Coordinated Credit Spaces: The Globalization of Chinese Development Finance

Until recently, development finance institutions (DFIs) and development finance have largely been relegated to the background of global policy making and relatively small subfields of economics, political science and sociology in the scholarly literature. That changed in 2014-2015 when nations of the world flocked to join the China-led, new multilateral development bank, the Asian Infrastructure Investment Bank (AIIB). Development banking entered the arena of geopolitics, front-page news stories and television controversy. Many of the perceptions of the AIIB, the China Development Bank (CDB) and the Export-Import Bank of China (CHEXIM) depicted these institutions as malevolent state policy tools surging into developing countries in a manner that defied the models and norms of their Western counterparts.

Many emerging market and developing countries, however, welcomed China’s development institutions for their focus on infrastructure and industrialization, particularly the lack of policy conditionalities that often came with financing from the Western-backed DFIs. China’s national development banks are now fairly established on the global stage.

A new journal article in Development and Change by Gregory T. Chin and Kevin P. Gallagher examines the emergence of Chinese development finance on the global stage and evaluates the extent to which it differs from, complements and competes with the Western-backed development finance institutions. Whereas the new, China-backed multilaterals are closer to the Western model, especially the AIIB, this analysis finds that China’s national development finance is significantly distinct among three parameters – the scale and business model of Chinese finance relative to its Western counterparts, the composition and approach of China’s lending portfolio and the governance of China’s development finance institutions.

Looking towards the future, the authors find that either contestations or convergence are possible trajectories, and the outcome will be determined by whichever can produce conditions akin to the “politics of productivity”.