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China and global development: 10 things to read in July 2021

Written by Linda Calabrese, Yue Cao

Hero image description: Suzhou Creek Rehabilitation Project in the People's Republic of China Image credit:Asian Development Bank Image license:CC BY 2.0

This month’s China and global development round-up covers ODI’s work on the Belt and Road Initiative (BRI) during Covid-19, China’s domestic development in climate and energy, and trends in overseas coal finance. We also cover the internationalisation of Chinese NGOs, and the evolving role of both the Asian Infrastructure Investment Bank and Chinese engineering companies within the global economy.

This issue is jointly written by Linda Calabrese and Yue Cao. Yue will continue to provide this resource over the coming months, until Linda returns.

The Belt and Road Initiative and Covid-19 in low-income countries

ODI is publishing a series of reports on the BRI and Covid-19 in low-income countries. A previous blog already discussed the Economic Pulse series, whose latest issue was published in June. This analysed China’s international economic response, as it moves from more reactive policy measures to contain the pandemic and rescue the economy towards risk management and proactive long-term planning. The report takes a close look at trade developments between China and the BRI 140, services trade, Chinese companies’ public-private partnerships, debt negotiations and decision-making structures, digital infrastructure, and China’s role in the rare earth elements value chain.

ODI also publishes country-specific BRI reports, such as this one, which analyses the social risks to sustainable development generated by the BRI in Zambia and Nepal. Another recent study explores how China can contribute to a green recovery in low-income countries. The study analyses the extent to which pandemic responses in Pakistan, Kenya and Nepal have included green elements (hint: limited), how these align with their ambitions expressed in Nationally Determined Contributions and high-level climate pledges, and how their relations with China could be leveraged to unlock new sources of sustainable finance, technology provision, aid and knowledge transfer.

Further reports on other countries are planned to be published soon, so watch this space for future announcements.

China and the journey to net zero

We highlight three recent reports which examine China's efforts to achieve net zero emissions domestically and along the BRI. The first, published by the Sino-German Energy Transition Project, provides a snapshot of where China is on this journey regarding domestic policy developments in areas including fossil fuels, renewable energy, new energy vehicles, hydrogen, carbon markets, power market reforms and air quality. The report is a useful compendium of key statistics, policies and outstanding challenges that can be equally useful for seasoned China climate and energy experts, as well as for researchers and policy-makers that are new to China.

The second report published by the IIGF Green BRI Center in Beijing shows how 40% of the $160 billion planned or announced Chinese coal power plants overseas between 2014-2020 has been shelved, mothballed or cancelled, with many more seeing delays in construction. The author identifies the increasing financing cost for coal-fired power plants vis à vis wind and solar projects, climate-related financial risks, and the risk of stranded assets behind this trend.

Focusing on the same issue, a BU Global Development Policy Center’s policy brief published in July corrects the misconception that the majority of new overseas coal plants are funded by China. The brief shows that only 13% of built or operational coal power capacity outside of China between 2013 and mid-2019 was financed by China. It references research from Urgewald showing that the lion’s share of overseas coal finance in the world economy comes from the private sector of G7 and other advanced economies.

The internationalisation of Chinese NGOs

On the People’s Map of Global China (a new interesting initiative, worth checking out), Ying Wang writes about the growing internationalisation trend of Chinese NGOs. The article provides a good overview of Chinese international NGOs (INGOs). It explains that China has no NGOs with purely international development purposes. All the NGOs have a main domestic focus, and can also engage in international development projects.

Wang discusses the projects in which Chinese INGOs engage, and where, based on the Chinese NGO Internationalisation Database developed by the author. The article discusses the difference between government-organised NGOs and independent ones, the challenges they face and the likely future of their internationalisation process.

Jin Liqun on the role of the Asian Infrastructure Investment Bank on the global scene

The Pekingnology newsletter (highly worth subscribing to, if you are interested in China’s domestic issues) provided the full translation of a speech by the Asian Infrastructure Investment Bank (AIIB)’s president Jin Liqun at the third symposium of the China International Finance Forum, held in May 2021.

The speech is packed with interesting insights on the AIIB, including on its membership and lending (did you know that India is the bank’s biggest borrower?), on whether the Washington Consensus remains valid for developing countries today (Jin’s short answer: no), on the differences between the AIIB and the World Bank (for example, any member country can borrow from the AIIB), and on its role in financing the BRI, despite being officially distinct from the initiative.

The agency of Chinese international construction and engineering contractors

There is abundant research on the determinants of China’s international lending to infrastructure projects. Most of this research has focused on the leading role of Chinese public financial institutions and line ministries, as well as on bilateral relations between the Chinese government and borrower and project host countries.

A new working paper (PDF) published by the China Africa Research Initiative (CARI) sheds light on the role of Chinese engineering companies as the de facto agents driving China’s international lending in infrastructure projects over Chinese lending institutions.

Hong Zhang, the author, traces the historical evolution of this sector domestically and shows how its growth overseas has been carefully cultivated by the state to facilitate the internationalisation of Chinese industrial capacity. While this research is an initial foray into understanding the role of these agents, the underlying message is that more scholarly and policy research should be dedicated to these actors given their importance.