China funnels its overseas aid money into political leaders’ hometowns | Belt and Road Initiative

Chinese financing of overseas projects has greatly benefited the core political supporters of the sitting president or prime minister of the country receiving the money, a new book says.

During the 20th century, China was known for receiving international development finance. Its overseas development plans are modest – roughly on a par with Denmark. But within a generation, as Beijing became the world’s second-largest economy, its footprint began to extend far beyond its borders – often in the form of infrastructure initiatives such as the Belt and Road Initiative.

It uses debt rather than aid to finance large overseas projects, creating new opportunities for developing countries to realize quick socioeconomic gains, but also bringing significant risks of corruption, “political captivity” and conflict.

authors of new books, Bank of BeijingThe study, published by Cambridge University Press, found that in those countries that received Chinese aid, political leaders increased funding to their home provinces by 52 percent during their time in power. But this political capture effect disappeared when the leader left office.

They also found that in the run-up to elections, Chinese government-backed funding in these regions often rises sharply.

“The system Beijing has put in place to fast-track the implementation of development projects is rotten,” said executive director Dr Bradley Parks. aid data research lab at the College of William and Mary in Williamsburg, Virginia, and one of the five authors of the book.

“Beijing often demands project proposals and loan applications from senior incumbent politicians rather than technocrats. This often results in projects being approved, disproportionately benefiting the president or prime minister’s core political backers.”

exist Sri LankaFor example, during his presidency, from 2005 to 2015, Mahinda Rajapaksa sought to bring the remote Hambantota district on the southern tip of the island — his birthplace and the town of only 12,000 residents — through Chinese-backed infrastructure. Homes – converted into a second capital building, including a huge international airport.

But questions quickly arose about the cost-effectiveness of these projects. In a 2007 cable from the U.S. Embassy in Colombo, Ambassador Robert Black reported: “An air port, an empty airport, and an empty large convention center will not yield the benefits that Hambantota needs, and if built, may be Think it’s the president’s stupidity.”

Sri Lanka in 2014 Aviation minister tells parliament The $210 million airport “made $123 in revenue in just one month.” When a visiting reporter asked a senior government official about the airport, he said, “When I visited the airport there, I asked the only immigration officer how many passports she had stamped that day. She said, “One.” ” “

But despite this controversy, Beijing insists The cooperation between China and Sri Lanka is “mutually beneficial and warmly welcomed by all walks of life in Sri Lanka”. In 2014, Chinese President Xi Jinping visited the island, Signed 20 bilateral cooperation agreements, That includes Colombo, a $1.4 billion Chinese port city. Xi Jinping described Sri Lanka as a “dazzling pearl”.

In 2016, former Sierra Leonean President Ernest Bai Koroma and Chinese President Xi Jinping presided over a signing ceremony in Beijing.
In 2016, former Sierra Leonean President Ernest Bai Koroma and Chinese President Xi Jinping presided over a signing ceremony in Beijing. Photo: Greg Baker/EPA

exist Sierra LeoneWhen Ernest Bai Koroma took office in 2007, his hometown of Bombali was one of the country’s four most populous regions and one of the poorest. That quickly changed when he became a political star.

Parks and his colleagues found evidence that Koroma and his allies, aided by Chinese aid, actively discriminated against their provinces and territories. By the end of Koroma’s second term, the region’s capital, Makeni, was one of the few places with 24-hour electricity.

In his 2012 re-election, Koroma’s average vote share in 13 other regions of the country was just 51 percent, but in Bombali it was 93 percent.

“This study found strong evidence of this ‘hometown bias’ in Chinese aid projects for social infrastructure (schools, hospitals, stadiums, etc.), but not in productive projects financed by Chinese loans, such as mines or factories. Otherwise,” said Dr Hong Zhang, director of the China-Africa Research Program at Johns Hopkins University in Washington.

“However, if other bilateral donors, such as Japan, also follow a request-based approach in development aid, it will be interesting to see if they also disproportionately support programs that benefit key constituencies of incumbent political leaders.”

Ben Brand, director of the Asia-Pacific program at the London-based think tank Chatham House, said it was not just Chinese companies and banks that were seeking to work with politically-backed companies and business people to boost overseas investment. Many other foreign investors have taken a similar approach.

“These deals often reflect the political economy of the partner country, but they can also expose foreign investors and funders to public and political backlash if the government changes due to elections, personnel issues or a coup,” he said.

Analysts have pointed out that Beijing’s extravagant overseas financing has inevitably diminished as China’s economic growth begins to slow. China’s overseas lending has been falling since 2017, while lending to Africa and Latin America all but halted in 2020 as many debtor countries defaulted or were about to default.

In Asia, many developing countries are still struggling to complete and integrate large infrastructure investments, such as new rail projects in Laos, Indonesia and Malaysia, Brand said.

“After a string of big deals in previous years, the pace at which countries digest these projects will naturally slow,” said Ben Brand, director of the Asia-Pacific program at Chatham House think tank in London.

An emerging risk for China is how the financially troubled country will meet its contractual obligations.Sri Lanka last week default on its debt For the first time in its history, it has battled the worst financial crisis in more than seven decades. China holds nearly 10% of Sri Lanka’s total foreign debt.

This is a cautionary tale for Beijing. “China now needs to decide what to do with countries that are unable to repay their loans on time,” Zhang said. “This is a highly uncertain time for Chinese banks, companies and borrowing countries.”