which is supposed to be achieved in providing loans mainly for infrastructure, resulting in future self-reliance of that

17 Those are the official group of world donors, who follow the OECD regulations about foreign aid. One of these regulations is also a requirement to provide detailed data about on each country’s developmental activities. China does not have to follow these obligations, since it is not a member of this club.

18 Principles introduced by Zhou Enlai in 1964, which are the backbone of China’s aid even today after several reforms. The main idea is the concept of non-interference, respect for sovereignty, equality, non-aggression, etc. These rules were supposed to stand in contrast with western dogma of development assistance (Official Chinese document in Trinidad 2013, 27).

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country. On the contrary, DAC club pays more attention to good governance, social problems of the country’s population and its improvement into the mature social capital. In the case of the preferred framework, China does not consider itself as being a donor. Instead, Beijing is portrayed as developing partner for third world countries, which builds the mutual trust by emphasizing on the similar background of developing countries. Such countries should treat each other respectfully, and help each other to achieve the win-win situation without any preconditions that have nothing to do with their path to development. Such attitude often easily wins the hearts of African or poor Asian countries, which are tired of constant criticism of western donors towards the way they run their countries. Another distinguishing element could be found within the initiative institutions which are source of the foreign aid. Western aid flow relies on various NGOs and other groups that indeed have their agenda and goals toward the recipient country; however, it has very little to do with the government’s official foreign policy.

China, in contrast, runs their aid campaigns directly from the center to melt all the ingredients together in order to achieve the core-interests as efficiently as possible. In other words, decisions about foreign aid remain under the authority of CCP. As for geographical preference, countries with low record of human rights and good governance are usually on the Beijing’s radars. It is much easier from the angle of establishing donors-recipient relations, since in such countries China especially does not care about any authoritarian practices carried out by local leadership.

Table 3: Aid from DAC donors and China

Areas DAC aid Chinese aid

2. Framework North-South cooperation Participatory

South-South cooperation Mainly state-centered

3. Priority Regions Strategic, historical importance

Strategic, diplomatic, and commercial importance 4. Priority Sector Social sector/ infrastructure Hard infrastructure

Source: A Study of China’s Foreign Aid (2013, 36)

Chinese White Paper about Foreign Aid (2014) states that the aid is provided in three forms:

grants; interest-free loans and concessional loans. Grants are gratis funds for small or medium-sized social welfare projects. Interest-free loans are, according to this official document,

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supposed to help to build the countries’ social facilities and improve people’s live-hood.

Concessional loan is a special mode of help, which should guarantee long-terms payment, very low interest, and grant element of at least 25%. Official rules also state that military aid and inflows from private funds do not qualify for concessional loan mode (ibid). All of these modes are used world-widely by most of the donors including DAC club and Chinese side. But if we look on Chinese concessional loans more in the detail, we will find several contrasts with the ones offered by DAC club. In case of China, the Export-Import Bank (EXIM Bank) is the only institution which is supposed to provide concessional loans to abroad at interests sticking with the official benchmark interest rate regularly updated by Bank of China (Wang 2013, 133). The difference between such rate and 2.5% limit of concessional loans rate is subsided by Chinese government (Kobayashi and Shimomura 2013, 47-48). However, this money are raised from market, and not covered by government funds. In addition, Chinese foreign aid is called tied aid.

That entails that country that is receiving the funding commit itself to numerous conditions of how to spend it in order to fuel the tighter cooperation between the sides, which intends to result in win-win situation – promise of development of recipient country on the one hand, and benefit of rising demand for Chinese services, goods, and creating an investor-friendly environment, on the other. For instance, such conditions could include Chinese technology, machinery, materials, equipment, qualified and unqualified labor, preference in land concessions, or certain advantage in future operation (Watanabe 2013, 70). Facilitating of such an economic interconnection proves the Quaternity Model in the real practice.

As it was already mentioned in the thesis limits, discussing the Chinese foreign aid brings about an issue of data availability. Kobayashi and Shimomura (2013, 48) observe that official Chinese statistics about foreign aid from Finance Yearbook of China do not include concessional loans, only grants and interest-free loans, which makes it almost impossible to make any conclusions about real volume of deployed Chinese assistance. Chinese White Paper (2014) states that “[In]

the last three years, the concessional loans China provided to other countries amounted to CNY 46.76 billion, or 55.7% of its total assistance volume in the same period.” Therefore, even though there have been attempts to make some calculations of the actual amount of the aid, those are just inaccurate estimations. For instance, Kobayashi and Shimomura (2013, 49) estimated China’s gross bilateral disbursement in 2012 at US$ 7.8 billion. In this estimation authors decided that government subsidy to EXIM bank along with supply of military material should not be eligible in the total amount, because former one is an internal financial transfer within China, and the latter one belongs to the category of military purposes officially rejected in accordance with DAC rules. Kitano and Harada (2014, 5) from Japan International Cooperation Agency (JICA) Research Institute point out that the previous estimations, including the one made by Kobayashi and Shimomura, do not include multilateral foreign aid, scholarships provided by Chinese Ministry of Education, and, in addition, do not distinguish between net and gross

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disbursements.¹⁹ Their estimation accounts US$ 7.4 billion of total gross foreign aid was deployed by China in 2012. In, addition, it was found out that only 7% of total foreign aid was provided for multilateral institutions in past 5 years (2014, 10), 46% of gross aid was in the form of concessional loans, and that the amount of Chinese aid is increasing sharply each year, soon to be overpassing DAC donors such as France, Germany or UK (2014, 13).

This thesis tries to prove the trend of rising Chinese foreign aid allocated to Cambodia.

According to Santosombat (2015, 10) China is the biggest source of concessional loans in the GMS in form of megaprojects. These projects mostly include Chinese firms, which use the money from concessional loans borrowed by the Mekong governments to build the lacking infrastructure. For instance, in 2009 61% of all concessional loans provided by China were allocated for economic infrastructure development (Trinidad 2013, 35). Fortunately, Cambodia publishes the official data of development assistance projects with almost all necessary information to make the comparison between China and other DAC donors.²⁰ The thesis makes the case based on data provided by Council for the Development of Cambodia (DOC), since I could not get to any detailed information from the Chinese side. Although such case cannot draw the whole picture regarding the real amount of aid flows from China to Cambodia, it is resourceful enough to understand the current trend of engagement of various players in this country. After all, overseas contracted projects are part of the China’s Quaternity Model, particularly addressed as the specific form of Chinese foreign economic cooperation (Ohashi 2013, 85). According to DOC, based on the date of approval in years 2000-2016 Cambodia received total aid of US$ 17 billion in form of various projects from bilateral and multilateral agreements. Following the Table number four, the biggest share of this assistance, estimated at 20%, came from Japan, which also supervised the largest amount of projects. China has been the second largest donor right after Japan with 17% of total share of aid for Cambodia, being ahead of multilateral organizations’ aid programs such as ADB, EU and UNDP. In total, China helped Cambodia with sum exceeding US$ 3 billion, which is almost three times more than help offered by USA with comparable amount of projects. China obviously focuses on large-scale schemes, since the second largest amount of money had to be allocated between second least amounts of projects. Hypothetically speaking, if every project had the same budget, Japan would have to raise US$ 7 million per one, while China would have to raise seven times more of that sum.

Table 4: ODA to Cambodia by source in 2000 -2016 (total budget in US$ millions)

Donor Number of

19 Gross volume is estimation without any further adjustments, unlike the net one, where, for instance, repayments from recipient countries are already included. Because China implanted concessional loans since early 90’s, it has received very little

repayments from borrowers yet; therefore the difference is not as large.

20 Data of some projects are incomplete.

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ADB 207 13% 2324

UNDP 68 2% 377

Japan 468 20% 3463

Republic of Korea 198 5% 806

China 57 17% 3022

USA 56 7% 1169

Source: The Cambodia ODA database

If we dig more into detail of Chinese projects, we will find out that huge part of Chinese aid flows into Cambodian infrastructure²¹, which was already addressed above. Investing into infrastructure is a win-win situation. Cambodia desperately needs it in order to attract investors, Chinese firms profit from building it, and better options of transport means more businessmen coming from China. Figure number six shows that with almost 70% of money spent on infrastructure China overtakes all other donors. This share is roughly comparable with amount of infrastructure plans which also accounts more than 60%. In total numbers, China invested more than US$ 2 billion in this sector, while Japan as the second largest infrastructure donor landed money worth of US$ 1.2 billion – that is 41% less than China. In fact, Japan is the main China’s rival in terms of the infrastructure construction. China’s main goal is to connect the SEA with two of its underdeveloped provinces with motive of stimulating their economic performance. It is also called North-South economic corridor, which links Kunming with Bangkok and Kunming with Vietnamese city called Haiphong (Yoshimatsu 2010, 99). Japan has come up with its own draft linking the whole Indochina from east to west to challenge the China’s political influence (ibid). For example, Japan announced the new railway connection between Bangkok and east coast of India, and also proposed the highway connecting Bangkok with Phnom Penh and Ho Chi Minh City (2010, 97). Competition between these two regional powers is beneficial for Cambodia, which profits of both plans, despite obviously both of them have hidden agenda.

While Chinese motives also include developmental needs, Japan has been purely seeking for improving its geopolitical position in SEA (Yoshimatsu 2010, 103). Another difference between these two donors is that while China focus only on hard infrastructure, Japan finds its way also in different sector by developing the soft infrastructure, such as “[…] a program for supporting human resources with the logistics management qualification system and the establishment of the ASEAN single window system” (2010, 99). Lack of diversification might pose a challenge for China in terms of efficiency of its influence. The third largest donor into Cambodia’s infrastructure is ADB with estimated value of US$ 910 million, though still almost three times less than China’s interest in this sector. For instance, in sub-category of transportation China funded the biggest project three times in a row from 2013 to 2015 in terms of disbursement. That means that despite the fact that Cambodia is trying to balance the Chinese infrastructure activities, if we look into table number five, it is pretty clear that China absolutely takes the lead

21 According to DOC Infrastructure projects consist of four subcategories: 1) Technology, Information, and Communication; 2) Energy, Power, and Electricity; 3) Transportation; 4) Water and Sanitation.

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in the transportation development. Very interesting is the case of South Korea, which landed funds for only 28 projects out of 198 into infrastructure. However, these 28 projects required almost 50% of the whole Korean budget, which estimated US$ 800 million. Other indicators also follow the line of Chinese aid theory in Cambodian practice. 98% of all Chinese projects for Cambodia are addressed as a tied-aid.²² In comparison with others, China naturally overcomes other donors, but that is also given by small amount of projects as such. Using the same indicator, Japan framed 24% of its projects as tied-aid, which makes it around 112 of the total amount. As for the form of the foreign aid, China again heavily outnumbers other top donors in terms of share of concessional loans of all projects, providing 84% of concessional loans and

在文檔中中國對柬埔寨的影響：新現實主義的看法 - 政大學術集成 (頁 39-47)