How Chinese Capital Has Gone Global: Q&A with Min Ye

By Liaoguo Chen

China’s overseas development finance has increased significantly over the last two decades, making China the largest bilateral official creditor in the world. The launch of the Belt and Road Initiative (BRI) in 2013 has brought China’s overseas investment and financing to the next level in global expansion. However, the BRI has also attracted controversy regarding the motives behind the initiative and how host country economies have reacted to the influx of Chinese capital.

In a 2021 special issue published in the Journal of East Asian Studies, Min Ye and Weiyi Shi aimed to strengthen the collective understanding of China’s export of capital through the BRI and beyond by asking two key questions: 1) can state-directed investment also follow a market rationale, and 2) to what extent can Chinese capital directed by the state win public support among recipient countries? The authors found the answers to these questions are nuanced and used the special issue to explore the perceived threat of China to global development and the environment and potential changes in China’s outbound investment and financing in the post-pandemic world. 

Below, Ye responds to questions on how Chinese capital has gone global:

Q: The special issue is a collection of six articles and studies examining different aspects of China’s global capital. What are some of the highlights of the issue?

MY: The special issue has three important contributions or departures from the existing literature. First, it provides an integrated framework to explain the fragmentation and coordination in China’s domestic politics and how it impacts external projects and outcomes. Again, other studies separate domestic politics and international relations or emphasize a cohesive state or fragmented system. To do that, research alone is not enough, but together, the articles in the special issue jointly illustrate this integrated framework. They are my article’s tri-block state model, followed by Gallagher and Kong’s article on national bureaucracy and Yin and Tian’s article on local governments. On the external side, Shi and Siem’s article explains how Chinese behavior produces a reputation deficit in developing countries, and Wong’s paper accounts for how Chinese-style economic statecraft backfires in advanced democracies.

Each article was written by comparative experts. The authors provide a generalizable framework for others to study similar policy questions. For example, my paper’s framework on the tri-block state can be useful to most foreign and development policies in China. Gallagher and Bo’s piece on power plants financing advances the push and pull dynamic, applicable to other studies of development and financing. Yin and Tian’s paper promotes the local choice model and shows how local government and business make trade-offs between growth and environment against contradictory top-down mandates. Outside China, Shi and Siem’s Zambia case study explains how reputation deficit emerges and why, and can be broadly applied to Chinese capital elsewhere. China’s capital in Australia and the pushback shows the failure of Chinese-style economic statecraft in advanced democracies in general.

Lastly, all papers have primary and extensive empirical research. In particular, I’d like to highlight Yin and Tian’s paper as providing excellent statistics on trade, investment and sectoral trends between China and BRI countries. More importantly, it calculates what pollutants and how much were generated within China’s borders due to local implementation of the BRI. Additionally, Shi’s paper on Zambia draws on official surveys and household survey data. Gallagher and Bo paper’s time series are focusing on coal power plants and financing in the last decades, followed by my presentation of the whole process of BRI policy evolution and Wong paper’s analysis of political discourses and policy outcomes in Australia.     

Q: How did this special issue come about? What was the inspiration for putting it together?

MY: The issue was motivated by a scholarly passion, but it would not be feasible if not for the excellent individuals involved. First, the senior editor Steph Haggard was patient and encouraging when I proposed this ambitious project to him. He also helped me recruit my superb co-editor Weiyi Shi, whose work in international political economy studies of Chinese outbound investment was first rate. Then, my colleague Kevin P. Gallagher was very encouraging and provided essential logistic and organizational support. We started by organizing a workshop in 2018 cohosted by the Boston University Global Development Policy Center and the Pardee Center for the Study of the Longer-Range Future. The results of the workshop laid the foundation for the special issue.

Furthermore, before this issue, I had been deeply impressed with outstanding scholarly research in China, which seldom made its way into top political-economic journals in the US, and I was also impressed with younger female colleagues, whose research and skills are very admirable. I’ve always liked Audrye Wong’s research and writing. The special issue was a good opportunity to involve them. For the workshop, I was able to bring John Ravenhill and Kent Calder, the very first generation of Asian political economists to read the papers and offer comments. It was a personal scholarly journey for me.

Q: How has the COVID-19 pandemic impacted the expansion of Chinese capital overseas?

MY: The pandemic did not alter the direction and dynamics of the BRI, or China’s capital abroad, but it exacerbated problems identified in the issue. For example, recipients’ perceptions of China have worsened, and strategic fallout between Australia and China has also been aggravated.

Conditions for the BRI have inevitably changed. For example, the pandemic stopped travel and exchange between China and the world, thus inevitably reducing the overseas footprint of Chinese capital. In terms of large infrastructure, resources and human capital became less feasible. In its place, digital, health and green infrastructure has been emphasized. And potentially, such green projects can be negotiated to restructure existing loans and investment.

Q: Since the publication of the special issue last year, what actions has China taken to address criticisms surrounding the BRI and beyond?

MY: There are two parts of external criticism. One is driven by geopolitical balancing. Here, China basically doubled down on its own narrative, responding harshly to any criticism mobilized by Western democracies.

The other criticism is about implementation of the BRI, for example, coal power plants, the lack of social inclusion and financial risks. The Chinese bureaucracy and think tanks have made real change: Asian Infrastructure Investment Bank (AIIB) and BRI financing will no longer support new coal-fired power plants, projects will have social and financial risks assessments and third-party mechanisms will be utilized to deal with debts. 

Q: Moving forward, what do you think is next for the BRI and Chinese global capital?

MY: Within China’s foreign policy, the significance of the BRI has increased. China’s globalist, regionalists and strategists have supported the BRI as the platform for China’s global power. Different from the earlier stage, and the BRI and Chinese capital will now have clearer demarcation. Commercial projects will follow more market mechanisms. Development loans will likely involve more AIIB and collaboration with other lenders. Such thinking is logical, but in practice, given China’s state-capital fusion, it is not easy. It remains a trial-and-error process, as identified in the special issue.

Q: What is the one policy change you would make overnight?

MY: One piece of advice I have is to host the BRI Summit regularly and bring practitioners and specialists together more often, whether virtually or in-person. Against intensifying US-China tensions in technology and Taiwan, the BRI provides a global and regional diversion, helping to de-escalate geostrategic risks. It can also offer a relatively safe venue to talk about debt refinancing, supply chain restructuring, global health and climate change. 

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