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The fallacy of China as a policy-monolith

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It’s the golden rule of commentary on politics that you shouldn’t attribute to conspiracy what can just as easily be attributed to incompetence.

To adapt that axiom to the analysis of China’s interactions with the world, it might be said that you shouldn’t attribute to a geopolitical masterplan what can readily be explained by the clash among domestic economic and political interests.

Even after more than a decade of Xi Jinping’s efforts to reassert the Communist Party’s top-down control over the state and the economy (while hobbling the ability of anyone to check his own power over the Party), the legacies of the ‘fragmented authoritarianism’ that reached its apotheosis towards the end of the reform era live on.

China’s policymaking landscape is still deeply coloured by sectional and regional interests at every level of government, Xi’s efforts to discipline them notwithstanding. When carefully studied, China’s engagements with its neighbours and the world bear the signs of a complex domestic political economy.

As Shahar Hameiri writes in this week’s lead article, ‘[a]s China’s economy has globalised, many domestically focused agencies at multiple levels have internationalised. Central ministries, provincial governments, state-owned enterprises, regulators, banks and law enforcement agencies now operate across borders regularly with varying degrees of coordination and control from the centre. As a result, China’s international engagements are often incoherent or even downright contradictory’.

One result of the boom in Belt and Road Initiative (BRI) financing has been that China has now emerged as the biggest provider of loans to the developing world. Even if there remains a big gap between promises and delivery on BRI-branded megaprojects, Western and multilateral donors are still being left in the dust by China in financing infrastructure in developing Asia.

Now, in the wake of the COVID-19 pandemic and with the surge in global interest rates, the developing world is facing a sovereign debt crisis not seen in decades — and the thesis that China will use its position as a major creditor to opportunistically claim geopolitical advantage abroad is being stress-tested.

In his analysis of how China is responding to this crisis, a longer version of which will appear in the forthcoming edition of the East Asia Forum Quarterly, Hameiri skewers the geopolitical interpretation. He argues that China’s reticence to offer concessions in negotiations with financially stressed sovereign debtors is rooted in the incentives provided by the Chinese system to the country’s policy banks — structurally significant state-owned lenders that dominate China’s overseas lending — encouraging them to avoid accepting losses on overseas loans.

Whatever strategies these banks decide upon, Hameiri says, ‘effectively becomes China’s official negotiating position’ — and in this case it has resulted in an insistence on loans being repaid in full, while bailing out debtor countries with loans that do little to address their underlying solvency problems.

In offering a critical analysis of China’s conduct as a creditor while pushing back against the ubiquitous ‘debt trap diplomacy’ zombie narrative that refuses to die no matter how many times it’s been disproved, Hameiri’s analysis illustrates the value in more nuanced interpretations of the interests and incentives that are driving a globalised China’s engagement with the world than usually appear in Western commentary.

Analytical accuracy is foregone when analysts ‘black box’ the PRC, attributing behaviour and policy — whether it be a port in Melanesia or the intimidation of a dissident in Canada — to a monolithic ‘China’. It is ironic that it’s China hawks in the West who are prone to this analytical fallacy, one which unduly validates party-state elites’ claims of having disciplined a vast array of public and private institutions towards coherent national goals.

A greater understanding of the complexities of China’s domestic institutional landscape — not least the important role its subnational governments play in its increasingly globalised state capitalism — will be an asset to Western governments, academia and media as they try to comprehend the origins and impacts of China’s emergence as a source of private investment and state aid.

This requires an ongoing pipeline of expertise on China’s government and politics and political economy. This is something countries like Australia — where the China-as-monolith fallacy infects much of the public discussion of the PRC’s global role — face challenges maintaining in a context of chronic underinvestment in, and increased corralling of, the study of China at universities, which are the main channel through which its national conversation will have to be infused with China expertise into the future.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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The post The fallacy of China as a policy-monolith first appeared on East Asia Forum.

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