China’s Economic Diplomacy. How Does It Work in Practice?

Maria Zakharova recently shared her views on Russian aid to Africa and how African countries are responding to that aid in a special interview with TASS: 

"So when you ask whether Africa is with us, I want to tell you, so much has been done for this continent and so much this continent has returned over the years in the form of non-solidarity with the position of the West, non-transgression through the adoption of anti-Russian sanctions, that I think to answer it one-syllable is simply not to respect our such important and such deep relations with Africa."

Some might say that "non-solidarisation" and "non-transgression" are arguable, or even insufficient benefits, especially if one looks at the amounts of aid that Russia (and before it, the USSR) gave to African countries. 

However, we will not argue with Maria Vladimirovna, but instead consider the experience of one of the most successful states in the use of economic diplomacy - China. 

Economic diplomacy

Before we start talking about economic diplomacy, we need to understand what it is in general. Based on the definition of one of the pioneers of the study of economic diplomacy, D. A. Baldwin, who in his book Economic Statecraft: New Edition explains the use of the term as follows: "The term economic diplomacy is sometimes used in almost the same sense as economic statecraft. Economic diplomacy is the use of the full range of economic instruments at a state's disposal to achieve foreign policy objectives. 

What about China?

Modern China actively uses economic diplomacy to achieve its political and economic goals. Thanks to two decades of rapid economic growth, China has been able to build up a wide toolkit of economic diplomacy: from international banks (Asian Infrastructure Investment Bank) and large-scale infrastructure projects (One Belt, One Road initiative) to large-scale foreign aid programmes during the COVID-19 pandemic. 

The most common pattern of Chinese economic diplomacy, which is used in almost all Chinese projects, is the so-called "tied loan". Let's imagine that country N wants to get a loan from China (or AIIB) to build, for example, a railway. It will most likely face a number of conditions: 

1. The railway will be built by a Chinese company ( with the maximum involvement of Chinese labour);
2. The loan to this state will be issued with pledged collateral. Exact terms and conditions of the deal are determined depending on the specific case, but most often it is either the unpaid use of the infrastructure object itself or the rights to extract natural resources in the country. 
3. The recipient country must recognise Taiwan as part of the PRC, not raise the Uighur issue, not bring up the Tiananmen Square events, condemn the protests in Hong Kong, and in no case challenge the leadership of the Chinese Communist Party in the country. 

These may seem dubious conditions, but many countries in the Global South are actively agreeing to them: for example, Sri Lanka had to lease to China for 99 years the Hambantota International Port, the loan for which was taken from the same China; Tajikistan found itself in a similar situation: Dushanbe had to give up the Upper Kumarg gold mine in exchange for the construction of a combined heat and power plant in the capital. The list of African countries in similar situations seems too extensive to fit into this article. 

But the Global South is not the only recipient of Chinese aid. European countries are also coming under the influence of Chinese economic diplomacy: during the COVID-19 pandemic, Serbia and Italy stood out from other countries: their situation at the beginning of the pandemic was much more difficult than in other European countries, so Chinese aid was very important for these countries.

The demands on the European countries were primarily political: Serbian President Aleksandar Vučić personally came to meet the plane with Chinese equipment, and a few days later a banner appeared in Belgrade, on which the Serbian people thanked the Chinese leader for the help. Italy was required to do less: it only needed to publicly ask China for assistance, which looked organic against the background of the European Commission's refusal to provide assistance and the announcement of an " everyone for himself" policy.

All of the above are the most vivid examples, from which it is very convenient to derive the rules and basic principles of Chinese economic diplomacy. Having considered these examples, one might wonder: is it really worth dwelling on "non-solidarisation" and "non-transgression"?