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This chapter seeks to first empirically establish the relationship between countries’ market failures and their level of infrastructure spending. It then seeks to test the most likely explanations for Chinese foreign spending based on explanations relating to FDI from Western MNCs. Notably, the results do not yield convincing results that these variables can account for Chinese foreign spending patterns. This finding supports the need for a novel approach to Chinese foreign spending in the context of the Belt and Road Initiative.
The chapter begins with a brief summary of the theory and findings. It then examines whether the strong relationship between electoral autocracies and Chinese foreign spending is evident among a wider range of issues based on analysis of United Nations General Assembly votes. The findings indicate that electoral autocracies have displayed a markedly higher propensity to vote with China since the launch of the Belt and Road Initiative. The chapter then discusses theoretical, policy, and business implications in turn.
To explain countries’ varying participation in the Belt and Road Initiative, this chapter begins with a discussion of recipient country characteristics that impact the demand for Chinese spending, including the political regime, clientelism, and the public-private orientation of the corporate sector. It then discusses the supply-side factors that influence Chinese foreign spending, including the Chinese Communist Party (CCP), state-owned entities (e.g., SOEs), and private firms. Finally, it evaluates the compatibility of these demand and supply characteristics. The key prediction is that electoral autocracies will display the strongest compatibility with Chinese foreign construction spending. This is amplified when the leaders of these regimes have a weak or insecure hold on power. Electoral autocracies are also predicted to be the most avid adopters of Chinese standards stemming from their eagerness for Chinese infrastructure spending.
This chapter establishes the empirical facts regarding political regimes and the prevalence of clientelism and the public-private orientation of the corporate sector. It begins by showing that electoral autocracies constitute around half of all developing countries during the 2010s, the most of any regime type. They are especially prevalent in Africa and Asia. The theory posits that clientelism plays an important role in driving Chinese foreign infrastructure spending. Several widely used proxies for clientelism establish that it is most prevalent in electoral autocracies. The theory also posits state control of the corporate sector is important to attracting Chinese foreign spending. A variety of measures are used to establish that state ownership of the corporate sector is significantly higher in autocracies than in democracies, especially in industries related to infrastructure. Overall, this chapter provides robust evidence about the characteristics of political regimes posited to influence Chinese infrastructure spending.
The aim of this chapter is to trace the link between political regimes and the initiation and implementation of BRI projects. The cases in this chapter provide context and detail for the quantitative findings presented in Chapters 5 through 7. The chapter includes five country cases that map the evolving policies toward Chinese foreign investment and construction projects from before 2013 to after, including the United Arab Emirates (closed autocracy), Djibouti (electoral autocracy in which the leader has a secure hold on power), Malaysia (electoral autocracy in which the leader has an insecure hold on power), Indonesia (electoral democracy), and Greece (liberal democracy). Each case represents a strategically important partner to China’s Belt and Road Initiative and includes a focused analysis and comparison of the construction of a port-related development project.
The key question this chapter addresses is which countries are the most receptive to Chinese foreign infrastructure spending? I theorize electoral autocracies will be the most avid recipients. This chapter analyzes Chinese foreign spending since the introduction of the BRI at the end of 2013 with data from the China Global Investment Tracker (CGIT) dataset. Multivariate tests indicate electoral autocracies are the major recipients during the BRI timeframe, from 2014 to 2019. Extending the timeframe to 2005 to 2019, the findings indicate a substantive difference in the relationship between Chinese foreign construction spending and electoral autocracies that occurs with the initiation of the BRI. Logistics performance indicators also show electoral autocracies display the greatest improvement from before to after the introduction of the BRI. While the share of Chinese exports flowing to electoral autocracies increases during the BRI time period, it is not possible to conclude this is a deviation from previous trends; more time is needed to establish confidence for these effects. The main takeaway is the exceptional role electoral autocracies play in attracting Chinese foreign spending in the context of the BRI, especially when the leaders have an insecure hold on power.
This chapter examines whether the patterns observed for political regimes and Chinese infrastructure spending are also manifested by foreign aid and exports of Chinese digital technologies that promote the adoption of Chinese standards. Analysis of several different datasets consistently show electoral autocracies are the major recipients. The datasets include Chinese smart cities technologies exports, foreign aid in the information and communications technology sector, and foreign deals for Huawei’s cloud infrastructure and e-government services. These quantitative findings are supplemented by case studies of Malaysia (electoral autocracy) and Greece (liberal democracy).
To explain what drives the demand for Chinese infrastructure spending and the adoption of its digital standards among low- and middle-income countries, we must begin by considering how they effectively address market failures. A first set of market failures regards impediments to private investment for building infrastructure. Western multilateral development banks such as the World Bank commonly impose liberalizing conditionalities on recipient states. These can be politically problematic for rulers of autocratic countries that rely on state controls to retain their hold on power. China, by contrast, has an explicit policy of noninterference in the domestic politics of foreign nations. China’s own political motivations coupled with huge dollar reserves have enabled it to effectively address the market failures of autocracies in a politically palatable way. A second type of market failure regards transaction costs and coordination failures. These can be addressed via the adoption of digital technologies. China can leverage its preferential access to autocracies for infrastructure spending in order to promote the adoption of its digital and related technical standards.
The puzzle of this chapter is whether characteristics of BRI projects display patterns corresponding to a host country’s political regime. The prevailing counterargument is that BRI projects reflect primarily what China wants. The evidence presented in this chapter is based on a different dataset from the prior chapter and includes over 2,100 projects up through 2019 across 127 countries. For each project, ten characteristics were manually coded. The findings both corroborate the importance of electoral autocracies and also provide more detailed evidence for systematic differences in the structure of BRI projects depending on the political regime in which they are located. The analysis demonstrates clear and significant patterns between BRI project characteristics and political regimes as well as for strong versus weak electoral autocrats that are consistent with and extend the findings of the previous chapter.
In 2013, Xi Jinping announced the launch of the Maritime Silk Road Initiative while visiting Indonesia. However, Malaysia became a far more avid recipient of Chinese spending in the years afterward. What can account for this surprising outcome? In this opening chapter, Richard Carney explains that we should care about the answer to this puzzle because it can help us understand how China can acquire global influence by addressing developing countries’ enormous unmet demand for infrastructure and spread the adoption of its digital standards. In contrast to existing explanations that focus on the demand for foreign investment by private firms, Carney proposes a novel explanation for why demand for Chinese SOE-led investment varies across countries. He argues state versus private control over the delivery of clientelist resources varies across political regimes, and this affects the demand for Chinese infrastructure spending that is principally delivered by SOEs. He argues electoral autocracies, which hold semi-competitive elections, possess the highest demand due to their heavy reliance on clientelism coupled with a high level of state control over the corporate sector.
How is China acquiring global influence? Rather than focusing exclusively on China's interests, this book considers a vital but overlooked feature – the interests of recipient countries. Richard W. Carney argues that countries in which political leaders rely more heavily on clientelism coupled with greater control over the corporate sector have a higher demand for Chinese infrastructure spending. Through a combination of statistical analyses and case studies, Carney shows that electoral autocracies (in contrast to closed autocracies, electoral democracies, and liberal democracies) display these features most prominently and are the most avid recipients. This in turn contributes to elevated levels of Chinese digital technologies imports which facilitates the spread of Chinese technical standards, enabling China to create the scale to assert its dominance over the emerging digital economy. Electoral autocracies are the most prevalent type of regime, and are therefore essential partners to China's global ambitions.