China's Global Investment w/ Austin Strange
Unpacking the economic and political sides of China's infrastructure investment in Africa, the Global South, and beyond
If you are in the San Francisco area on August 28, come join us for a book talk with Terry Lautz. Terry will be discussing his latest project, a collections of memoirs and histories of Chinese people who visited America and went home to transform the U.S.-China relationship. The event will be from 2:00PM to 3:30PM at the San Francisco Public Library.
Thanks,
Nick
Austin Strange (郝思诚) is an associate professor in the Department of Politics and Public Administration at the University of Hong Kong (HKU), where he teaches international relations and Chinese foreign policy. Professor Strange’s research focuses on China’s diplomacy through building infrastructure and investing around the globe, and has written two books, Chinese Global Infrastructure and Banking on Beijing, in which he analyzes the economics and politics behind major infrastructure projects in Chinese history. Professor Strange was the recipient of HKU’s Early Career Teaching Award, and, aside from a PhD in Government from Harvard, completed a Master’s degree in Non-Traditional Security Management at Zhejiang University, a program administered fully in Mandarin.
In the interview, professor Strange touches on important arguments in his two books, emphasizing that China’s influence has expanded in the Global South through its cooperations with partner countries on infrastructure and investment projects. Strange notes that China’s Belt and Road Initiative has generated positive economic benefits for governments in Africa and beyond, elevating China’s political influence in the regions, especially on the deterrence of the regime in Taiwan. While public opinion toward China’s infrastructure may be mixed, there have been positive responses, including for projects in Indonesia. Strange reasons that the United States should not impose heavy tariffs if it is trying to insulate China’s influence. Regarding the educational exchanges, Strange encourages young American students and scholars to make judgements about China after seeing it themselves, and the Chinese government helps them do so with more programs to enhance foreign students’ Mandarin proficiency.
Edison Chen (EC): Professor Strange, you published Chinese Global Infrastructure in 2023. Can you talk about the main thesis of your book, and what led you to this research topic?
Austin Strange (AS): I started writing this book, Chinese Global Infrastructure, during Peak BRI, the Peak Belt and Road Initiative. Chinese infrastructure lending to the global south had soared over the past 10 years. There was a lot of academic and policy attention toward the BRI, but despite all this attention, many were still struggling to pinpoint what exactly the Belt and Road Initiative is and how it fits within China's foreign policy. One main argument I make is that China's global infrastructure is not new. There are important historical foundations of the initiative that go back to the founding of the People's Republic of China. I show in the book that infrastructure has been an important tool in China's foreign policy toolkit for a long time. Another key argument is that Chinese global infrastructure is not an automatic influence on machines. The U.S. government and other critics made it sound like Chinese infrastructure is this straightforward influence tool. They're very wary of the prospects of China building influence around the world through the initiative. I take issue with that type of simplistic thinking. Both the idea of infrastructure and this concept of influence have been very hazy in the public and even academic discourse, so I tried to clarify these things in the book.
EC: Many pundits argue that China’s role in Africa is not as a builder, but as a financier. In your perspective, what is China’s logic behind investing in foreign nations, especially in Africa?
AS: I think China has long been both an important builder and financier. It’s not only Africa, but also the Global South. Chinese companies have been builders in these places for decades, and they are still building today. Also, China being a major financier is one of the defining features of the Belt and Road initiative. It's a state-financed strategy that involves both financing and building major projects around the world. Some research shows that China's recent lending has started to focus more on transactional finances rather than tangible infrastructure projects. The logic behind this has multiple layers.
China's infrastructure and developmental cooperation in Africa and beyond is multidimensional. One of the foundational logics is a set of national economic priorities that the Chinese government formulated 20 -30 years ago, including trying to offload excess production of construction inputs like steel that were being overproduced in China. Even today, it’s a challenge to manage China's excess foreign exchange reserves and find productive investments for them around the world. China wants to provide opportunities for big state-owned enterprises to internationalize and deepen their presence in emerging markets around the world to increase China's energy security. In addition to national economic priorities, there's also a political logic. In the book, I lay out different types of political objectives that China hopes to obtain through these projects and financing.
EC: I agree that it's not just Africa, but the Global South in general. In a Center for Strategic & International Studies (CSIS) podcast, Dr. Tom Christensen made a point that China's economy is largely supported by exports, and that makes it vulnerable because the need for Chinese exports globally is not that high. What is your perspective on that?
AS: Again, this issue has a longer history. I think the buzzword overcapacity is correct. A country can’t assume that exporting excess capacity is always going to be a viable option. It depends on the ability of foreign markets to absorb that excess capacity. Over the years, there have been favorable conditions for China to do that, but it's becoming more difficult to export one's problems both economically and politically. A lot of other countries, like China, are looking to move up the value chain. They want to be high up in these supply chains and be well-positioned to have the ability to have technological innovation, producing and consuming high-quality products. Overcapacity showed us that it has a lot of unintended consequences. When you're exporting a lot of goods to other countries around the world, particularly if those are very competitively priced goods and goods that are benefiting from state subsidies, this can be disruptive for other countries, and that is not always a good thing for China.
EC: Some people have observed that China’s global investment is also a political investment. How did the Belt and Road Initiative change China’s global influence? In places with major Chinese investments, is China’s presence welcomed by the government? How about by the people?
AS: At a global level, the Belt and Road Initiative helped cement China's reputation around the world as a leading infrastructure builder and provider. When we look at China's potential influence on the BRI members and other countries around the world, I like how you split up whether China is welcomed by the government versus by the people. I take a similar approach in my research. At the government level, the major BRI infrastructure projects are national-level investments, so they require cooperation and reasonably good relations between China and the counterpart government. In many of these countries, the BRI projects exist at the elite government level, among which China is very much welcomed. For a lot of the big transportation, energy, and other big infrastructure projects, there are no clear alternatives other than China, so China has been welcomed by the politicians in these countries. I think public opinion in the same countries is more complicated. If you look at all the research on this question, there's not a global consensus on whether China's global infrastructure and other investments are welcomed or not. In general, attitudes toward China globally tend to be more positive than many people realize, but there's a lot of unevenness across and within countries. You can find some studies that find robust evidence that Chinese aid projects improve attitudes towards China, while others find the opposite or find no effect at all. Without a consensus, I think the local context is the deciding factor that shapes China's popularity in these countries.
EC: You argued that China’s investment in the Global South is not randomly scattered. How did China choose where to invest, and has it gotten its desired returns on those investments?
AS: My colleagues and I talk about where China chooses to invest in our other book called Banking on Beijing. We wanted to provide high-quality data that carefully distinguishes between different types of Chinese financing and investment. For example, we make a distinction between Chinese foreign aid projects that are official development assistance if we were working with available international definitions from the OECD, and separate them out from commercially oriented investments that are mostly state-backed loans, which we call the Other Official Flows or OOF, again based on the OECD framework. We used these terms to compare China's investments in the global south to what the World Bank or the United States are doing. China's foreign aid tends to be very closely related to economic need on the part of developing countries. For example, smaller and poorer countries in Africa and other developing regions tend to get more aid projects, which is encouraging. There are political motives behind aid projects too.
Countries that vote more with China in the United Nations General Assembly, certainly countries that do not recognize Taiwan, get more aid from China. That doesn't necessarily mean that China is this rogue actor that's using its aid simply to build influence. We do find evidence that China is using aid to build political influence, but that makes China look no less similar to other major lenders. There's a lot of evidence that suggests this is what all powerful donors and lenders do. Still, China's commercial lending, like the big infrastructure loans from the BRI, is driven more by commercial considerations.
Whether or not China has gotten its desired returns is difficult to measure since China's motivations are multilayered. I think China's aid has been reasonably successful at consolidating high-level political and diplomatic ties, having been a key foreign policy tool to diplomatically isolate Taiwan in the world, and there's evidence of success in political return on investment from the commercially oriented financings. It still depends on how you're thinking about return.
EC: Following up on your point on Taiwan, is the Taiwanese government engaged in similar investment projects around the globe?
AS: Yes. The PRC-Taiwan diplomatic competition was a key driver of foreign aid throughout the Cold War and the 20th century. Initially, this was a diplomatic tug of war where competing to win support of dozens of newly independent countries was an open and active competition. Countries actually switched back and forth multiple times because both China and Taiwan won them to their side. One of the most important episodes in this competition was in 1971 when the PRC became the sole legitimate Chinese representative to the United Nations. The vote from the Global South was pivotal in that resolution, which had a lot to do with the infrastructure and other types of aid China was providing. In theory, this competition is still going on today, but there are only about 11 countries in the world that still recognize Taiwan, and all of them are small island nations and developing countries. This is a very lopsided competition today, but Taiwan has continued to provide aid to preserve its diplomatic presence in the world. However, it's becoming less and less tenable for Taiwan. Its allies are dwindling, especially over the past 20 years. It's become extremely difficult for Taiwan to compete with the packages that the Chinese government can offer some of these small countries.
EC: Could you elaborate on a few cases of countries with major Chinese infrastructure projects? What can we learn about China’s global investment strategies from those cases?
AS: Since I moved to Hong Kong, I started working on China's infrastructure investments in Southeast Asia, particularly in Indonesia. One of the takeaways has been that China's infrastructure and its development are constantly evolving. In Indonesia, there are increasingly complicated financial arrangements to support the most high-profile Chinese-financed projects. The traditional vocabulary that I was describing earlier of foreign aid and commercial lending only gets you so far if you want to understand the nature of China's development finance in 2025 and moving forward. One example of a financing type that's gotten popular in Indonesia is the special purpose vehicle where the Chinese and Indonesians formed a new entity and implemented a major infrastructure project.
This is what we've seen with the Jakarta-Bandung high-speed railway. This is a project I've been studying on the ground. I've also gotten a better sense for the public opinion in these countries. Looking at public opinion in Indonesia toward Chinese infrastructure and China has been very eye-opening for me. Even in a country like Indonesia, which, to put it lightly, has a very complex history with China and ethnic Chinese people in the country, China's investments in Indonesia's economy are more popular than is widely believed. In a lot of these countries, certainly in a big emerging economy like Indonesia, people are a lot less obsessed with U.S.-China strategic competition than we realize. People don’t think about U.S.-China competition in the same way.
Even the most high-profile national level projects, like the Jakarta-Bandung high-speed rail, and controversial ones like the Morowali Industrial Park, don't have nearly as much recognition in Indonesia as we might think they would. They are not as well-known as you might think they are.
EC: How did the United States initially react to China’s ambitious global expansions? How did its policy reactions change over the years?
AS: If you rewind to around 25 years ago, when China's expansion strategy was just kicking off, the United States encouraged China to be a responsible stakeholder as China was beginning to go global. I think there was relative openness on the U.S. side. There were efforts to encourage China to join some of the existing aid and development architectures and provide more information on its aid and financing. I don't think these efforts came to fruition. Since then, over the past couple of decades, it's fair to say that the U.S. policy establishment has long been very skeptical toward China's developing finance, certainly in Africa, and even further afield.
I think the skepticism predated the downturn in U.S.-China relations in the past decade, and since 2016, this has been a widespread bipartisan trend. I think it's interesting and maybe puzzling that there's been a combination of skepticism and dismissal. On the one hand, there have been a lot of doubts about the merits and the quality of Chinese finance, accompanied by alarms about what China's doing. You asked me earlier about China's influence in the world. The BRI, for example, has been portrayed simultaneously as a questionable low-quality effort, but also as something that is a threat to the United States' influence. You could argue that the US reaction has shifted a little bit more towards the latter, away from the doubt and towards the threat thinking in the past several years. I also think there's been a consistent concern on the U.S. side about what it sees as secrecy and a lack of transparency by the Chinese when it comes to the different types of aid and lending that China’s providing around the world.
EC: In the aforementioned CSIS podcast, Dr. Christensen argued that the United States should leverage its economic power to force East Asian countries to reduce their reliance on China. Do you see this strategy working out?
AS: What Professor Christensen and others have been pointing out is that the United States uses economic tools such as tariffs to try to achieve its strategic objectives. This can affect our interests in other policy spheres, and is very closely related to how the United States is interacting with some of its allies and partners in East Asia and Indonesia. These allies are now seen rightfully as a very important resource for the United States because it's becoming increasingly difficult to unilaterally compete with China. The United States sees itself as being in this strategic competition with China, but there's a growing sense that some of America's economic policies are hurting its ability to leverage these partnerships. Tariffs are a good example. The best example for Japan and Korea, two of our most important partners in the region. If you inflict a lot of pain on big car companies in Japan and Korea, it's probably not going to make it easier to convince these governments to support your policies in other areas. Leveraging economic power needs to be done in a way that appreciates the broader strategic setting. If you look at other parts of Asia, it's clear that the United States wants to convince other countries such as Vietnam to reduce their reliance on China. This is difficult for two reasons. One, it's operationally difficult. The latest announcement of the deal between Vietnam and the United States basically suggests that there's going to be an additional penalty and tariffs on goods that are rerouted from a different original country through Vietnam. This is seen as trying to get at products that originate in China but are simply rerouted through Vietnam. That is going to be operationally costly and complicated to implement. The second reason is that appreciating the larger strategic setting is very important because if America is instructing countries in Southeast Asia to reduce their engagement with China but not providing attractive alternative gaps, it's going to be difficult to convince these countries to choose and work with the United States.
EC: Shifting gears, I found a clip of you talking about your exchange experience in China, and you were speaking in Mandarin! Could you talk about what it is like to study and teach as a foreigner in Hong Kong?
AS: I joined HKU as a professor in 2020. Before that, I had spent several years studying in mainland China. I was very familiar with living in the mainland, but I hadn't spent much time in Hong Kong. I moved to Hong Kong at a rather precarious time, both politically and right in the middle of COVID. I feel very fortunate that I took this leap and moved here. I enjoy calling Hong Kong home and working with my students and colleagues here. Our students are excellent. It’s a place where someone can be in an environment with lots of international faculty and students while also being embedded within the Chinese society and enjoying access to regions in mainland China for research.
Unfortunately, it's getting more difficult for everyone to invest in expertise in China these days. I am a little worried about the next generation of American experts on China, and I do think being here in Hong Kong affords me some freedom to escape the confines of what I think has become a more narrow and less open and less interesting China policy space in the United States. It’s just much harder for young Americans to go to China and learn about the country's society, language, and people in politics compared to 20 years ago. I do try to remind myself of where I am. I'm unhappy about the trajectory of US-China relations, and I'm particularly worried about how strategic competition as it's being framed is coloring many aspects of US-China relations. That’s a very unhealthy state when we think about broader global problems like climate change and global development.
EC: President Xi Jinping announced in 2023 that China is inviting 50,000 foreign students for exchange in the next five years. From the perspective of someone who experienced Chinese education, how can China do a better job of accommodating foreign students and professors?
AS: This question doesn't always get as much attention because there aren't as many Americans studying in China, but I think this is an important policy question for China. I think it would make sense for China to offer stronger Chinese language training to its international students. Chinese is a very difficult language to learn. You need to learn it intensively if you're to speak the language well. The government should try to give incentives to get more students into intensive Chinese language training and eventually Chinese language degree programs, meaning programs that are administered in Chinese rather than English.
Another related challenge is integrating foreign students into the daily life of Chinese universities. I was very fortunate because I got a degree in China that was fully administered and taught in Chinese, making me a part of a Chinese academic family. All of my written instructions were in Chinese, and the experience had a transformative effect on my Chinese language skills and the way I viewed China. Thus, flexible accommodations to international students would be beneficial to China. Institutions should encourage both foreign and Chinese students to avoid bubbles where students end up with people from their own country rather than people from other countries. China has made it easier in recent years to enter and study in the country for people from different countries. The larger issue these days is not on the China side. It's more about the supply side and making it possible to attract more Americans to study in China and learn about what China's actually like.
Edison Chen is an intern for China Focus at The Carter Center and studies Public Policy at Duke University.
The views expressed in this article represent those of the author(s) and not those of The Carter Center.
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