Chinese Agencies’ Responsibilities Are More Transparent Than Usually Assumed | D + C
Observers tend to have a hard time getting the big picture of China’s development lending. It helps to understand the responsibilities of Chinese institutions. Urgewald, a non-governmental organization based in Germany, assessed them in a recently published stakeholder analysis.
China’s foreign policy approach to developing countries is complex, but more transparent than is often thought. The main problem is that the most relevant information is only available in Chinese, says Marina Rudyak, assistant professor at the Center for Asian and Cross-Cultural Studies at Heidelberg University. She specializes in Chinese aid and is the author of the recent Urgewald publication entitled “Who’s Who in the Chinese Institutional Lending Landscape.” It offers a detailed account of the most important agencies and gives relevant information on the type of loans they grant with which type of conditionality.
The researcher points out that China distinguishes bilateral loans from multilateral loans. The Ministry of Finance is responsible for multilateral credits, while the Ministry of Commerce is responsible for the bilateral variety.
The two most important agencies involved in bilateral affairs are the Development Bank of China (CDB) with share capital worth $ 2.4 trillion and the Export-Import Bank of China (Exim- Bank) with assets worth $ 610 billion. The CBD is now the largest development bank in the world. Its mission is to provide moderately profitable loans and it ranks as a ministry directly subordinate to the Council of State, the highest administrative body of the People’s Republic. In contrast, Exim bank is not expected to make a profit and it ranks as a deputy ministry which is also subordinate to the Council of State.
No clear division of labor
The two banks are helping to finance the One Belt One Road Initiative (OBOR), the vast international infrastructure program (see Katja Dombrowski in the Monitor section of the e-Paper D + C / E + Z 2017/10). However, in this context, there is no clear division of labor, as Rudyak reports. In addition, four other commercial banks owned by the Chinese government also contribute to the financing of the OBOR. The author admits that this context can be confusing, but states that there is no evidence that China is trying to trap countries in debt traps. In his view, Chinese loans do not carry greater risks than other bilateral loans.
She pointed out that several agencies under the Ministry of Commerce are active in the area of bilateral loans. For example, the Department of Foreign Investment and Economic Cooperation (DOIEC) has a say in credit decisions, and the Agency for International Economic Cooperation (AIECO) implements infrastructure projects at large scale in its entirety.
Chinese embassies and consulates have offices of economic and trade advisers (ECCOs). These are important benchmarks, where both Chinese companies and national agencies in partner countries submit proposals. ECCOs also supervise ongoing projects. Other offices of the Ministry of Commerce also deal with aid and aid-related loans. Ambassadors, who report to the Foreign Ministry, have also been empowered to grant loans, but only for smaller projects.
The China International Development Cooperation Agency (CIDCA) has officially led China’s aid efforts since 2018. Rudyak points out, however, that his responsibilities are not precisely defined. In theory, CIDCA is supposed to oversee the Ministry of Commerce in aid matters, but it is simply a vice-ministry, and therefore of lower rank. As a result, its influence is limited.
Nora Sausmikat, who heads Urgewald’s China division, says the publication is a “tool for civil society”. In his experience, nongovernmental activists in the south of the world often lack information on who they might turn to in China and what to expect from different Chinese agencies. Sausmikat hopes the document will prove useful in future workshops with NGO activists around the world.
Urgewald, 2020: Who’s Who in the Chinese Institutional Lending Landscape.