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Environment

Opinion: Are we asking the right questions when the talk turns to China?

In the last two years Chinese banks have allocated more loans to developing countries than the World Bank. Analyst Doris Fischer says the West must finally cope with China's growing influence in the developing world.

Opinion

The news, reported by the Financial Times, was based on World Bank statistics and calculations derived from media reports about loans granted by the China Development Bank and the Chinese Export-Import Bank. The two banks do not publish any official statistics. The report was greeted with some excitement in the western media, but was published largely without comment in the Chinese media.

In the daily flood of media stories, the news has played no more than a minor role. But one thing it does reveal is that the western world still does not seem to have grown accustomed to the idea of China becoming important. Our reaction to reports emphasizing China's growing influence is still one of latent fear, often mixed with prejudice and displaying little self-confidence.

The news that two Chinese banks have allocated more loans to developing countries than the World Bank prompts the subliminal questions: "Are they allowed to do that? Is the World Bank's importance waning? What should we do to stop this?"

Doris Fischer

Fischer says the West has to stop worrying and learn to ask the right questions instead

What is not reported, or at least not asked, is how many loans other countries allocate to developing countries or if the figures calculated for the Chinese banks are at all comparable with those published by the World Bank on its lending.

For most Westerners, China lacks transparency

The fact that China is growing in importance and playing a global role should not be a problem for us. We want the developing countries to develop and, at some stage, to stop being developing countries. In this respect, China is on the right track. But one challenge is undoubtedly that China is so large, too large to be ignored, too large to slip into the group of developed countries unnoticed.

The second, and perhaps most serious, challenge is that, for most people in the West, China is not transparent, that China today is so difficult to understand. Here we have a country growing in stature and importance, playing an international role, but little is known about the motives driving its politics, people and politicians.

Achieving transparency and the understanding based on it is certainly a complex exercise. It requires both access to information that can bring about this transparency and the willingness and ability to process the information accessed. In the past, doubts about transparency have often been associated with the way in which Chinese policy is communicated.

In the first few decades after China began to open up, it was common practice for political documents to be classified as "internal," with only selected circles permitted access to them. At the same time, however, compliance with the rules laid down in these internal documents was definitely expected. The situation has changed significantly.

Access to information remains difficult in China

A Chinese construction worker

While China used to receive World Bank loans, it is now itself financing development projects abroad

The quantity of information to which access can be gained today through websites and other media is enormous. Most rules are now laid down in laws and regulations, which are published. Nonetheless, access to information is still an issue. This is evident, for example, from the fact that the impression of China gained from a reading of the country's two leading English-language newspapers (the China Daily und the Global Times) differs markedly from that conveyed by Chinese-language newspapers.

Chinese research colleagues continue to emphasise the importance of good contacts with certain institutions for obtaining "correct" data (rather than what is generally accessible). In these circumstances, the important question for us is: Why, unlike the World Bank, do the two state banks not publish any statistics on the level of their loan commitments or on the recipients of the loans?

For transparency and understanding, however, what is also needed is the willingness and ability to make correct use of available information. The sum of the loans allocated to developing countries by the two banks, according to press reports, is certainly not the same as the volume of credit actually granted.

Not everything is reported by the press, nor is every loan announced to the media necessarily disbursed. Nor can the question of whether this volume of credit is impressively large, normal or even small be answered simply by making a comparison with World Bank data. Such a comparison may reveal that China's credit volume has risen more sharply over the years than the World Bank's. But perhaps the same can be said of other countries. Perhaps China's credit volume has grown only in proportion to its economic growth.

Learning to cope with China's growing influence

It would be helpful if a comparison could be made with data from the US, the EU or other countries. But there is a problem here: Data issued by these countries or regions on their financial development cooperation are not comparable with Chinese data. The data collected by the Financial Times newspaper is, at best, gross figures while the development cooperation statistics of individual countries are usually expressed as net figures (those for 2010 are not yet available in their final form).

Moreover, Chinese loans do not entirely satisfy the criterion set by the Organisation for Economic Co-operation and Development (OECD) to qualify as Official Development Assistance (ODA). The Chinese government sees its cooperation with other developing countries primarily as economic cooperation, and the loans of the Export-Import Bank of China are undoubtedly used largely to promote Chinese exports.

A man reads the Chinese Global Times newspaper which features a front page article about Barack Obama

Chinese-language media often have a different take on international issues

After all these considerations the headline about China allocating more loans to developing countries than the World Bank is suddenly no longer headline news: the comparison is hardly relevant, it is statistically weak, and even if the statement is true, the question is "So what?" Many other examples, some perhaps more important, could be found to show how rashly we tend to pass judgment on the basis of a report on China without having asked the right questions.

We must learn to cope with China's growing significance. Not for fear of the great unknown, but with the serious aim of asking the really important questions.

Dr. Doris Fischer is a researcher with the department "Competitiveness and Social Development" at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

The German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) is one of the leading think tanks for development policy world-wide. DIE draws together the knowledge of development research available worldwide, dedicating its work to key issues facing the future of development policy.

The unique research profile of the DIE is the result of the cooperation between research, consulting and professional training. DIE is building bridges between theory and practice and works within international research networks.

Author: Doris Fischer (ara)
Editor: Andreas Illmer

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