Demystifying the Role of Chinese Commercial Actors in Shaping China’s Foreign Assistance: The Case of Post-war Sri Lanka

Abstract

Hedging against its potential exclusion from the Trans-Pacific Partnership and other mega trading agreements, China embarked on its 21st Century Maritime Silk Road agenda to generate growth through supply chain integration and infrastructure construction in South Asian economies. However, the characteristics of China’s business-led and elite-oriented overseas development practices created policy gaps in high-risk countries. Based on interviews and fieldwork focused on Chinese State-Owned-Enterprises (SOEs) in Sri Lanka, this paper explores how globalization changed the nature of these SOEs: from policy executor to both policy maker and market actor in host countries and in China. However, these changes in nature and influence of key Chinese economic actors in host countries are actually not reflected by, and are in fact out of step with, the 1994 regulation that lays down the principle of non-interventionism in foreign assistance. Such a mismatch between expansionist business and restrained regulation leads to a new paradigm where businesses, especially SOEs, serve as a bridge between the host country and Beijing to identify areas where business interest and development needs intersect, thereby shaping development financing distribution in a way that facilitates SOEs’ ascension of the global value chain. However, the exclusion of the local private sector from expressing the most pressing needs makes the new paradigm insufficient to integrate the local supply chain. This, in turn, implies the new paradigm is less able to address debt sustainability problems, and geopolitical and ethnic tension in high-risk regions. In order to redress this imbalance, this paper proposes the inclusion of the private sector and civil society into China’s mainly business-led overseas development paradigm.