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Dividing ASEAN and Conquering the South China SeaChina's Financial Power Projection$
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Daniel C. O'Neill

Print publication date: 2018

Print ISBN-13: 9789888455966

Published to Hong Kong Scholarship Online: May 2019

DOI: 10.5790/hongkong/9789888455966.001.0001

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Buying Influence

Buying Influence

The Strings Attached to Chinese “Aid”

(p.68) 4 Buying Influence
Dividing ASEAN and Conquering the South China Sea

Daniel C. O'Neill

Hong Kong University Press

This chapter analyses how China converts its financial power into influence abroad. It argues that the provision of aid, loans, and foreign direct investment is a key tool China uses to project its power. It further asserts that China’s financial resources have a greater impact in less developed states, which by definition are lacking in capital, and in authoritarian regimes, due to the much smaller number of those whose support must be garnered in order to influence policies. It shows how Chinese finance secures influence over foreign state governments by enhancing the resources available for the foreign leader to disburse to the ruling coalition that keeps the leader in power. A stylized “aid game” illustrates the bargaining that occurs between state leaders over such capital imports. It further examines some of the accepted wisdom concerning Chinese “aid”, including the strings attached to what is often termed “no strings attached” aid, as well as whether China’s financial assistance is accurately termed “aid.” It also shows the myriad of channels through which capital inflows from China can be diverted from the projects they are funding in order to help the recipient state leader maintain power, thereby enhancing China’s influence over that leader.

Keywords:   China’s EXIM Bank, corruption, debt forgiveness, financial assistance, foreign Aid, Overseas Development Assistance (ODA), regime type

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