What the U.S. Can Learn from the Chinese Development Playbook

In what has come to be referred to as the Great Power Competition (GPC), malign, revisionist powers, like the People’s Republic of China (PRC) and Russia, challenge nations and institutions across the globe. As FBI Director Christopher Wray said in 2020, “China is engaged in a whole-of-state effort to become the world’s only superpower by any means necessary.” Extensive, well-documented, publicly available, year-over-year evidence exists, ranging from intellectual property theft to data-collection efforts to transnational repression, which together paint a clear picture that the PRC is a direct threat not only to the United States but to all liberal nations.

The GPC demands revisiting the way the United States engages with the world, including the way we deploy foreign aid. As of 2019, the United States was the largest donor of foreign aid in the world. Even though foreign aid accounts for approximately 1 percent of the U.S. federal budget as of 2019, it still represents a key component of the diplomatic and economic aspects of U.S. power. The United States should learn from the PRC’s effectively matrixed investments, leveraging of PRC firms, and security stipulation. By learning from these three key elements that the PRC does effectively, the U.S. can make the 1 percent go much further.

Aid Should Follow National Security Aims

In 2013, the PRC launched a global program called the Belt and Road Initiative (BRI). This initiative, sometimes referred to as a “modern-day Silk Road,” weaves together policy, trade, people, and financial institutions with an emphasis on infrastructure development. But, although the BRI was marketed as an attempt to create secure trade routes and economic opportunities worldwide, it often involves China investing in foreign countries in ways that benefit China more than the host countries. The PRC’s link of economic and geopolitical goals in this effort is a reminder of the profit that can be captured through matrixed investment. 

To win the GPC, the U.S. needs to ensure that national security and economic and humanitarian outcomes are designed and executed in concert. The existing U.S. development apparatus must evolve to achieve this harmony. The United States can learn from what the PRC has done well while ensuring these execution efforts are done in alignment with liberal values. 

U.S. Firms Should be Contracted for All Development Work. 

The international community has criticized the PRC for using far fewer local firms for contracting than other development partners. However, using PRC firms for most of these projects means that their government spending on these has a direct positive effect on PRC companies. PRC-funded project contractors are approximately 89 percent PRC companies; for projects funded by the multilateral development banks, 29 percent are PRC-owned.

The United States can learn from both the economic benefits to its economy of using U.S. firms, as well as the need to involve local partners, by requiring all development dollars to be contracted with U.S. companies in partnership with a local firm for all goods and services, with exceptions on a case-by-case basis. This model will enable U.S. companies to mentor private ventures in host countries while ensuring that the U.S. government appropriately prioritizes U.S. commercial interests. 

There are already similar preference requirements in place for U.S. government flights and domestic contracting. These could serve as models for a similar framework to align U.S. government dollars being spent abroad with U.S. commercial interests while simultaneously doubling the positive effect by encouraging partnerships with private industry in the host country.

The BRI’s approach to debt has also been criticized across the international community for, at a minimum, not adhering to international standards, including restructuring for low and middle-income countries and, at worst, deliberately structuring likely-to-fail deals. The latter is referred to as “debt-trap diplomacy” because this debt is then used as leverage to force concessions that the host country would not otherwise have given. Countries unable to pay these debts are encouraged to give land or natural resource rights in exchange for forgiveness, or both, as in Tajikistan. These deals may also result in countries giving away majority equity control of state-owned enterprises to the PRC in exchange for debt forgiveness, such as Laos giving the PRC majority ownership of its power grid. At a minimum, accepting these funds commits countries to back PRC stances publicly, such as ownership in the South China Sea or regarding Taiwan. Requesting countries to create or alter policies to align with the donor’s interests is something the United States also does and should continue to do. Washington can learn from and adopt lessons from the BRI, such as increased engagement of U.S. firms, while avoiding the malign elements of the PRC’s activity, such as its debt traps.

Security Must be a Key Component of All U.S. Funded Development Efforts. 

Security stipulations for both the investment itself and the personnel involved should be included in the planning of all future U.S. development projects. These requirements would build on the widely accepted best practices in the economic development of community contributions. In this model, the country or community receiving the aid is required to provide a portion of the funding either in real dollars or in-kind contributions.

The model is leveraged not only to maximize community buy-in for the project but also to ensure the community prioritizes foreign assistance versus simply these projects reflecting foreign nation priorities. This practice also ensures that projects draw the widest possible range of development experience and perspectives. Given that violence against aid workers has increased, it also makes sense to ask host countries to guarantee the security of aid projects and workers. 

This security planning should also include increased attention to the hardware and software used in projects. It is well documented that the PRC exports facial recognition technology and privacy-invasive cyberinfrastructure as a part of the BRI. It is also well documented that the PRC prioritizes investments in ownership and operation, largely through the BRI, in maritime ports. U.S. economic development should seek to develop and adopt standards of infrastructure, both physical and cyber, in line with the host countries’ capabilities, working to educate partners and allies on the importance of these being agreed upon broadly as a pre-requisite for investment.

Developing Development 

The PRC and all illiberal powers deserve critique for not prioritizing humanitarian aims and for deliberately suppressing human rights on the road to a consolidation of power. However, the PRC’s development programs are not entirely coercive, nor are the United States’ entirely collaborative. Both countries leverage a system of incentives and disincentives in the way development dollars are leveraged in support of bilateral or multilateral aims. The United States can do this better by adopting matrixed investments, leveraging U.S. firms, and including security stipulations. Adopting these best practices will serve not only U.S. taxpayers’ interests at home but also the most disadvantaged people across the globe.

Leah Kieff is a senior associate (non-resident) with the Project on Prosperity and Development at CSIS. All views, positions, and conclusions expressed in this publication should be understood to be solely those of the author and not reflective of any group, organization, or institution that may be affiliated.

Image: Stanley Dullea / Shutterstock.com.