In this lecture, I discuss the global shift towards emerging donors, explain China’s approach to international development finance, explore the drivers and impacts of Chinese foreign investment, and offer some tentative observations about China’s role as a major source of financing for development projects in Sri Lanka.

1. Chinese Investment in the
Developing World
Joshua C. Gellers, PhD
US-Sri Lanka Fulbright Commission
25 July 2017

2. Roadmap
1) The global shift towards emerging
donors
2) China’s approach to international
development finance
3) The drivers and impacts of Chinese
foreign investment
4) Tentative observations about
China’s role in Sri Lankan development
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3. Abbreviations
• BC: Beijing Consensus, the Chinese model of
development assistance designed to counter the
Washington Consensus
• BRIC: Brazil, Russia, India, and China
• DAC: Development Assistance Committee
• OECD: Organisation for Economic Cooperation
and Development
• WC: Washington Consensus, a Western model for
development that prescribes deregulation,
liberalization, and privatization
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4. Donor Typology
Traditional Donors
• DAC countries
• France, Germany, Japan,
Sweden, Switzerland, UK,
United States, etc.
Emerging Donors
• Non-DAC countries
• China, India, Iran, Korea,
Mexico, South Africa,
Thailand, Turkey, Vietnam,
etc.
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5. (Re)emerging Donors?
• Myth: Emerging donors like China and India
represent a new trend in foreign aid
• 1950s: Developing countries engage in mutual
assistance (i.e. Bandung Conference)
• 1980s: South-South aid declines due to debt and
inflation
• 1990s: OECD countries dominate the aid scene
(95% of all international aid flows)
• 2000s-onward: Greater attention to non-DAC
donors due to size of flows
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6. Concerns of Traditional Donors
• Support rogue regimes, reduce
access to raw materials, shift
economic relationships away from
the West
Undermine
Western
interests abroad
• Esp. in terms of environmental
protection, good governance, and
transparency
Change the
rules of the
development
assistance game
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7. A “Beijing” Consensus?
• Myth: China has established a unique model of
development assistance intended to rival the West’s
Washington Consensus model
• Reality: BC is not a fixed package of development aid, but a
flexible approach to providing assistance
• Based on 8 principles of foreign aid:
– (i) equality and mutual benefit; (ii) respect for sovereignty with
no conditions attached; (iii) provided through interest‐free or
low interest loans; (iv) promotes self‐reliance, not dependency;
(v) quick results; (vi) uses best‐quality equipment of Chinese
manufacture; (vii) emphasises technology transfer through
technical assistance; (viii) Chinese experts will live at the
standard of local experts (Enlai 1964)
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8. Chinese Development Assistance
Foreign aid v. foreign assistance
Policy banks:
•China Export-Import Bank (Eximbank)
•China Development Bank (CDB)
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9. Drivers of Chinese Foreign Assistance
Political: Promote ‘One China’ policy
Economic: Access resources & markets
Strategic: Enhance status, assert
sovereignty
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10. Impacts of Chinese Foreign Assistance
Salience, lack of empirical evidence
Progress from the policy banks
The deference problem
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A bad reputation at home and abroad

11. Research Question
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To what extent are decisions regarding
Chinese investment in the developing world
motivated by environmental factors?

12. Results
Hypothesis Result
H1: Poor environmental credentials Partial support
H2: Need for foreign assistance No support
H3: Plentiful natural resources No support
H4: Compete with DAC countries Low support
H5: Poor institutions Low support
H6: Geographic proximity Inconclusive
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13. China in Sri Lanka
• Not a new relationship (1952 Sino-Lanka
Rubber Rice Pact)
• Relations have ebbed and flowed across
different administrations
• But Sri Lanka has treated economic relations
and foreign policy toward China separately
• Today China is the largest lender to SL, while
US is largest source of grants
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14. China in Sri Lanka
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15. Ports and Mega Development Projects
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Port City
Colombo

16. Ports and Mega Development Projects
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Hambantota Port

17. China’s One Belt, One Road Initiative
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18. China and Sri Lanka: Moving Forward
• China will continue to offer unrivaled loans for road
construction, hydropower, and real estate
development
• Social, environmental, and economic consequences of
China's financial stake in Sri Lanka remain unclear
• Some believe China is "crucial" to development; others
ponder whether reliance on Chinese loans will lead to
unsustainable debt and land grabs
• More research will be needed to determine whether
and how this partnership benefits Sri Lanka’s pursuit of
sustainable development
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19. THANK YOU.
QUESTIONS?
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Email: josh.gellers@gmail.com
Twitter: @JoshGellers
Website: www.joshgellers.com