2016 Book ChinaSForeignAidAndInvestment1

China’s Foreign Aid and Investment
Diplomacy, Volume I
China’s Foreign Aid and
Investment Diplomacy,
Volume I
Nature, Scope, and Origins
John F. Copper
CHINA’S FOREIGN AID AND INVESTMENT DIPLOMACY, VOLUME I
Copyright © John F. Copper 2016
Softcover reprint of the hardcover 1st edition 2016 978-1-137-55181-8
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Library of Congress Cataloging-in-Publication Data
Names: Copper, John Franklin.
Title: China’s foreign aid and investment diplomacy / John F. Copper.
Description: New York City : Palgrave Macmillan, 2015– | Includes
bibliographical references and index.
Identifiers: LCCN 2015020279
ISBN 9781137551825 (v. 2 : hardback) | ISBN 9781137551832
(v. 3 : hardback)
Subjects: LCSH: Economic assistance, Chinese—Developing countries. |
Investments, Chinese—Developing countries. | BISAC: POLITICAL
SCIENCE / History & Theory. | POLITICAL SCIENCE / International
Relations / General. | POLITICAL SCIENCE / International Relations /
Diplomacy. | POLITICAL SCIENCE / Public Policy / Economic Policy. |
POLITICAL SCIENCE / Government / General.
Classification: LCC HC60 .C66525 2015 | DDC 33.91/5101724—dc23 LC
record available at http://lccn.loc.gov/2015020279
A catalogue record for the book is available from the British Library.
To my beloved son Royce Wellington Copper,
to whom I entrust the future
Contents
Preface ix
Preface to Volume I xi
Chapter 1 Introduction: The Nature and Scope of China’s

Foreign Aid and Investment Diplomacy 1
Chapter 2 China’s Worldview and Its Foreign Aid and Investment
Diplomacy 43
Chapter 3 China’s Economy and Its Foreign Aid and Investment
Diplomacy 83
Chapter 4 China’s Foreign Policy Goals and Its Foreign Aid and
Investment Diplomacy 123
Notes 169
Selected Bibliography for Volume I 251
Index 265
Preface
T
he People’s Republic of China began giving foreign aid as soon as
its government was established in 1949. China helped finance two
wars. They were the wars that had the greatest impact of any in the
post–World War II period: the Korean War and the Vietnam War. China
also financed wars of national liberation in a host of Third World countries.
Meanwhile foreign aid helped Beijing negotiate establishing diplomatic ties
with a number of developing countries and win support for important tenets
of its foreign policy.
To some, China became a model for aid giving: a poor country that gener-
ously helped other poor countries and a country that gave assistance expedi-
tiously, efficiently, and without conditions. Some observers said that China
made it necessary to reexamine the meaning of the term “foreign aid.”
In the 1970s and 1980s, notwithstanding impressive successes in its for-
eign aid diplomacy, Chinese leaders noted that China’s aid program had
experienced serious setbacks; more important, they felt China needed capital
for its own economic development. China thus became a major recipient of
financial aid from international lending institutions while it attracted large
amounts of investment money from Western countries and from Overseas
Chinese. Giving foreign assistance in this context did not make much sense
and China drastically reduced its aid giving.
But China’s economy soon boomed, and in the 1990s after it began to
accumulate large stores of foreign exchange, Chinese leaders resurrected
China’s foreign aid giving and increased it several fold while labeling it on
many occasions foreign investments. Investments served many of the same
purposes as aid and sounded better. In any event, China “transferred” large
amounts of its newly acquired foreign exchange to poor countries. This pro-
vided succor for their development. It also expanded China’s external influ-
ence. Not by accident China’s external financial help became a major factor
in its global rise.
x ● Preface
Providing aid and investment funds to developing or Third World coun-

tries, China also hoped to realize strategic military objectives, acquire energy
and natural resources to fuel its continued rapid economic boom, and, like
capitalist nations before it, find or expand markets for its goods to keep its
workers employed. It succeeded in all of these objectives. Meanwhile Beijing
improved its global image and its global influence.
China’s aid and investments also created a backlash. From the begin-
ning China’s policies shaping its aid and investments to poor nations dif-
fered from the norms. In the name of not interfering in the domestic affairs
of other countries while extending financial help to developing countries,
China virtually disregarded local governance; it did not pursue democratic
aims, and Beijing did not generally take human rights conditions into
account. Moreover, China paid less attention to environmental standards
than Western countries. Some countries, especially the United States and in
Europe, did not like these policies. Developing countries’ leaders, however,
approved of China’s mode of providing financial help while observers noted
that China greatly improved economic conditions in recipient countries. In
any case, China’s aid and investments presented a serious challenge to the
West and to some international financial organizations.
In the last decade, while fast increasing the level of its aid and invest-
ments, China has suddenly become a big player in helping Third World
countries, often surpassing Western countries’ aid and investments and
frequently eclipsing the financial help extended by international aid-giving
organizations. As a result China presented an existential aid and investment
threat.
This study will not focus as much as most analysts on the economic
aspects of China’s foreign aid. Nor will it examine in any depth the deci-
sion process in China that involves extending foreign aid or making foreign
investment decisions. Rather the author’s primary goal is to assess aid and
investments as tools of China’s foreign policy, its successes and failures, and
its political impact as China seeks world power status.
The author wishes to thank the Smith-Richardson Foundation for finan-
cial support to work on this book.
John F. Copper
Preface to Volume I
I
n Volume I of China’s Foreign Aid and Investment Diplomacy the author
focuses on the basis for China’s foreign financial “transfers.” This
includes comparing China’s aid and investments to other countries that
provide both, its background and rationale, China’s capabilities to extend
financial help, and why it does so in terms of its historical diplomacy and its
current foreign policy objectives.
In the introduction chapter, the author defines foreign aid and foreign
investments and puts China’s activities in those realms in perspective while
noting the differences and special qualities of China’s financial assistance.
Changes in China’s policies are also analyzed as are difficulties noted in
calculating China’s foreign assistance.
In chapter 2 the writer looks at China’s “historical aid.” The author argues
that China has a more salient history in giving foreign assistance than any other
country in the world. In fact, its traditional diplomacy was based on “aid giving”
tribute missions. China’s tribute even determined the very essence of the East
Asian “international” system. China’s foreign assistance is viewed in that con-
text as well as China’s worldviews, particularly Mao’s, but also his successors’.
Chapter 3 examines China’s economy focusing on both its growth and,
early on, its lack of it. The author argues that during the Mao period China
gave meaningful foreign aid in spite of its poor economic performance but
that China’s economic boom after 1978, especially following more than
three of decades of miracle economic growth, became the direct cause for
China’s foreign aid and investments to grow exponentially.
In chapter 4 the author examines the decision-making process involved in
giving aid and making foreign investments together with China’s major foreign
policy objectives that drive both. These goals, the writer notes, changed mark-
edly over time; yet conducting foreign policy was the driver behind its aid and
investments.
John F. Copper
CHAPTER 1
Introduction: The Nature and

Scope of China’s Foreign Aid
and Investment Diplomacy
Defining Aid and Foreign Investments

Foreign aid and foreign investments are both complex and controversial sub-
jects. Even defining these terms has evoked intense debates and, at times,
heated disagreements. There are good reasons for this: The terms have been
used to mean different, sometimes contradictory, things. They reflect divi-
sive views of economic and political policies. They connote moral behavior
and are often used for propaganda purposes. They are instruments of power
and influence. They mirror a nation’s status in the world.1
Hence we need to begin by discussing what the terms usually mean while
pointing out the problems encountered in reaching more workable defini-
tions of both while offering some alternative views. We will proceed from
there to assess China’s views and practices in purveying foreign aid and
making foreign investments.
We begin with aid. The Development Assistance Committee (DAC) of
the Organization for Economic Cooperation and Development (OECD),
which comprises the rich Western countries, all of whom give foreign assis-
tance, defines foreign aid this way: “Grants or loans undertaken by the offi-
cial sector, with the promotion of economic development and welfare as
main objectives . . . at concessional financial terms.”2 According to the DAC,
foreign aid, or what it calls overseas development assistance (ODA), must be
concessional. Exports credits do not count. Nor do grants, subsidies, or fund
transfers made by private organizations. Finally debt cancellation, giving
2 ● China’s Foreign Aid and Investment Diplomacy, Volume I
market access, remittances, and tariff reductions are not generally covered
in the definition.3 The DAC definition is narrow and restrictive. It assumes
economic development is foreign aid’s main purpose; yet some of the most
effective means of facilitating development are excluded.
The DAC definition also fails to consider an important fact: whereas
foreign aid is usually thought of as an economic activity, aid giving clearly
has political purposes and indeed may be regarded in large measure as a
political act. Certainly to understand it, political motives and political gains
and losses to a donor nation and its leaders have to be considered, not to
mention the government decision-making processes that initiate it, advertise
it, and defend it.4
There are alternative definitions. One writer defines foreign aid thus:
“Economic, social, or military assistance rendered to a country by another
government or international institution . . . offered bilaterally, by regional
organizations, and by global agencies under the United Nations system.”
It, he says, “includes categories such as technical assistance, capital grants,
development loans, surplus food disposal, public guarantees for private
investment, and trade credits.”5 This definition is not as well accepted as the
DAC’s definition. In any case it is in some ways narrow and incomplete.
Rather than devote further time and effort to defining the term “foreign
aid,” it will be more productive in assessing China’s aid to look at the main
points of the current debate about what aid is, or is supposed to be, and
apply these discussion to China’s aid giving. Following this, the author will
expound on the nature of China’s foreign aid and offer some comparisons
and contrasts between its aid giving and the aid given by other nations.
Finally, the writer will note changes in China’s foreign aid giving and cite
some published data and estimates on the amounts of foreign aid China has
given and to whom it has gone. China’s foreign investments come later but
are examined along with foreign aid and are considered similar or identical
in terms of analyzing China’s foreign policy motives—which is the leitmotif
of this study.
The writer prefers the term “foreign assistance,” which is broader than
foreign aid, to describe nations’ activities in this realm. The author also uses
the terms “financial assistance” and “financial help”—even broader terms.
However, most writers use the term foreign aid because it is the more con-
ventional term. The author uses all of these terms, more often foreign aid
because it has a legal definition. Also China uses the term “foreign aid” but
defines it broadly.
In any event, the first task in assessing foreign aid (or foreign assistance)
or any like term, and one that is often ignored, is to differentiate between
aid announced and aid actually delivered. It is customary that the donor of
Nature and Scope of China’s Foreign Aid ● 3
aid and/or the recipient reports the act when the former decides to provide
it and/or when the latter accepts it. But there are frequently delays or time
lapses between the announcement by the donor and/or the recipient and the
actual delivery. In fact, delays are commonplace, as donors typically have
to budget for and prepare to deliver the aid. However, put more cynically,
foreign aid givers want to see what they have “bought” with their assistance
before dispatching it. Since foreign aid is often given more for political rea-
sons than for other motives this process can be tedious. In fact, it is not
unusual for the delivery of aid to be postponed for some time or even can-
celled if the political milieu changes in either the donor or recipient country
or if the expected positive reaction to an aid promise is not forthcoming.6
As stated, there is usually a record of an aid donation when it is announced.
In fact, in most studies this constitutes the so-called act of giving foreign aid.
Unfortunately, neither the media nor academics have shown much interest
in following up on or checking to be sure delivery is actually consummated.
This creates a serious problem in determining an aggregate figure on aid
giving, since that is usually done by simply adding up the amounts cited in
announcements or promises, even though many are not fulfilled.7
However, the most frequent topic of debate about foreign aid or foreign
assistance and one which helps to some degree to define the subject, though
certainly not as well as many would hope, is to differentiate between grants
(or gifts) and loans. At face value the former is free and would seem to be
both generous and lacking in political motive, while the latter is neither.
But that is hardly the case. Aid giving is not a simple process. Grants fre-
quently have strings attached and are often linked to acquiring political or
even economic advantages.8 Loans do too, indeed generally more often, but
not necessarily.
For a variety of reasons most aid-giving nations favor loans. Giving for-
eign aid as loans means the donor can extend more loans (since repayment
funds will be coming in that can be used to make new loans). It is also
easier for donor countries to justify giving loans. This is important since
heretofore most nations in the aid business were democracies and aid giv-
ing was not generally a popular endeavor.9 Also loans can be tracked or
accounted for better, and it is less likely that aid in the form of loans will be
diverted into foreign bank accounts of corrupt officials. Finally, recipients
usually give development goals greater consideration when receiving loans
as opposed to grants.10
There is, however, a major caveat when talking about the difference
between grants and loans, especially if one assumes a more generous nature
of grants and more effective control over loans. The reasons: considerable
foreign assistance given in the form of loans is cancelled or “forgiven” later,
in the case of many Western countries often when nobody is watching or

when it becomes obvious that the recipient country will not be able to repay,
or it seems, for humanitarian or other reasons, that the loan needs to be dis-
charged.11 In fact, recipient nations know this and often anticipate it.
The difference between grants and loans also becomes fuzzy, and even
moot, when it is noted that many loans have a zero or very low interest rate
and are repayable over a lengthy period of time. With inflation these loans
have a large “grant factor,” or to a considerable extent are gifts. This is even
truer if repayment is set in the form of a local currency since the rate of infla-
tion in developing countries tends to be high. However, it may be the other
way around, if repayment is to be made in goods or services. The former,
especially raw materials, may increase in value and the repayment of a loan,
thus is possibly more (even excluding interest) than the amount of a loan.
There is still another twist: if repayment is to be made in services this will
likely help the recipient country reduce unemployment, which development
economists consider desirable but is not usually accorded any monetary
value. Hence the differences between grants and loans may or may not be
very significant while the differences among types of loans and their repay-
ment terms are.12
Notwithstanding the fact that there is less distinction between grants
and loans than there appears, much has still been made of the presumably
more charitable nature of grants. It is thus not surprising, given the public
relations value attached to aid giving, that there are numerous advocates of
the so-called liberal doctrine of foreign assistance or “free aid.” It is, in fact,
commonly asserted that loans make the recipient dependent and thus vul-
nerable to undue pressure by the aid-giving nation or institution, and even
the target of intervention (to collect a debt). It is indeed true that most poor
countries have not been able to repay the foreign loans they have received.13
Thus many argue aid should be extended as gifts.14
The Marxist view of Western aid comports with this position. Marxists
and/or Leninists have argued that Western aid is a tool of imperialism and
neocolonialism and is intended to keep the recipient nation in arrears to
the Western aid-giving nation and, therefore, dependent or in bondage.
Based on the so-called Leninist dialectic of backwardness, Communist Bloc
nations got into the aid-giving business to break the bonds between devel-
oped Western capitalist nations and underdeveloped nations, seeing colonial
ties as vital to the former to maintain their economies and their dominant
position in the world.15
Bolstering the Marxist argument, indeed, Western countries often give
aid to promote their exports and even to dump goods that are in excess pro-
duction. Western countries are also guilty of helping Third World nations
in order to increase the availability of natural resources the donor wants to

import. Whether these activities constitute exploitation or are just normal
aid policies is difficult to say. In defense of this kind of aid, it usually pro-
motes local economic development and most recipients want it.16
Anyway, at the extremes some have accused Western countries of using
aid to preserve the capitalist system, which they charge might not survive
otherwise due to the fact that capitalist countries overproduce and this
causes unemployment and conditions for social unrest and even the possibil-
ity of revolution that may overthrow these governments.17 Countering this
argument, others say that Western aid programs engender economic “take-
off” or sustained growth in underdeveloped countries; in other words, aid
is given “to end aid” and the recipient then becomes a competitor thereby
accentuating the problem of overproduction and unemployment in the
aid-giving country.18
In counterpoint, Western countries have argued aid giving is based on
the view that foreign aid engenders economic growth and begets a middle
class, thus leading to the development of democratic institutions. Similarly,
it is commonly held that foreign aid helps build a firewall against politi-
cal extremism—including communism. This, in fact, constituted to a large
extent the “logic” or rationale of Western aid giving during the Cold War.19
Western aid is also predicated on certain theories of economic develop-
ment that differ from those of the Communist world. Western aid officials
generally favor helping the agricultural sector of the economy first since
most underdeveloped countries need to ensure adequate food supplies for
their populations before undertaking industrial development.20 In contrast,
Communist nations favor facilitating the growth of industry as it frees devel-
oping countries from dependency on Western industrial nations.
To return to the issue of strings or conditions attached to aid, regardless
of one’s philosophy about aid giving some conditions or checks have been
seen as necessary by most donors to ensure that the aid goes to the people
that need and deserve it. For this reason much foreign aid has been given,
and is now given, in the form of projects. This way the donor can keep
track of its money.21 Another tactic is to give aid in goods that cannot eas-
ily be absconded with or aid accompanied by advisors who oversee its use.
Sometimes engineers or even workers are provided with the aid, especially
with big project aid; this is another way to make sure that the aid is used
for the benefit of the recipient country and/or its people and does not get
sidetracked.22
Still another tack used to avoid both the accusations of imperialism or
charges of facilitating corruption when aid falls into the pockets of corrupt
officials is to transfer aid funds to an international organization to distribute.
This is also a way of avoiding charges that aid is politically motivated or

that the donor expects something in return and thus aid constitutes brib-
ery. Giving aid funds to an international body also strengthens the United
Nations or the UN system and thus helps the cause of globalism, which is
supposed to be progressive.23 Finally it can compensate for low commodity
prices in global trade, which is very often a disadvantage to poor countries, if
an international organization makes an effort to alleviate this problem.24
The problem with multilateral aid is that it is often slow to reach recipi-
ents and a large portion of funds typically goes for administrative overheads,
and, as a result, it is not so efficient in promoting economic development,
the presumed purpose of aid. Furthermore, international organizations are
not free of agendas.25 In any case, since most nations give aid for the purpose
of gaining influence with the recipient (the essence of foreign policy mak-
ing) they oppose in principle turning significant amounts of their aid funds
over to a regional or global organization for disbursal.26 In any case, it needs
to be noted that this kind of aid does not fall within the standard definition
of foreign aid.
Another type of financial assistance that does not fit the standard defi-
nition of aid is military aid. Pacifists oppose military aid (and also defin-
ing military aid as aid) saying it leads to war. Some economists agree it
should not be called aid and charge that military assistance is unproduc-
tive, meaning that it does not facilitate economic growth; hence they prefer
“economic aid.” In counterargument, those that support military aid say
it helps enhance the security of the aid-recipient nation and thus provides
the proper milieu for economic growth and political modernization in the
direction of democracy.27 Others argue military aid is generally indistin-
guishable from economic aid since the recipient will spend money on the
military anyway and/or divert economic aid to buy arms. Some experts also
note that the military in many underdeveloped countries is more honest
than the civilian government and the military is a better overseer of develop-
ment. Complicating the matter, military aid is often disguised economic aid
or vice versa.28 Thus the distinction between the two types of aid is often
meaningless or at least blurred.29 Certainly the advantages just cited regard-
ing one or another kind of aid are usually exaggerated.
In any event, giving or selling (usually on credit) weapons to another
country typically bolsters the donor’s influence on the military in the recipi-
ent country (for good or evil) and enhances the donor’s relationship with
that country.30 Military aid also commonly facilitates the sales of weapons
by the donor country and thus helps the weapons manufacturers at home
while building a reputation for the donor country’s weapons and weapons
systems. Finally, it is worthy of note that decisionmakers in most donor
countries understand very well that military aid facilitates power projection
and other foreign policy objectives and thus it passes the test of aid helping
to realize the donor nation’s national interests.31
Not of small consequence, arms aid can and is given to opposition groups or
movements to overthrow the government of a country the donor does not like
or does not want in power. Arms aid to insurgency or rebel groups is frequently
this. Communist Bloc nations have given aid to such groups to destabilize a
pro-Western nation or help a pro-Communist group seize power. However,
Communist countries may also compete with each other in this realm.32
Western countries have also given arms aid with this purpose in mind.
Still another kind of foreign aid that does not fit the DAC definition
but is commonly written about as promoting economic development is
economic help given by nongovernmental groups; this is called private aid.
Western countries, especially the United States, provide large quantities of
this kind of assistance. Huge amounts of private money have been purveyed
for war relief. Churches, foundations, and individuals have given this kind
of aid. In fact, they specialize in humanitarian aid, generally with positive
results. Often called “charity aid,” this aid has had a major impact not only
on the human conditions in recipient nations but also on their economic
development.33 As will be shown later, this kind of financial assistance is
much larger in value than most analysts of foreign aid seem to realize.
Considerable foreign aid has been rendered in the form of technical assis-
tance (which also does fit the definition of foreign aid).34 The assumption of
donor nations is that one of the greatest needs of recipient nations is trained
or skilled manpower. Giving technical aid usually means providing advisors
and technicians who can boost economic development. But this also allows
the foreign aid-giving nations a bigger presence in country and becomes
an avenue for advertising the donors’ technical advancement and a way for
aid personnel to engage in other (sometimes nefarious) activities.35 Both
Western and Communist countries send advisors to recipient countries to
also help the countries choose their development model to suit their politi-
cal/economic system.36 In the 1950s and 60s, most technical aid was given
as grants, but that has changed over the years.
Another form of aid or economic help, but one that is usually not called
foreign aid, is remittances from workers in a developed country that are sent
home to relatives and/or friends in a less developed country. In fact, remit-
tances constitute a very effective and a generally stable form of aid, whereby
a rich country facilitates a poor nation’s economic growth.37 Moreover, the
amounts have been sizeable. Since the year 2000, remittances have exceeded
official aid from most OECD countries and in the case of the United States
have amounted to more than double its bilateral aid.38
Having discussed the various kinds of foreign aid, it should be noted that
there is considerable debate about the overall generosity of nations giving
aid. A construct or idea, based on the official definition of aid, often cited
when foreign aid is discussed is that rich countries are duty bound to give
aid. Hence many politicians as well as scholars cite a percentage figure (rang-
ing from 0.7 to 1 percent) of the nation’s gross national product to be allo-
cated toward foreign aid as an obligation.39 A number of Western European
nations boast about how close they are to this target and mention others that
are farther away—such as the United States. This is so even though America
is the largest aid donor in absolute terms, US private aid and remittances are,
both larger than official aid, far eclipse European countries providing this
kind of aid.40 Many writers thus feel that assessing the generosity of foreign
aid-giving countries this way is deceptive or worse.
In this connection it needs to be mentioned that there is still another
effective way to promote economic growth in less developed countries, which
almost all observers think aid is designed to do and does do, but which does
not involve giving aid. This is offering market access, which is very effective
in fostering economic development itself but also because it offsets unequal
access. In fact, it has been argued that overall unequal market access costs
developing countries more than the aid they receive.41 The United Nations
(UN), the World Trade Organization (WTO), (and its predecessor the
General Agreement on Tariffs and Trade [GATT]), and others have tried to
rectify this situation, but have been only marginally successful.42
The United States has given very significant help to developing nations
by allowing them lower tariffs and thus access to a huge market of rich
consumers. This helps recipients’ exporters and through spin-off stimulates
that nation’s economic development. In this realm the United States is much
more generous than the European countries and Japan, which are consider-
ably more protectionist (in terms of tariffs and quotas) and thus do not give
poor countries as much opportunity to sell in their markets.43
Related to foreign aid, but usually seen as quite different and normally
assessed apart from foreign aid, are foreign investments or what is usually
called foreign direct investments (FDIs). FDI is defined by the OECD as
capital transferred by a “resident entity” (foreign direct investor or parent
enterprise) to an “enterprise resident” in another country. FDI implies a last-
ing relationship in which the investor exerts a significant degree of manage-
ment and other types of influence over the parent enterprise. There are three
types of FDI: equity capital transfers or buying shares in a foreign enterprise
or company, reinvested earnings (earnings not remitted to investor), and
intra-company loans or debt transactions between parent companies and
affiliated enterprises or companies.44
However, many investments are made by national governments, large

companies, or corporations with ties to a government or that are controlled
by the state. A considerable amount of investment money, known as sov-
ereign funds or sovereign wealth funds, is also transferred through gov-
ernment-run organizations that have access to the donor country’s foreign
exchange reserves. It was estimated that in 2007 sovereign funds controlled
around $3 trillion, a figure that reached over $5 trillion in 2012. Some say
the amount might reach $12 trillion in the not too distant future.45 These
funds have grown rapidly in recent years due to the accumulation of money
by a number of countries from the sale of oil and other resources and by
countries (such as China) that sustain large trade surpluses.46 These trans-
fers are often made in the form of loans and may be linked to the donor
acquiring access to natural resources in the recipient country or the recipient
buying goods from the donor country.
However, large amounts of investment money given by governments or
government-run funds are obviously provided for political and/or strategic
reasons or are frequently not intended to make a profit. Many investments
are also provided to developing countries under very favorable conditions
(e.g., low interest rates), and many times the conditions on these investments
are later changed in favor of the recipient or they are written off. If repay-
ment is cancelled, this turns them into foreign aid gifts. Yet usually no such
redefinition takes place. Thus the line between investments and foreign aid is
artificial. There is still another problem to consider: in many cases the donor
country extends investments instead of foreign aid to convince their own
public that they are not wasting money on aid. Finally, some recipients ask
the donor to use the term “investment” rather than “aid” for face-saving or
other reasons while accepting the same or similar conditions as apply to aid.
Clearly investments are now commonly made for the same purposes or
goals as giving foreign aid. They accrue for the donor influence in the recipi-
ent country and support the donor’s foreign policy goals. Thus it is very
often impossible to separate the two and in many cases for both the donor
and the recipient there is no reason to distinguish between them.
Finally, it needs to be noted that foreign investments have become more
important than foreign aid in recent years, or, it may be said, they consti-
tute the main form of financial help to developing countries. In the 1990s
foreign aid saw little to no increases. During that time foreign investments
increased markedly—quadrupling from 1990 to 1994.47 Subsequently for-
eign investments to developing countries surpassed foreign aid in value.48 In
2012, global foreign investments totalled $1.35 trillion. Developing coun-
tries received 52 percent of foreign investments by value. While the total
decreased by 18 percent that year due to a sluggish world economy (Europe
accounting for two-thirds of the decline), South America experienced an

increase of 12 percent and Africa 5 percent.49
China’s Foreign Aid and Investments

How do the definitions of foreign aid and foreign investments cited here
apply to China? In other words, how are China’s foreign aid and investments
different? This constitutes a good starting point for assessing the nature of
China’s foreign assistance. Analyzing more specific issues will follow.
First, a general overview of China’s extension of foreign aid and invest-
ments is in order. For an effective assessment of the two, the time frame
will be divided into two periods: the “early years” from 1950 to the late
1970s or 1979 and the “later years” from the early 1980s or, for conve-
nience, 1980, to the present time.50 The reasoning behind this periodization
is that during the first period, China’s economy was a centrally planned,
socialist one. Moreover, the country was poor and development was not
up to expectations (as will be seen in Volume 1, Chapter 3). Hence China
could not afford much aid and made almost no foreign investments. In
period two, China’s economy was decentralized and its workings based on
the principles of the free market and free trade (with some caveats), and it
performed exceedingly well. Its foreign aid and foreign investing increased
exponentially as a result.
China launched a foreign aid program officially in 1950 with the aid it
gave to North Korea. During the Korean War, China delivered weapons to
North Korea. These had been captured from the Japanese during World
War II. It also manufactured and supplied small arms and military equip-
ment. Heavy arms acquired from the Soviet Union (aid given to China,
which it repaid) too were given to North Korea. In addition, China supplied
small arms to North Vietnam and, later, heavy or larger weapons as well.
China sent its soldiers to both countries, but many more to North Korea.51
China’s early financial assistance went solely to fraternal Communist
countries, during wars in these two countries; its aid consisted mainly of
military and military-related goods. China’s stated purpose in purveying
this aid was to bolster Communist Bloc solidarity and do battle with the
forces of the West, especially the United States, but more broadly imperial-
ism and neocolonialism.
In the mid-1950s China began to offer aid to non-Communist countries.
China’s main motives in doing so were to break out of the isolation that
it had imposed on itself and that was forced upon it by the West and the
United Nations after the Korean War. China specifically sought diplomatic
recognition from more countries. Also Beijing hoped to undermine Taiwan’s
status and its diplomatic influence. Chiang Kai-shek’s Republic of China

was a competitive regime that endeavored to, and did, represent China in
the global community. Finally, China endeavored to negotiate border agree-
ments. Still, in the 1950s nearly 90 percent of China’s foreign aid went to
other Communist nations and of its grant aid more than 97 percent was sent
to bloc nations.52
In 1960, Sino-Soviet differences led to the Soviet Union terminating its
economic assistance to China without warning and in a way designed to
hurt China economically. China responded by pledging more aid to show
that Soviet aid had not been helpful or generous and was, in fact, exploit-
ative. From then on China’s aid became as much or more anti-Soviet in tone
and in its objectives than anti-Western. Beijing and Moscow aided many of
the same countries and engaged in numerous “aid battles.”53
In the late 1970s and 1980s, China’s aid giving changed dramatically.
China promised much less foreign aid. Beijing described its aid as “mutually
beneficial aid.” Economic cooperation became the watchword. The reason
was China now focused on its own development and needed capital at home
for that purpose. Also China became a large recipient of global aid and
investments. This made China a competitor with developing countries for
foreign aid and investments.
Beginning in the 1990s, China was no longer poor, at least not in terms
of its foreign exchange position.54 Thus China’s aid policies shifted again.
China’s aid and foreign investments became larger. Investments often replaced
aid, though the difference between the two was often murky. (China’s new
aid policies and practices and its greatly enlarged capabilities to purvey aid
and investments are discussed in the next section of this chapter.)
Marking the beginning of the new century, China’s aid became much
larger, especially after 2005 (when China began to manufacture many of the
products it imported) and again after 2008 (when Western aid decreased as
a result of the economic downturn in the United States, Europe, and Japan,
and China “filled the gap”).
What can be said about the nature of China’s financial help to develop-
ing countries? How did it differ from other countries? How did this finan-
cial aid relate to China’s foreign policy objectives?
During the early years or in “period one” of its giving foreign aid,
China often pledged aid that neither the Chinese government nor its media
announced and/or was not acknowledged or even mentioned by the recipi-
ent. Most of it was military aid. Evidence of it became available mainly
when the recipient country was observed to have received Chinese weapons
and/or when its military showed signs of noticeable improvement or in some
cases the course of a conflict changed.55
There were good reasons for China not announcing its aid. China gave
aid primarily to other Communist countries at war; providing information
on its help to these countries would have helped the enemy. Elsewhere, espe-
cially when China sought to support wars of national liberation, which it
did in many Third World countries, or even when China simply sought to
influence recipients’ foreign or domestic policies, the United States often
portrayed the situation as a conflict between democracy and communism
and aided other groups or competing nations.56 Another factor was the
Chinese government’s general concern with secrecy, which applied to its
foreign assistance.57
Even when China extended aid to non-Communist countries it did not
provide much information on its aid (especially when military or political
motives prevailed) and the recipient, ostensibly at China’s request, said less.
If the aid was on record, in the media for example, Chinese leaders some-
times explained that a formal agreement had not been made, or said there
were only “talks about aid.”58 Or China simply refused to provide detailed
data. However, when Beijing announced its aid, it usually cited whether
it was a grant or loan and if the latter the interest rate and the repayment
period. Also China disclosed the types and purposes of aid projects. But it
typically said little else.
China frequently pledged aid that it did not deliver.59 Even if an agree-
ment was signed and sealed China had ready excuses for not giving the
aid, such as that it lacked the resources at the time. Also a considerable
amount of China’s aid was delayed.60 Since China often purveyed aid
to countries that were unstable as well as insurgency groups that often
changed their ideological views with little warning and were headed by
leaders who rose and fell quickly, it is quite understandable that China
frequently did not keep its promises. One observer notes that China failed
with deliveries much more commonly than Western aid-giving coun-
tries.61 But few countries that China promised aid to and then did not
deliver complained. Also the Western media rarely reported this.62 This
was partly because China was a poor country and therefore not much was
expected of its aid giving.
However, from the onset, a major portion of China’s aid, when compared
to rich Western aid-giving countries, was given in the form of grants.63 It
was Mao’s contention (in true Marxist fashion) that China’s aid was not
“imperialist” as was that of the West.64 Mao and other Chinese leaders,
in fact, depicted China’s foreign aid as being very different from Western
foreign aid, asserting it was magnanimous and reflected China’s lack of ulte-
rior motives, while often mentioning China’s willingness to sacrifice capital,
which was in short supply, to help other countries.65
However, one reason why Chinese aid could be considered truly “gener-
ous” in terms of its proportions of grants (though China did not make men-
tion of this) was because the lion’s share of the aid went to North Korea and
North Vietnam—“fraternal” Communist Bloc countries that were at war
and could not reasonably be expected to repay the aid, if indeed they were
asked to do so. Likewise, Albania, another major recipient, was not able to
repay China’s aid, which again was largely in the form of arms.66 Yet another
reason to consider China’s aid as generous was its policy of promoting self-
reliance in the recipient; this distinguished its aid from that of Western coun-
tries, which, China said, fostered dependency.67 Mao often said that Chinese
aid helps developing countries shatter the bonds of Western colonialism and
neocolonialism, and he wanted to make that statement meaningful.68
China continued the practice of giving most of its aid in the form of
grants when it extended foreign aid for the first time to non-Communist
countries in 1956.69 Why? Mao wanted, for propaganda reasons, the world
to perceive China’s aid as being altruistic and with no strings attached.70
However, since China wanted to make sure it got what it wanted, it delayed
implementation by making many of its grants deliverable over an extended
period of time or even by changing the conditions on the aid or the scope of
the projects midstream.71
Whether China’s aid was truly generous or not is debatable. The
Western media and scholars generally praised China’s “selfless aid.” 72 The
US government cited the large concessionary part of Chinese aid even
when China switched to giving more aid in the form loans than grants.73
Some, however, disputed this, especially those who examined China’s for-
eign aid giving in the late 1960s and 1970s. They observed that Chinese
aid was not really generous except for the fact China was a poor country
and therefore its aid seemed benevolent.74 Doubts about the generous terms
of China’s aid have also been expressed since then. The International Bank
for Reconstruction and Development published a report on China’s aid
from 2002 to 2006 noting that China’s loans to African countries were for
12 years (with a 4-year grace period), the interest rate was 3.6 percent and
the grant element was 33.3 percent; these figures, it said, were “not neces-
sarily” favorable to the recipients, though the report also observed that
China’s aid “varied widely.” 75
In any event, China’s foreign assistance was viewed around the world as
magnanimous and special. This was mainly because China, though a poor
and developing country, purveyed a significant amount of foreign aid.76 In
fact, the term “horizontal aid” (meaning it was given to countries at a simi-
lar level of development) was coined to describe China’s aid.77 This meant
China’s aid was more effective and it was more appreciated.
In any case it is incontrovertible that China’s aid was big-hearted in the

sense that most of the nations to whom China extended foreign assistance
had higher living standards. In other words, China gave aid to countries
richer than itself. During phase one, nearly twice as many of its recipients
had higher per capita incomes than China.78 Arguably no other country
in the world then or now has rendered significant foreign aid to so many
countries better off than itself economically. China’s aid was also said to
be munificent in terms of its ratio to total government spending, averaging
5.88 percent during the period 1971 to 1975—said to be the largest in the
world and 70-fold or more than the United States.79
However, because China lacked foreign exchange, its aid was given in
small amounts (though its aid to North Korea, North Vietnam, and later
Albania, and its building the Tan-Zam Railroad were obvious exceptions).
Most of its nonmilitary aid was small-project aid. Little aid was given in
cash or foreign products. Its aid was low-tech; it involved basic levels of engi-
neering often using Chinese technicians. China provided low-cost workers.
It kept costs down. Also its aid was less encumbered by rules and did not
have many conditions attached to it. Many observers applauded China’s aid
for these and for various other reasons.80 Some considered China’s foreign
aid a model.
During the early 1960s, China, without clearly explaining its reasons,
shifted to giving more of its aid in the form of loans, though when it gave
loans they were usually no-interest or low-interest loans.81 According to
one writer, China’s foreign aid loans were three-quarters grant because
they were no-interest or low-interest loans.82 Also many loans were even-
tually written off.83 Thus the “grant factor” was higher than originally
estimated. An analyst of China’s foreign aid stated that China’s aid was
worth 25 percent more than Western aid because of this, plus the fact
China charged very low prices for its supplies, aid specialists, and its
workers.84
Yet there are some caveats. Since many Chinese loans were given in its
own currency and/or were repayable in goods, the interest rate was less
important and the grant factor was lower than it appeared owing to the
fact that the inflation rate of China’s currency was less a factor than with
Western aid.85 Moreover, China at times resold goods it received in repay-
ment for its loans, thus pushing the price of these items on the world market
down sometimes to the detriment of poor countries.86
Another reason (indeed an important one) for considering China’s aid
to be altruistic was that China paid less attention to the economic risks
involved and often provided loans for projects that were not considered
economically feasible (the Tan-Zam Railroad being the most noteworthy
example).87 In addition, the Chinese government pledged aid to countries

and regimes that were both politically and economically unstable and were
not good economic risks.88
China’s foreign assistance was also noteworthy for its variety. Included
in its aid giving were grants and loans as mentioned above; but China also
purveyed commodities, services, credits to offset trade deficits and/or to buy
consumer goods, arms, and military hardware. China provided aid to build
roads, public works, small factories and agricultural projects, and much
more.89 China’s aid was more flexible in responding to developing nations’
needs than most donors.
China sent its own laborers to work on aid projects more than other
aid-giving countries. The reasons: This cut costs and provided China with
a presence in countries where it lacked diplomatic or other representation,
or where there was an insurgency or civil conflict in progress that it might
influence.90 The number of Chinese workers sent abroad to work on aid proj-
ects though initially small averaged nearly 5,000 a year from 1976 to 1981
and grew to more than 150,000 by 1993.91 China also dispatched a large
number of advisors and technicians to aid developing countries. To score
points, especially in view of the fact that aid personnel working on Western
aid projects regularly charged large amounts for their employees who lived
comfortable lives in the field compared to local citizens, the Chinese gov-
ernment established a policy that China’s aid does not include high costs for
technicians and engineers and Chinese aid advisors and other aid personnel
live at the same standard of living as local citizens.92
China, for reasons of seeking good publicity (when it did not seek to keep
its aid giving secret) and to be sure the money was used properly, favored
project aid. The projects China undertook, according to one writer, fell
mainly into the following categories: light industry, transport, agriculture,
water control and irrigation, public health and training, medical assistance,
power and communications, sports and cultural complexes, and heavy
industry.93 Another source put the type of projects by value and accord-
ing to sector during phase one: transportation, 35 percent; light industry,
20 percent; agriculture (including irrigation), 20 percent; heavy industry,
5 percent; other, 20 percent.94 Still another writer cited the number of proj-
ects as follows: light industry, 36 percent; agriculture, 15 percent; building,
12 percent; transportation, 12 percent; medical, 9 percent; other projects,
16 percent.95 Although the figures are at variance one thing is clear: China
liked simple projects that it had experience doing.
The total number of projects China’s aid financed was large. However,
the figures that have been published vary considerably, probably owing to
the lack of a definition of the term “project.” According to one source the
number averaged more than 7,000 a year from 1971 for a decade.96 These
large numbers indicate that China took into account even very small proj-
ects such as medical teams and small agricultural schemes.97 Including only
large projects (certainly excluding medical teams, etc.) the number is much
smaller, but still large.98 An official Chinese source put the number at 950
up to 1980.99
In 1990, a Chinese publication put the number at 1,240 over the pre-
vious 30 years involving more than 90 countries. The projects were cat-
egorized as follows: 112 agricultural, animal husbandry, and fishery; 10
forestry; 59 power generation; 21 water conservatory; 282 light industrial;
61 textile; 19 oil refining; 38 construction; 128 transportation; 55 edu-
cation and health; 91 building; 334 chemical, electronics, metallurgy,
machine building and coal but included also radio, television, postal, tele-
communications, geology, and mine exploration.100
China’s aid decisionmakers in particular liked small projects that could
be finished quickly and had maximum impact both in terms of the develop-
ment benefit to the recipient and their public relations value.101 In principle
China eschewed providing aid for spectacular or showy projects such as sta-
diums, airports, luxury theaters, and the like, though it made a considerable
number of exceptions to this policy.102
China has also favored giving technical aid. Initially this took the form
mainly of sending agricultural and medical teams to poor countries. Both
afforded China a presence in the recipient country and usually gave it favor-
able publicity.103 According to one expert, up to 1965 China provided more
technical aid (broadly defined) than the Soviet Union and the Eastern
European bloc countries combined.104 China typically did not charge much
for its technical assistance though it is said it often sent manual workers
under the guise of technicians.105 Providing technical and other training in
China for officials of aid recipient countries was also a part of its foreign aid
giving. China likewise provided training and scholarships to foreign techni-
cal personnel and students.106
By 1990, according to a Chinese source, China had sent 450,000 “train-
ing” experts abroad and had hosted 50,000 foreign students in China.107
Another source reported that in 2003 the Chinese government sponsored
a total of 42 technical training classes or seminars and within two years
planned to have trained nearly 6,000 people.108
A group of Western scholars subsequently described the nature or style
of China’s foreign aid this way: (1) China gives aid without conditions for
reform as demanded by Western donors, such as democratization, market
opening, and environmental protection; in fact, China promises no interfer-
ence in the recipients’ domestic affairs; (2) China does not require a lengthy
period of application; (3) aid is usually announced at a lavish reception or

dinner, often with considerable publicity given to it locally, thus carrying
symbolic value (with, of course, the caveat that China did not announce
much of its aid, especially arms aid); (4) much aid is given in the form of
high visibility projects, often built by Chinese companies and frequently
using Chinese labor; (5) China gives aid to accomplish difficult tasks, often
entailing considerable hardship for its engineers and workers, and even tak-
ing on projects that Western countries and/or international organizations
turned down.109
Finally, during period one, China purveyed very little multilateral aid.
China generally did not face the problem of its aid duplicating the projects
of other nations and thus saw little reason to transfer aid funds through an
international organization. Of course, another explanation is the fact that
China was not a member of the United Nations until 1971 and became a
member of most UN-affiliated organizations only after that. Even then, as a
result of its previous experience with the United Nations (notably the UN’s
hostility toward China during the Korean War and its subsequent boycott of
China), China did not trust these international agencies. Anyway it chose to
keep tight control over its foreign aid and wanted, even though as noted ear-
lier much of its aid was not announced, to take credit for what it provided.
Since China’s motives in aid giving were (and are) in large part political and
military, this is another reason for it favoring bilateral aid. Finally, it is rel-
evant that Chinese leaders espoused a realist view of international politics,
which meant acting solely according to its national interests.110 According to
one writer, up to the late 1970s, all of China’s aid was bilateral.111 This was
not accurate, but it was nearly so.112
China gave very little private or charity aid. During the first phase of
China’s foreign aid giving, its charitable organizations were seldom involved
in giving aid abroad. Private aid giving organizations were almost nonex-
istent. Thus, as a matter of record, China’s nonpublic assistance was not
a significant part of its aid giving. This, of course, was largely due to the
fact that China had few private charities and the scope of China’s charity
work at home was not large.113 Hence China chose not to compete with
other countries in this realm. On the other hand, on occasion China did
give somewhat meaningful amounts of aid in the form of emergency help
through the Chinese Red Cross and/or by government agencies sending
money or goods to disaster-stricken countries. It garnered some goodwill
in this way.114
At times Chinese leaders discussed China’s obligation to give aid includ-
ing the moral imperative to do so. Early on they did this almost exclusively
in the context of helping poor countries “fighting” Western (and later Soviet)
imperialism. Chinese officials spoke of China’s aid as generous and assumed

that China being a poor country giving aid, observers would naturally think
China’s aid is benevolent.115 Put another way, China, in its view, was a case
of “the poor helping the poor” and this made its aid special.116
As noted during period one of its giving foreign assistance China’s aid
policies changed a number of times and in various ways. This happened
even more during period two. These shifts needed to be examined more
thoroughly.
Shifts in China’s Aid and Investment Policies

When China began giving foreign aid the Chinese government provided
no documents or reports explaining what might be called China’s aid poli-
cies. Chinese officials spoke of China’s foreign policy objectives, which they
linked aid to: China’s foreign assistance was aimed at countering Western
imperialism and neocolonialism and to promote Communist Bloc unity.
They also mentioned a struggle against American militaristic actions and
Washington’s efforts to contain China. They declared China’s commitment
to supporting wars of national liberation in Third World countries and deal-
ing with the “Chiang Kai-shek clique” that illegally represented China in
world affairs.
But these were statements about its aid, not aid policies. China’s aid poli-
cies can to some degree be gleaned from China’s history of giving aid or its
tribute diplomacy (see Volume 1, Chapter 2), its (Mao’s and his successors)
worldview(s) (which will be discussed in detail in Volume 1, Chapter 2), its
negative views of Western and Soviet aid and its obvious desire to be differ-
ent, and its efforts to realize important foreign policy objectives (Volume 1,
Chapter 4). But these reflect China’s motives for giving aid rather than its
policies. Even after several years of purveying foreign aid China still had not
set forth what can be said are aid rules or guidelines.
In 1964 the Chinese government broke precedent and announced what
became widely known as its “eight principles” in giving foreign aid. These
principles derived from unique aspects of its aid, which according to Chinese
officials distinguished it from that of other countries. China pledged to have
an equal relationship with its aid recipients, respect their sovereignty, pro-
vide aid generously, make no effort to create dependency, show quick results
in the projects it undertakes, use high-quality equipment, transfer technol-
ogy to recipients, and provide aid workers who are inexpensive and who
live and work according to local standards. The document also explained
why China’s aid was in some important ways better than Western or Soviet
aid.117 No other such aid policy documents followed, though these principles
received some elaboration.118 In ensuing years Chinese aid officials often

cited the “eight principles.” They have been cited even in recent years.119
After Mao died in 1976, China’s leaders engaged in some intense (but
generally internal) debates about China’s foreign aid policies. Many felt Mao
had often pledged aid for less than good reasons and was irrationally gen-
erous—giving aid when China itself was desperately in need.120 Some top
Chinese Communist Party officials even expressed concern that the Chinese
government and the Chinese Communist Party risked losing public support
by giving too much aid.121
In 1979, Deng launched far-reaching economic reforms. Accordingly,
China’s foreign policy changed dramatically. Deng shifted China’s external
policy goals from promoting an anti-Western, anti-imperialist agenda and
the Maoist model of peasant-based socialist construction to ensuring regime
survival (its own) while advancing its national interests defined mainly,
almost wholly, in terms of its economic growth. Simply put, China’s foreign
policy was geared to realize its drive for economic development. Therefore it
employed most of the capital it had for its development plans.
In this context Chinese officials saw foreign aid very differently. In
1983 the government announced its principles of “economic and techno-
logical cooperation” (with a focus on Africa), which emphasized working
with developing countries (in other words complementing each other),
self-reliance, the quality of work, noninterference, etc. However, foreign aid
was not specifically mentioned.122
Meanwhile, to further advance its drive to boost its economy China
sought to borrow from global institutions and Western countries.123 (For
details see Volume 1, Chapter 3.) This meant China would compete with
other poor countries for capital.124 China, as a matter of record, soon became
a huge beneficiary of grants and loans from international financial organiza-
tions and investments from several rich Western countries, most important
being Japan and the United States. Between 1979 and 1983 China became
the beneficiary of $230 million in grants from the UN Development Project,
the UN Fund for Population Activities, and the UN Children Fund. China
became a major recipient of numerous concessional loans made by other mul-
tilateral organizations. By 1989 it was the world’s largest recipient of official
foreign aid, including multilateral and bilateral grants and loans (receiving
$2.2 billion that year), surpassing India, which had been the largest.125
Logically China would have to reduce its foreign assistance markedly. It
did so; but it did not get out of the aid business. Chinese leaders explained
its new aid policies this way: Foreign aid “cannot be sustained . . . if it is lim-
ited to one-way aid.” China, therefore, adopted a policy aimed at “gradually
switching the emphasis of China’s economic and technical relations with
developing countries from extending foreign aid to pursuing co-operation

which can benefit both partners.”126 China also promised support to Third
World countries in matters other than financial.
This may be seen simply as China’s rationalization for giving less aid.
But it was more than that. One scholar/author describes the situation as
China ending Mao’s “conceptual pillars”: self-reliance, minimizing depen-
dency, and transforming the capitalist world economy. Mao’s worldview,
he says, was replaced by a neofunctionalist perspective wherein self-reliance
was no longer a desired objective, technology (once seen as the tool of for-
eign imperialists and multinational corporations to plunder the economies
of developing countries) was no longer said to have a class character, and
globalism was now seen as an advantage to China and even the key to its
economic development.127
Coinciding with its changed views about the role of foreign aid, China
terminated its aid to North Vietnam and Albania, though it had already
made a major reordering of its foreign policy (notably its rapprochement
with the United States), which negatively impacted relations with these two
countries.128 Less aid money was made available for work on China’s biggest
aid project in Africa, the Tan-Zam Railroad, than in previous years.129 And
various other projects were cut back or not started. Finally, China changed
its policy regarding supporting wars of national liberation virtually ending
its aid to various insurgency groups. (Before this, China, in some regions of
the world, expended as much money to support wars of national liberation
as it gave in regular aid).130
China thus cut dramatically both the amount of its foreign aid and the
number of its aid recipients.131 As part of this shift of policy and China’s
need for capital to advance its economic development, many of its aid proj-
ects were converted to moneymaking enterprises. China’s arms aid was to a
large extent transformed into arms sales that provided China with income
to promote its own economic growth as well as its military moderniza-
tion.132 In 1984, China held its first ever arms exhibition and began to
advertise in Western military magazines.133 Middle Eastern countries that
had recently gained wealth from oil sales were expected to pay for arms,
and they did.134
However, China increased its emergency aid donations and its funding
to some United Nations’ programs. Both gained China favorable publicity
for its aid program at a fairly low cost. Medical and agricultural aid proj-
ects were also continued and to some countries were increased.135 Some aid
projects, especially smaller ones, were retained. In short, China planned to
continue giving aid, but at a much lesser expense. Whether Chinese lead-
ers calculated that China would again become an active (and even large)
provider of foreign assistance later when they believed the country could
afford it is uncertain; probably this was the case.136
In the late 1980s, China’s foreign aid giving was put back on track. Then
and through the 1990s, China’s financial help to developing countries grew.
China had by then become a rich (at least richer) country. Its growth had
generated stores of foreign exchange. So there was money to give. (This point
will be discussed at length in Volume 1, Chapter 3). Also, as a product of
its economic growth, especially it being driven by its manufacturing boom,
China’s need for energy and natural resources increased exponentially. Thus
it began giving aid to ensure access to sources of oil and raw materials. China
also required foreign markets for its products in order to generate employ-
ment in its now capitalist economy. (These issues will be discussed further
in Volume 1, Chapter 4.) As a consequence, the style, goals, and much more
of China’s foreign assistance changed.
Changes in aid giving also reflected domestic ideological and policy
reforms that were made during the early Deng era. Egalitarianism, which
was the essence of Maoist ideology, was out; Chinese leaders even said that
higher levels of economic inequality were appropriate.137 Private property
replaced collectives and the state’s control of land in China diminished.
Expertise became a more valued “commodity” than political awareness.138
Mobilizing workers through moral incentives was ended in favor of material
incentives; so too the incessant use of slogans, campaigns, and movements
was abandoned in favor of merit pay increases. Models were no longer in
vogue; pragmatism prevailed.139
This became the basis for new aid policies. Henceforth Chinese offi-
cials spoke less of self-reliance to recipients when giving foreign assistance.
They applied technology more and put it ahead of social change (contrary
to what Mao had advocated), gave material incentives to its aid person-
nel and to local workers, recognized the importance (and value) of skilled
workers, and even used cost benefit analysis. To the astonishment of some
observers, China’s foreign aid with considerably frequency supported pri-
vate ownership of land and capitalist enterprises. Aid decisions favored
helping poor farmers less and successful ones more.140 It was even said that
foreign assistance could be profitable. The then head of the Ministry of
Foreign Trade and Economic Cooperation stated publically that favorable
loans “should primarily be used for providing funds to businesses that can
make a profit.”141
China also adopted new foreign aid policies designed to much more
aggressively help Chinese businesses. Beijing announced granting low-
interest loans through the China Export Import Bank, indicating that
assistance would consist more of business-type loans or would be given
in the form of foreign investments.142 Foreign aid was viewed as promot-

ing Chinese commerce. Chinese officials, in fact, even stated, “aid should
stimulate exports.”
By then, the difference between foreign aid and investments made by
China’s large companies (generally state-owned corporations), sovereign
wealth funds, and large banks became blurred. They were indistinguishable
in many cases.143 China made “capital investments” in developing countries
for many of the same purposes it had for giving foreign aid. Western insti-
tutions and writers did not know how to label many of China’s “invest-
ments,” especially those that helped Chinese companies via funds from the
Exim Bank.144
China had made few external investments during period one and thus
saw no need to formulate policies regarding foreign investing. This situa-
tion continued during the early years of period two. However, after gain-
ing experience in attracting and utilizing foreign money from a variety of
sources China became familiar with foreign investment strategies.145 In fact,
Chinese decision makers learned from investments it received about those
that facilitated (or did not) economic growth. This helped them make good
foreign investment decisions in developing countries later.
In any case China did not formulate a definition of foreign investments;
nor did Beijing follow or use the accepted Western definitions. Causing fur-
ther difficulty in assessing its foreign investments, Chinese leaders often used
the term “investment” instead of foreign aid for domestic policy reasons to
suggest it was not giving money away frivolously. They also used the term
“investment” at times because the recipient country did not like the term
“foreign aid” (as we will see in later chapters). Also Beijing did not see any
reason to distinguish between making investments in developed countries
and developing countries. China’s aid and investments were thus often con-
flated causing confusion about both. Another issue was that China put large
amounts of its investment funds in Hong Kong, the Cayman Islands, and
elsewhere and then transferred the money from there to developing coun-
tries; this made accounting difficult.146
Chinese leaders regularly spoke of engaging in external investing and
seeking to expand China’s international trade. In the late 1990s it for-
mally announced a policy of “going out” or “going global.”In accordance
with this policy the State Council designated 120 state-owned industry
groups as “national champions” and charged them with internationaliz-
ing Chinese companies.147 Subsequently, most of China’s foreign invest-
ments were made through China’s banks and its state-owned enterprises
at the behest of the government. At this time China began making huge
investments abroad, to the degree its foreign investing became a big factor
in conducting its foreign relations; it also engendered criticism to the

effect that China was “buying up the world.”148
Both China’s aid and investments obviously did not fit the Western defi-
nitions of the two. It was said that the gift or concession part of much of its
aid was too low—even though by most accounts China’s aid was generous,
given without delays, and fostered economic development. China’s invest-
ments frequently did not qualify—even though they had interest rates that
ranged from 1–6 percent, grace periods from 2–10 years, maturities from
5–25 years, and were concessionary to around 18 percent.149 More impor-
tant repayment was often cancelled. In addition, China made investments
in places that were dangerous and inhospitable and where others considered
the risk so great as to justify higher interest rates.150 The catch was China’s
investments were made mainly by the state or state-owned companies; that
did not fit the definition by Western standards.
An event that occurred in 1997 (the incorporation of Hong Kong into
China) had an impact on China’s foreign aid giving though this hardly
represented a predesigned change in its foreign assistance policies. As a
result of this, China became the provider of significant remittance aid
to Indonesia, the Philippines, and few other Southeast Asian countries.
Workers from Indonesia, numbering more than 100,000, and a large
number from the Philippines, employed in Hong Kong, sent money back
to their families, funds that facilitated the economic development of these
countries.151
That same year, in the midst of the Asian financial meltdown or crisis,
China provided billions of dollars in financial help to three Southeast Asian
countries to weather the crisis. Indonesia received the largest amount, but
also included were nations (Malaysia and Thailand) to which China had
not given aid before and that were richer than China. In so acting China
upstaged several international aid-giving institutions and won acclaim from
a number of other countries. (This point is discussed further in Volume 2,
Chapter 1.)
Chinese officials subsequently talked about aid more. They became more
critical of Western aid. They noted that Western aid led to their interfering
in beneficiary nations’ domestic affairs. They observed that political strings
attached to Western aid were burdensome and had even increased. The con-
ditions Western countries put on aid, Chinese leaders said, were ideological
in nature, such as efforts to promote democracy and requiring that the recip-
ients have good (or at least improving) records of governance and human
rights. In essence, China said Western donor nations were advancing their
own foreign policy agendas, which were intrusive and threatened recipient
nations’ sovereignty.152 China had made these charges before; but Chinese
officials now asserted them with more force because the country had more
assistance to offer, and more countries and people were listening.
The Chinese government also provided more information regarding its
foreign assistance. Government officials made some formal policy state-
ments and the government even published some detailed foreign aid guide-
lines. In 2005, China stated that it would provide zero-tariff treatment to
a number of countries with which it had formal diplomatic relations, write
off debts to a number of poor countries, provide loans for infrastructure
building and cooperation between enterprises in the two countries, supply
medical aid (including antimalarial drugs), and train more personnel from
developing countries. Herein China defined foreign aid (though this was
not a change of policy but simply stating what was already policy) to include
various kinds of financial and/or economic help that arguably would not be
aid as per the Western definition of that term.153
The parameters of foreign aid as China employed the term were much
broader than the OECD definition. China’s use of the term “aid” was closer
to what in Western countries was called “foreign assistance.” But even this
term as used by countries other than China did not usually include export
credits, tariff preferences, funds for cultural exchanges, debt cancellation,
and a number of other kinds of economic help. China’s “aid” to developing
countries included all of these.154 “Financial help” would be a better term
to define it.
China also increased its technical aid as it gained the ability to do so. As
noted earlier, during the early years China gave technical assistance; but it
was not very sophisticated. This changed. In 2004, Chinese officials dis-
closed that China would help train 3,000 professionals from 130 countries;
training soon became one of the important components of China’s foreign
assistance.155
China stepped up giving emergency aid by a large amount. China even
cooperated with and/or worked with other countries to do this. This had
never been done before. In December 2004, after the big tsunami in the
Indian Ocean, the Chinese government pledged $22.5 million as disaster
funds. During the subsequent avian flu crisis, China hosted a conference
on the crisis and donated $10 million. China did not provide a lot of aid
in comparison to other donors since it was new at this game, but it had
the potential to become a bigger player in this realm.156 If one includes
China’s generous financial help to several countries during the 1997 Asian
financial crisis, which ran to billions, China was an important purveyor of
emergency assistance.157
In the late 1990s, China changed its stance on giving foreign aid
through multilateral institutions, including the United Nations. It began
by purveying significant financial support to the United Nations for peace-

keeping.158 In 1997, Chinese officials decided to join UN standby arrange-
ments for peacekeeping. In 2002, one of Beijing’s top officials at the United
Nations stated that China sought to strengthen the capacity of the UN to
prevent armed conflict.159 The next year, China more than doubled its con-
tingency of peacekeepers in the Democratic Republic of the Congo, reflect-
ing, it was said, a change in the stance of China’s People’s Liberation Army
about peacekeeping.160 In 2006, China became the largest contributor of
personnel to UN peacekeeping operations among the five permanent mem-
bers of the UN Security Council.161 The next year China’s spending for
UN peacekeeping was said to have increased by 42 percent, to $190.6 mil-
lion.162 In 2009, the Chinese media reported that China had contributed a
total of 13,000 peacekeepers; there were currently almost 2,000 serving in
14 countries—constituting the sixth-largest number of any country in the
world. Chinese officials, moreover, stated that China would increase its con-
tributions in this realm.163This was considered by some to be the precedent
that changed the nature of China’s aid giving.164
Another major shift in China’s aid policy was that it provided large
amounts of aid through regional organizations, especially ones that China
had created or was close to. This included notably the Shanghai Cooperation
Organization (SCO), the Association of Southeast Asian Nations (ASEAN),
and the Forum on China-Africa Cooperation (FOCAC).165 Chinese leaders
found that by funding regional organizations and giving aid through them
it could avoid some amount of Western criticism of its aid while it rallied
“collective” support for its mode of giving financial assistance. China could
also more effectively carry out large projects such as dams, roads, and rail-
roads that involved more than one country.
Some of China’s aid policies’ shifts constituted doing something truly
new or different. Some of them developed into something bigger later. In
2006, at the FOCAC meeting in Beijing, China promised funding to develop
free-trade zones in Africa copying its own experience in this area. In 2008,
China issued a statement promising aid to promote agriculture and clean
energy. Included was a commitment of money to the United Nations Food
and Agricultural Organization. In 2009, at the fourth FOCAC Ministerial
Conference, the Chinese government issued a statement called an “eight
point plan” that included allocating aid funds to promote research and tech-
nology development to its previously stated facets of foreign aid.
The year 2008 was a watershed year for China’s foreign aid and foreign
investments. China came to the rescue of a host of developing nations that
suffered due to the global recession. China’s financial assistance poured into
Africa and Latin America. In many countries China’s help came to be seen
as critical in preventing economic collapse. Many local leaders expressed

their heartfelt gratitude to China. The United States, Europe, and Japan
could not offer much aid at this time, making China’s foreign aid relatively
larger and more vital.166
China announced cancelling many debts that aid recipients owed it,
often with some fanfare. It was as if China were extending aid in so doing,
which arguably it was. China had done this during period one of its aid giv-
ing; but in period two it did this much more—in amounts over several bil-
lions of dollars. As we will see in forthcoming chapters China subsequently
cancelled debts worth much more. China also extended considerable finan-
cial help to relieve trade imbalances and for budget support and negotiated
currency swaps in large amounts, billions, to a number of nations that were
in trouble financially.
Meanwhile, China began to show a new confidence about its foreign
assistance. The reason was China literally had an oversupply, a glut, of for-
eign exchange. China could thus well afford to give foreign aid and make
foreign investments. Further, because most of it was in US dollars that were
depreciating and inasmuch as China was being criticized for mercantilist
policies that generated such large holdings of foreign currencies, Chinese
leaders reckoned that it was a good idea to draw down its currency holdings;
and purveying foreign aid and investments was the way to do this.167
China’s investment policies changed though not to the extent its aid
policies have in large part because China’s investments were more recent.
The most obvious change was the increase in amounts and the fact that
large investments have been extended to regional organizations. Also many
investments in recent years have been made by some of China’s provinces
(as has been foreign aid). This reflects the decentralization of China’s econ-
omy under Deng. Investment money has pursued opportunities and has
increased or decreased depending on recipients welcoming conditions and
“favorability” in terms of the potential for an investment being productive or
not. Recently China has gotten more into investing in start-up ventures and
mergers and acquisitions (even though China has made some serious and
some very costly mistakes in both).168 Much of the investing made by China
in the last few years has also been nonfinancial and strategic in nature.
China’s aid and investment policies changed together or in tandem. This
bolsters the view that they serve the same or similar purposes and that,
as stated in Western studies, they are complementary.169 Indeed they are.
Further, as its aid and investments became much larger, Western countries
began to criticize China’s aid more, pointing out that China disregards good
governance, does not promote democracy, and makes human rights con-
ditions worse with its aid (because its financial assistance helps prop up
authoritarian regimes). Critics complained that China gives aid only to gain
resources and to capture markets. A few even remarked on how China uses
its own labor and does not employ people locally, flaunts local labor and
environmental laws, and worse.
Not typical of its earlier responses to criticisms of its foreign aid, Chinese
leaders publically refuted these and other charges. China’s leaders replied to
critics who depicted China’s foreign aid and investments as resource driven,
saying that China had to find resources and that its help to developing coun-
tries was reciprocal. They declared that China’s aid was more efficient and
less bureaucratic than Western aid and that most recipients favored it.170
They also asserted that China’s foreign aid policies were discussed publicly,
donations were reported in the media, and aid giving was not a burden to
the Chinese people.171 Sources in Beijing reported that China was planning
to make its aid giving more transparent and was even contemplating setting
up a united aid agency.172
In 2011, the Chinese government for the first time published a long offi-
cial document providing details and even data on its “foreign aid.” It was
called a white paper on China’s foreign aid. This document clarified China’s
aid policies and provided more information and figures than ever before.
The document asserted that since China is a developing country it had a
better understanding of the problems faced by other developing countries.
China’s aid giving was considered as reflecting “South-South” cooperation.
The document read that China seeks to promote long-term development
and pledges diverse and flexible ways to do this underscoring its broad defi-
nition of foreign aid. The report even provided information on the “manage-
ment” of aid (or the decision-making processes involved in deciding aid) and
cooperation with international agencies in giving aid.173
This report also provided a somewhat clearer definition of foreign aid as
used by China.174 It was obviously a broader definition than offered before or
that Western countries employed. It included technical cooperation, coop-
eration in the development of human resources, emergency aid, volunteer
programs, debt relief, and more. It included a section on management of for-
eign aid. Attached to the report were previously made official statements on
foreign aid. Yet these guidelines still lacked clarity on aid as it relates to (or
is different from) investments. Investments made by China’s various funds,
banks, and state-owned and other corporations were not mentioned in the
report. Cancelled debts were mentioned as though they were aid, but not
write-offs of investments gone bad. China considered lower tariff benefits as
a form of economic help but provided no ideas about how to measure them.
While its new policies reflected a serious change in thinking in Beijing it
seemed likely that China would continue giving mostly bilateral aid. It still
showed distrust of international organizations and did not want to abide by

the policies of its aid-giving agencies. Beijing also wished to keep control of
its aid funding, viewing it as an important tool of its diplomacy while seeing
an advantage in bilateral aid giving as advancing China’s image as a poor
country helping other poor countries.175
In 2014 the Information Office of the State Council in China issued
a second white paper on foreign aid.176 This report was lauded by observ-
ers, including a number of Western reporters and even scholars, for pro-
viding an even more detailed explanation of China’s foreign aid and for
listing the number of nations China granted aid to, where those nations were
located, and the amounts of its aid granted during certain periods. It cited
161 nations as having received China’s aid from 2010 to 2012 and also that
half of its recipients were African countries, during the period mentioned. It
cited debt relief as if it were aid.177
But the report did not provide a new or clear definition of foreign aid;
in fact, it created more confusion about China’s use of the term. It did
not include military aid. It was still unclear about the linkage (or overlap)
between aid and investments. The numbers it cited were difficult to use
without a clearer definition of foreign aid. The facts and data do not com-
port with the analysis provided in following chapters of this book.
Measuring China’s Aid and Investments

It is not possible to state with any degree of certainty the value of foreign aid
China has either promised or delivered over the years since (1) China does
not adhere to the DAC definitions of foreign aid and foreign investments,
(2) has no official aid agency or even regular funding schedules for aid,
(3) aid budgets are not published, (4) a considerable amount of its aid (most
of its military aid) is not announced (neither do the recipients announce it),
(5) aid and investments are frequently conflated, and (6) for a variety of
other reasons.178 Making the task of measuring China’s foreign aid and
investments even more difficult, Chinese statistics are often unreliable and/
or are suspect.179 Then there is the problem of fixing the value of China’s
currency. China’s currency early on was overvalued; in recent years it has
generally been considered undervalued.180 Related to this problem the price
of Chinese labor, not to mention technicians and engineers, used in many
of its aid and investment projects, is something Chinese officials have not
talked about much and others have rarely discussed.181
Notwithstanding these quite formidable obstacles, there have been a num-
ber of published reports emanating both from Western and Chinese govern-
ment agencies and even in books written by academics stating the value of
Chinese foreign aid and foreign investments to various countries and regions
of the world and even its total aid during specific periods of time.
The writer will cite some of the published data later in the chapter. The
main purpose in doing this is to provide the reader with some notion of
the scope of China’s foreign aid and foreign investments, or what observers
thought them to be, during certain periods, and to various nations and to let
the reader understand that there are serious inconsistencies in the use of the
terms as well as disagreements about the numbers, not to mention questions
about how the data should be interpreted. The reader is reminded that in
purveying financial help to developing countries, “foreign aid” predomi-
nated early or in period one; “investments” prevailed during period two.
Thus data on aid are provided first.
Early on two European scholars writing on China’s foreign aid, who
defined it to not to include arms aid and covered only aid to Third World
countries, provided some numbers. One of them put China’s aid during
the period from 1956 to 1973 at $3.38 billion, listing Pakistan, Tanzania,
Indonesia, Zambia, and Somalia as the top five recipients and Africa as the
biggest recipient area.182 The other estimated China’s aid during the years
1957 to 1974 at $3.47 billion, citing the top five recipients as Pakistan,
Tanzania, Zambia, Sri Lanka, and Egypt.183 The two writers agree that
1970 was China’s biggest year for aid giving, but disagree on the list of
top recipients and differ by almost half on the amount given in 1973. The
two scholars excluded China’s military aid and assistance to Second World
(Communist countries) ostensibly because data in these two categories were
difficult to obtain or they chose to define aid as “economic” help only to
Third World countries. Thus there was a serious hiatus in these studies:
During this period China’s foreign aid was mostly arms aid to Communist
countries (virtually all of it before the mid-1950s).
An American academic, drawing primarily from US government sources,
put China’s “economic aid commitments” during the period 1954 to 1965
at $815 million, with the most ($410 million) going to South and Southeast
Asian countries, followed by ($264 million) to African countries, and
($141 million) to Middle East countries.184 The author’s definition of aid
excluded military assistance and aid to Communist countries for the same
reasons the scholars cited above did this. Another US scholar put China’s
aid, called “economic credits and grants to less developed countries” during
the period 1956 to 1972 at $2.7 billion. The term “less developed nations”
excluded Communist countries (because they are not Third World) and pre-
sumably did not count military aid. He oddly includes Malta and Cambodia
in his analysis, but not Laos.185 He cites 1970 as China’s biggest aid-giving
year with donations totaling $709 million and 1969 its lowest with zero
aid that year.186 His numbers are in obvious disagreement with the other
scholar cited above. Yet another scholar put China’s aid up to 1982, to
more than 74 countries, at $32.26 billion, of which $27.39 billion went
to bloc countries (the biggest recipients being North Korea, Vietnam, and
Albania).187 His estimates are at huge variance from the others just men-
tioned, but this is the result of his including China’s aid to Communist
countries and its military aid.
A Western-trained Chinese scholar estimated China’s aid from 1953
to 1964 to have been $2.26 billion, of which $754 million, or one-third,
went to non-Communist countries.188 North Vietnam and North Korea
were the largest recipients, he states, receiving 27.3 percent and 25.4 percent
respectively. Other major recipients were: Albania (5.4 percent), Mongolia
(4.1 percent), Burma (4.0 percent), Egypt (4.0 percent), Cuba (3.5 percent),
Indonesia (3.1 percent). By region, Asia received 71.9 percent followed by
Africa (15.1 percent), Europe (6.6 percent), Latin America (3.6 percent), and
the Middle East (2.8 percent). After 1958, he says, Asia fell to receiving
52 percent of China’s total aid and Africa rose to get 25 percent. In 1961, he
says, China gave $395.2 million in aid, but in 1962 (a bad year for China) it
extended only $11.7 million; in 1963 China’s aid was $125.3 million and in
1964 $292.1 million.189
A writer from Taiwan states that China provided foreign aid worth
$10.98 billion during the period beginning in 1953 up to and including
1992. Its aid, he says, ranged during these years from a low of $10.3 million
in 1969 to a high of $1.11 billion in 1970 (a huge difference in just one year).
The average during the period was $272.4 million.190 The author’s data are
also at variance with those cited here, especially the figure on China’s aid
given in 1970.
The US Department of State estimated China’s aid to “developing states”
up to 1965 to be $845 million.191The OECD reported that China purveyed
aid in the amount of $1.28 billion between 1970 and 1975 and $298 million
from 1976 to 1980; OECD put China’s total bilateral aid commitments to
developing countries (excluding Communist Bloc countries) at $9.3 billion
up to 1985.192However, since the latter mentions China terminating its aid to
Albania and Vietnam, it must have included aid to Communist nations and
military aid in its estimate. The US Central Intelligence Agency put China’s
aid during the period 1960 to 1989 at $9.66 billion. It does not define aid in
its report, but presumably it did not include arms aid or investments.193
This writer estimated the amount of China’s foreign aid (defined to
include both economic aid and military aid) at between $4.08 and $9.44
billion up to 1975 with aid to Communist Bloc countries “guesstimated”
to be in the vicinity of less than threefold to nearly sixfold that which was
announced, largely due to extensive undisclosed military and military-related

aid to North Korea and North Vietnam. This was well above other estimates
because the definition of aid was broader.194
China did not provide official data on its foreign aid for any year dur-
ing period one of its aid program and rarely reported amounts for any spe-
cific time period. It did, however, announce some budget data from which
aid giving can be derived or at least presumed. During China’s first Five
Year Plan (1953–57), Beijing budgeted $647 million for aid, much of which
consisted of China’s costs to help North Korea during the Korean War.195
In 1953–54, China reportedly allocated $118 million for foreign aid (not
including military aid); in 1955, $166 million; in 1956, $171 million; in
1957, $192 million; and in 1958, $116 million.196 The total amount of
China’s aid, using these data sources, was $779 million.197 Of the total,
Communist countries received 724 million; $55 million went to non-Com-
munist countries (Cambodia, Nepal, Ceylon, and Egypt).198 Obviously
these Chinese budget-derived data do not comport with the various Western
data sources cited earlier.
One thing however seems certain: China’s foreign aid giving diminished
markedly in the 1970s. Some writers state this in quite specific terms. One
observer notes: “Aid levels dropped markedly in the 1970s and remained
around $100 million annually for the whole world.”199In fact, China’s “offi-
cial aid” probably dropped every year from 1971 to the close of the decade.
In February 1978, the Chinese government announced that a reduction in
its aid giving was unavoidable.200 According to one estimate, in 1979 China’s
total aid giving was less than $100 million. The number of recipients also
steadily dropped to, it was said, a low of two in 1979.201
In summary, during period one it is clear that the analysis of China’s aid
giving was adversely affected by the lack of a clear definition of aid (certainly
not complying with the OECD’s definition of aid that is considered the
benchmark by many).202 It was also hampered in some instances from con-
sidering only aid China provided to Third World countries, thereby exclud-
ing aid to Communist countries and the fact that military aid (which for
some years constituted most of China’s aid) was not counted. Finally, few
analysts considered the conditions on China’s aid such as interest rates on
loans and how (for example, in what currency or whether in goods) it was
calculated, whether the loans were repaid, and rarely took up the matter
of whether the aid was actually given or, if it was, whether repayment was
later forgiven.203 These matters constituted serious impediments to a sound
analysis of China’s foreign assistance.
In the second, or later period, China’s foreign aid remained difficult to
define and/or calculate for some of the same reasons; but there were also
new problems. One serious obstacle was the fact that it was, and is, hard to
separate China’s foreign aid from either its official (sovereign funds or state-
owned companies) or its private (smaller company) investments. At times
China distinguished between the two; at other times it did not. Generally
both served the same purposes; so why should Chinese leaders care? In fact,
they did not. The repayment of investments, as with its foreign aid, has often
been renegotiated and the terms changed to help the recipient or repayment
forgiven entirely.204
One American researcher estimated China’s aid giving (excluding invest-
ments) per year to developing countries at $621 million during the 1970 to
1975 period, $162 million during the 1976–1980 years, and $198 million
from 1981 to 1989.205 Another American scholar, based on interviews with
Chinese government officials and “hints” they provided, “guesses” China’s
aid to be between $1 and $2 billion per year in recent years. She states that
officials told her that half of China’s aid goes to Asian countries (which
contradicts other Chinese officials’ statements and various published reports
both from China and elsewhere).206
In 2003, according to a US private academic organization, China gave
$1.55 billion in foreign aid.207 This is close to yet another American scholar
who put China’s aid in 1993 at $260 million, increasing to $1.5 billion in
2004.208 More recently a World Bank official estimated that China has been
giving African nations $2 billion annually, indicating that its aid overall
is much more than most analysts estimated it to be.209 A specialist who
interviewed a number of Chinese officials involved in its foreign aid giv-
ing estimated that Chinese aid spending has been between $1.5 billion
and $2 billion annually with one-third to one-half of it going to Africa.210
Presenting a very different picture a European scholar states that China’s aid
(more broadly defined and including investments) to Africa over the past
50 years has amounted to $44 billion.211
During the later years of phase two, a report published by a US academic
institution notes very large increases in China’s foreign aid. It cites $51 mil-
lion in 2002, $1.48 billion in 2003, $10.49 billion in 2004, $19.11 billion in
2005, $27.52 billion in 2006, and $25.10 billion in 2007 for a total during
that six-year period of $75.1 billion. Aid here is defined to include “loans
and other reported aid and economic projects using Chinese financing.”
Judging from the title of the publication the figures include investment, or
at least some, but oddly not China’s foreign assistance to Northeast Asian,
Central Asian, and South Asian countries, which, as we will see in subse-
quent chapters, was very substantial.212
Using foreign investment data from developing recipient countries as a
measure, China’s financial help was worth US$35.5 billion up to the end
of 2002.213 China’s balance of payments statistics, which shows that there

was an annual average outflow of more than US$2 billion, vaguely confirms
this figure.214 Using this data, however, is complicated by the fact that a
significant, but difficult to ascertain, portion of China’s foreign investment
went to developed countries and to Hong Kong and Macao, from where
it was transferred to other places (including, of course, some developing
countries) and a considerable amount no doubt left the country in order to
come back in to take advantage of investment opportunities in China under
different rules.
US private analysts measuring China’s aid in 2006 and 2007 report that
“China’s ODA” (overseas development assistance), using the Western defini-
tion of aid, amounted to around $1.5 to $2 billion a year (compared to the
United States, which gave $19.5 billion in fiscal year 2007).215 Other writers,
however, say that concessional loans, special trade deals, and state-sponsored
investments are, or should be, considered part of China’s foreign assistance
and if counted, China’s aid may far surpass US “overseas development assis-
tance,” though use of this term excludes US private aid, remittances, and
market access, all of which in the case of the United States are very large. 216
Another source put the amount of China’s aid, pledged and delivered, in
2007 (to Southeast Asian, African, and Latin American countries) at $31
billion. A Taiwan source reports that China extended 50.1 billion in the
period 2005–2007.217
During the years 1999 to 2006, a US government agency recorded that
China purveyed weapons to developing countries worth $5.8 billion.218 The
author does not say, and it is, of course, not possible otherwise to know
how much of this consisted of grants (versus sales) and if the latter whether
Chinese loans financed the sales and what the conditions on the loans were.
As will be seen later, China continued to provide a considerable quantity of
arms to friendly countries free or through soft loans.
Neither the Chinese government nor private sources in China have pro-
vided total figures on China’s aid during phase two or any part of this period
until China’s white paper on foreign aid was published in 2011. Furthermore,
many of the figures provided on specific aid pledges or deliveries for cer-
tain periods, areas, or even nations in that report contradict other data the
Chinese government also provided.
According to the various issues of the official China Statistical Yearbook,
during the years 2003–06,China gave $970 annually in foreign aid. But
it appears this did not include loans, the main form of Chinese aid dur-
ing this period.219 The 2005 China Statistical Yearbook states that China
expended $731.2 million in 2004 for “external assistance.” Most experts
on China’s aid giving, however, believe this figure is way too low. 220 One
US source puts China’s aid that year (only to Southeast Asian, African, and
Latin American countries) at $13.7 billion.221
Aid has been mentioned in Chinese newspapers. But some of the report-
ing has been contradicted by other published newspaper articles. In April
2006, for example, China Daily, one of China’s official newspapers, reported
that by the end of 2005 China’s total investments in Africa amounted to
1.25 billion. Four months later the same paper reported that China had
invested $1.18 billion in Africa, with more than 800 Chinese enterprises
operating on the continent. That same year, this paper stated that China had
invested $6.27 billion in Africa.222 Clearly the data on Chinese investments
published by the Chinese press are inconsistent. Furthermore, it does not
comport with US figures.
Chinese officials have sometimes provided specific information on poli-
cies related to the country’s foreign aid giving that is somewhat helpful. For
example, officials have said that China has often offered tariff-free privi-
leges only to nations with diplomatic relations with China.223 In 2005, the
Foreign Ministry announced it would exempt or cancel all interest-free and
low-interest loans due the end of 2004 owed by all of the “heavily indebted
poor countries” and would provide these nations with $10 billion in prefer-
ential loans for infrastructure and another $10 billion in concessional loans
and credits.224 Official sources have also disclosed that China provides train-
ing in the areas of finance, journalism, tourism, and agricultural technology
and that Beijing had trained a specific number (more than 90,000) of people
from developing countries.225
In recent years China has offered some information on its military aid,
but no aggregate figures. Western sources have provided data on China’s
“arms transfers” but have not defined transfer precisely. A US government
source cites the figure of $2.6 billion during the period 1967 to 1976, plac-
ing China at fifth position in the world.226 This same organization put
China at seventh place worldwide during the period 1974–1978.227 A more
recent US government report states China’s arms transfers during the period
2004–07 were $2.3 billion annually, increasing to $3.8 billion in 2007.228
There are, of course, some important caveats concerning these figures. First,
there is no attempt to separate military aid in the form of grants from arms
sales, or if the latter what portion is paid for by Chinese loans. Second,
these data do not include China’s extensive arms aid to North Vietnam (and
later Vietnam), North Korea, and Albania. Third, a considerable amount of
China’s arms aid is missed in the counting and/or consists of dual-use items
(military and military-related technology, etc.)229 Fourth, China almost
stands alone in providing help in building nuclear weapons.230 No analyst
has put a value on this. Likewise nothing is said about profits made by some
of China’s recipient nations selling weapons and even nuclear technology

to other countries. A final note regarding China’s arms aid: until the 1980s
nearly all of China’s military assistance took the form of gifts or low-interest
loans; after that China’s arms “aid” has been mostly sales and is a source of
hard currency for China.231 This would indicate that China’s “arms aid”
(using the Western definition of aid) has nearly ceased, which, as other
information indicates, is hardly the case.
In 2010, China marked the sixtieth anniversary of its foreign aid giving
with an exhibition that was visited by top Chinese and foreign officials.
The media reported at this time that China had provided economic and
technical aid to more than 120 countries and 30 international and regional
organizations and helped recipient nations with 2,100 projects. Further,
according to the Chinese media, by 2010 China had given scholarships to
70,000 students and supported training to 12,000 individuals in 150 disci-
plines. China also signed debt-free agreements with 50 countries, cancelled
a total of 380 cases of debt, and carried out 200 emergency relief operations.
Finally, China had sent 21,000 medical personnel to 69 countries since
1963, 8,000 Chinese teachers to 70 countries, and 405 youth volunteers to
19 developing countries.232 Vice Premier Li Keqiang visited the exhibition
and said that China’s aid helped countries follow China’s development path,
drew attention to China’s superior skills in engineering and construction,
and burnished China’s image as a responsible large nation.233
In 2011, as noted earlier in an effort to counter growing criticism of a
lack of transparency in China’s foreign aid, the government issued a white
paper report on the subject, including an aggregate figure on China’s aid
and details on the types of aid it gave, recipients, etc. Many considered this
report a “breakthrough.” According to the report, China gave a total of
$39.2 billion in foreign aid from 1950 to 2009, the amount having risen
30 percent annually from 2004 to the date of the report. The report said that
40 percent was given in the form of grants ($16.5 billion), the rest in low-
interest or concessionary loans ($11.7 billion in the former, $11.3 billion for
the latter). Aid went to 161 countries, two-thirds of it for infrastructure.234
Aid distributed by sectors of the economy was cited (61.0 percent infrastruc-
ture, 16.1 percent industry, 8.9 percent energy and resources development,
4.3 percent agriculture, etc.) and the portion given by geographic region
(45.7 percent Africa, 32.8 percent Asia, 12.7 percent Latin America and the
Caribbean, 4.0 percent Oceania, and 0.3 percent Europe).235
However, the term aid is not defined in this report and, in any case,
it does not comport with the definition of aid provided by the OECD.236
Further confounding the matter the data in this report do not agree with
statements the Chinese government made earlier about its aid, especially
a statement that its aid to Vietnam totaled $20 billion or, as Chinese offi-
cials said, one-half of China’s foreign aid went to North Korea. 237 Also
it is assumed that investments are not included even though the Chinese
government has often not distinguished between the two. Finally, aid to
regional and international organizations is not counted. Thus there are
very serious inconsistencies in the data on foreign aid provided by the
Chinese government. This is not to say that this report or any other or the
various Western studies on China’s foreign aid are deliberately misleading;
rather there are very serious problems with definitions and parameters
that have led to confusion about what China’s foreign aid is and is not and
thus its scope.
There are no data to be found on China’s external investments during
period one because there were few of them. From 1979 to 1985 there were
reportedly 189 cases approved totaling to around $200 million. 238 In the
next five years this increased to $1.2 billion. In 1992 it rose to $4 billion after
which it averaged $2.3 billion annually for the rest of the decade. As a result
of the government encouraging external investing and reducing regulations
governing it, it reached $6.9 billion in 2001.239 According to an official
Chinese source, in 2004, China made foreign investments to the tune of $4
billion—25 percent more than the previous year.240 In 2005, according to
a Chinese source, the government of China provided $6.9 billion in foreign
investment money.241 China thus provided data on its external investments,
but not figures that adhere to the definition of foreign direct investment
(FDI) used by Western countries.
According to a US analyst, China made foreign non-bond investments
totaling more than $316 billion from 2005 to 2010. The Western Hemisphere
(excluding the United States) received the most ($61.7 billion), followed by
West Asia ($45.2 billion), sub-Saharan Africa ($43.7 billion), and the Arab
countries ($37.1 billion). The main economic sectors China invested in were
energy and power, finance and real estate, metals, and transport.242 These
figures, however, do not agree with the data that Chinese provided as cited
in the previous paragraph.243
China’s Ministry of Commerce reported external investments of $68.8
billion in 2010 and $65.5 billion in 2011 for a total of $317.2 billion.244
This seems a large amount, but not when compared to US foreign invest-
ments and investments made by other countries.245 In any case, China’s for-
eign investing was increasing very fast. In 2012, China reportedly became
the world’s third largest investor after the United States and Japan. That
year China expended $84 billion—at a time foreign investments overall in
the world declined sharply.246 As a result China became seen as an investor
of consequence.
From the above discussion it is apparent that we do not know with any
degree of accuracy how much foreign aid and foreign investments China has
provided to other countries. The published figures are at best incomplete.
Inconsistent definitions of the parameters of both aid and investments and
different meanings of these and others terms used have created the huge
discrepancies cited. More will be said about this in the concluding chapter
of Volume 3.
The Scope and Purposes of This Book

In one sense the scope of the three volumes of this book is very wide. The
author will define the term foreign aid broadly—to include grants, loans
(including no-interest, low-interest, and all other types of loans), budget
support, military aid, technical aid, medical aid, training (in country or in
China), emergency aid, humanitarian aid, favorable barter agreements, remit-
tances, debt forgiveness, and various other kinds of financial help China has
rendered to other countries. Included also are such actions as China buying
another nation’s products at above the market price, allowing access to its
market by giving tariff reductions or exemptions, not revaluing it currency,
and giving other fungible benefits. In this book, foreign assistance, a broad
and nearly all-encompassing term, is also used and is considered a better
term, though both Western and Chinese works use the term “aid.” The term
“financial help,” which is even broader, is also employed. To the author both
terms describe what China calls foreign aid and is a term used herein.
The writer includes China’s foreign investments to developing countries
in the equation. He believes this is justified because China makes foreign
investments for many of the same purposes it purveys foreign aid and has
not infrequently cancelled repayment or has written off its investments, just
as it has forgiven foreign aid loans. Furthermore, most of China’s foreign
investments are secured by government-to-government agreements and gen-
erally do not create financial risk for Chinese corporations or companies
involved.247 Chinese investments are not like Western investments in most
respects, though Western governments often guarantee investments. Finally,
as we will see in later chapters and as noted earlier, China often uses the
terms aid and investments without distinguishing between them and even
on occasion allows recipients to decide which term to use.
All of this makes analyzing China’s foreign assistance, or aid, difficult.
Nevertheless, employing an all-inclusive definition of foreign aid or using
such terms as foreign assistance or financial help while considering foreign
investments similar to or identical to aid seems appropriate when analyzing
China’s purposes and motives for doing what it does, and the results. This
is especially so when assessing China’s foreign policy objectives and linking

foreign assistance to them. (China’s foreign policy perspectives and goals are
discussed in detail in Volume 1, Chapter 2 and Volume 1, Chapter 4.) It is
also appropriate, if regarding one of China’s motives in providing financial
assistance to developing countries to be promoting their economic growth,
which is what foreign assistance is suppose to do.
The time frame of this study is from 1950, when China first officially
granted foreign aid (though Mao provided aid even before he was in power
in 1949 in the case of helping the opposition in Vietnam), to the present. In
the early years China’s foreign assistance was not large compared to other
aid-giving countries; but it was large relative to China’s economy. It was also
unique and it had great impact—affecting the results of the two major wars
of that time. As noted, in the 1970s it diminished. In recent years China’s
foreign assistance has become very large. Accordingly more attention will be
given to the special qualities of China’s assistance during period one and its
impact on conflicts with the United States and the Soviet Union. In period
two less attention will be given to aid transactions and projects; more atten-
tion will be devoted to China’s use of foreign assistance to obtain energy and
natural resources, to market its products, and realize its aim of expanding
its global influence.
As stated earlier, this study is not an economic one. However, the eco-
nomic impact of China’s financial assistance to developing countries will
be taken into consideration since facilitating economic growth means that
China’s help will more likely be considered successful and, this in turn,
means it will have greater political impact. In other words, promoting
economic development or creating the hope or expectation of economic
growth on the part of recipients translates into foreign policy influence
for the foreign aid giver (in this case China), which is what this study is
about. In recent years China has been a major factor in enhancing the eco-
nomic growth of developing countries and China’s external influence has
increased accordingly.
Another reason the author favors a broad definition of foreign aid or calls
it foreign assistance or financial help and includes investments is that he can
devote more attention than other writers to the question of whether China’s
financial assistance helps realize its external policy goals and how exactly
it does that. In other words, the salient questions to be answered in this
study are: Was (and is) China’s national interest advanced by giving foreign
assistance, including this or that donation specifically? If so, how and to
what extent? Hence, one must ask of each pledge or donation: Did China’s
assistance foster bloc solidarity, enhance China’s security, gain prestige for
Beijing, help win diplomatic ties, help seal border negotiations, etc.? More
recently one must query: Does China’s financial help give an advantage
to China in terms of acquiring energy or natural resources or in selling
Chinese-made goods and abetting China’s global reach and its quest for
global influence? In short, the author will focus on the influence (broadly
defined) China has gained by its aid and investments.
China’s successes and failures are topics of concern. So is the topic of
how China’s foreign assistance is, or is not, a challenge to the United States
and the world. Clearly China’s financial help to developing countries in
recent years has been of such a magnitude to render US aid and investments
much less influential. In fact, it has dramatically reduced the influence of
an important tool of American diplomacy. In the process its assistance has
made China an economic and political model to developing countries. The
United States and other Western countries do not like this, because, they
charge, when China gives foreign assistance it ignores human rights, good
governance, and some other important matters. They criticize China for
this. How China copes with this and other criticisms of its financial assis-
tance is thus also a major consideration in this study.
Given this situation, the writer wishes to note some special (besides those
mentioned in the previous section) problems in obtaining information and
data about China’s foreign aid. Studying China, especially the Chinese for-
eign policy decision-making processes and its actions in foreign relations,
very often entails interpreting what data are available and speculating when
little or nothing can be obtained, when the information is sketchy, or when
it contradicts other information. It needs to be noted in this connection that
scholars who have done research using Chinese economic data to explain its
foreign relations have constantly faced serious obstacles.248
Another barrier in assessing China’s foreign assistance is that aid fig-
ures and even information about its decision-making processes, as noted,
are considered “state secrets.” This seems odd and maybe even absurd.
Why should China have such a policy? This seems to be, in part, the result
of China overclassifying information and its fetish about keeping secrets
(which most governments have, though China more).249 While this applies
much more to the past than the present it is still a concern among China’s
leaders that many countries will make more (and excessive) demands upon
China for aid if its policies or operations are widely published.250 Many
developing countries now view China as rich and a very generous provider
of financial help. In addition, Chinese officials are apprehensive of public
opposition to foreign aid giving if it becomes widely known at home that
Beijing gives large quantities of financial help to countries that are better
off than China while there is still extensive poverty in China.251 In short,
Chinese officials do not like to speak in specifics about its aid, especially
putting a value on it—though they have solved this problem to some extent
by calling it investments. Finally, the decision-making processes regarding
foreign assistance in China are not centralized or regularly open to officials
in other agencies, and that makes it difficult to agree on what information
should be disclosed.252 The author will explore these issues in detail in the
following chapters.
Several researchers who have asked Chinese officials about China’s aid
policies have come to the conclusion that there are no clear policies on for-
eign aid. There are principles, but they are very general. Principles accom-
pany and justify aid and investment pledges but an intimate connection is
often difficult to discern. Announcing aid or investments frequently coin-
cides with top officials traveling abroad.253 This makes these announce-
ments seem ad hoc and not necessarily related to aid and investment policies.
Chinese officials also need to “follow the current political line” while not
knowing exactly what it is at any given time or lacking any instructions
from higher ups to clarify it. These are some more obstacles encountered
researching this topic.
When the author made inquiries with officials in China about its foreign
aid and foreign investments, they would often cite one or more published
documents about China’s aid discussed earlier in this chapter, in particular
the eight principles of foreign aid.254 This reflects the apprehension of most
officials to talk about the subject on their own. But it also indicates that
there are many organs of government involved in giving foreign assistance,
and that there is no coordination in their work, especially in explaining aid
policies. Thus talking about aid too much can be risky and may endanger
one’s career. Yet some officials, generally at higher levels, speak of aid with
great fanfare. In fact, in recent years, China’s top leaders have proudly
made announcements of very large donations (in the billions of dollars)
to several regions of the world.255 Sometimes they have even addressed
giving financial help to a specific country. One would conclude that top
leaders have the right to speak about China’s foreign aid and laud it; lesser
officials do not.
Finally, it bears repeating that China, deliberately to a large degree, does
not adhere to definitions or guidelines for foreign aid giving used by other
nations or provided by international or multinational organizations. China
has signed the Paris Declaration on Aid Effectiveness; but it is unclear
whether it did so as an aid giver or recipient.256 The Chinese government
has shown some interest in working with aid organizations in other coun-
tries and even agreeing on some common policies. But this policy shift, if
it is a shift, is new and it is uncertain if it will be continued or if it will pro-
duce results.257 In 2002, the Ministry of Commerce introduced new rules to
evaluate aid projects and in 2003 began to draft regulations on China’s aid
giving.258 But assessment reports did not become available and anyway it is
still usually not discernable whether they have had an effect or not. In 2011,
as mentioned, China issued a white paper on China’s foreign aid. But still
aid was not defined clearly, its relationship to foreign investments was not
delineated, and the amounts of aid cited and the regional distribution of aid
contradicted other official statements on its aid.
The reader will be made more cognizant of the obstacles encountered
in assessing China’s foreign aid in the chapters that follow. Efforts will be
made to get past the difficulties heretofore mentioned and be as precise as
possible to delineate and evaluate the results of China’s financial aid giving.
Sometimes this works; sometimes it does not.
Last, but certainly not least, the author will attempt to reach some conclu-
sions about the importance of China’s now vast financial help to other coun-
tries overall. Since the first decade of the new century China has become an
important provider of foreign aid and foreign investment money, in fact,
critical to a host of nations. As China became very rich in foreign exchange
(around 2005) and as the West fell into recession in 2008 China assumed a
more prominent role as a provider of financial help. This gave China a new
status. It gave it unprecedented influence over global financial affairs. It
made many wonder: What is the significance and meaning of China’s new
role? The author will attempt to answer these questions in the next chapters
of this work.
CHAPTER 2
China’s Worldview and Its Foreign

Aid and Investment Diplomacy
A
s noted in Volume 1, Chapter 1, since 1950, the People’s Republic of
China has given foreign assistance to a significant number of coun-
tries throughout the world. By most accounts China has been very
generous—giving aid at considerable cost and sacrifice. More important to
the analysis here, its foreign assistance has been, and is, a much more impor-
tant instrument of China’s diplomacy than it is for most aid-giving coun-
tries. Explaining this is not easy; it requires assessing both China’s history
and its leaders’ worldviews.
China’s history of giving foreign assistance was based on its ancient polit-
ical thinking, which stressed the importance of morality; in fact, morality
was the essence of governance in China. Further, because China claimed
to be a universal kingdom, its norms of ethical behavior as well as altruism
applied externally as well as at home. Thus China was generous toward other
peoples and political entities in Asia. This reinforced the notion that China’s
government was an upstanding one and it gave its rulers prestige.
From this arose the tribute system. In fact, China’s relations with other
political entities were founded on tribute diplomacy. The rulers of peoples
in various parts of Asia sent emissaries to China to present their respects and
give gifts to the emperor. China more than reciprocated, returning gifts and
privileges (especially trade and access to China’s technology) worth much
more. Tribute was thus an early form of foreign aid, and its recipients ben-
efited greatly from it.
Tribute missions ended more than a century ago. Yet in some ways little
has changed. Chinese leaders still seek a sphere of influence in Asia. They
feel a special relationship with former tribute states and have given an inor-
dinate amount of their foreign aid to these countries. Considerable evidence
suggests China’s current leaders want to restore the tribute system, and even
extend it to the entire world.
In 1949, China’s leaders adopted a Communist-cum-Soviet view of the
world and the Communist Bloc in many ways replaced China’s East Asia
world of the past. China thus gave aid to solidify bloc relations. But, China’s
Sino-centric view of the world and its sense of cultural superiority could not
be easily subsumed into the Communist worldview. In fact, it was not long
until Mao proffered his own perspective of global affairs, which was at odds
with that of the Soviet Union.
After 1978, Deng Xiaoping adopted for China a new and different view
of the world. China became capitalist and adopted free markets and free
trade. It prospered as a result. China’s worldview became what many observ-
ers said was based on pragmatism. But China’s pragmatism was also global-
ism, which proved to be more advantageous to China than to most other
nations. It included making China a world power (where Mao had failed).
Aid was increased and in some ways redefined to facilitate China’s economic
growth. Specifically Deng (and his successors) employed foreign assistance
to help China in its search for energy, raw materials, and markets, though it
remained also an instrument of enhancing China’s image and its security.
Finally China’s foreign assistance has served as a kind of soft power and
in important ways an instrument of foreign policy whereby China could
compete with the United States and the West. Meanwhile it has helped
make China become a global economic and commercial power, recreating
to some degree its historical role in world affairs.
China’s Ancient Political Philosophy

As with other early cultures or civilizations, political thought or ideas about
the nature of politics in China originated from a belief in God or religious
precepts.1 However, unlike other places in the world, notably the West, early
in its history the Chinese belief system evolved away from the idea of a
creator or anthropomorphic God and settled on a more deistic view of the
world. In accordance with this shift Chinese political thinkers advanced the
notion of Heaven (t’ ien) as, rather than a God or godly being in the Western
sense, the “supreme governing force in the universe.”2 This view Heaven was
otherworldly. Man existed in a worldly or separate realm.
While the definition of “Heaven” shifted over time, from being unforgiving
to having a mild or gracious character, or the other way around, its nature was
in any case complex and difficult to understand.3 There was a solution: The
China’s Worldview ● 45
ruler, his close advisors, and the government bureaucracy served as mediators
or go-betweens linking heaven and earth. They made it possible for ordinary
Chinese to comprehend Heaven (to a certain level) but, more importantly, to
live in harmony with its rules. Expanding on this role, the Chinese emperor
and his coterie of officials took responsibility for the “worship” of t’ ien. In so
doing the emperor took the title t’ ien-tzu, or Son of Heaven, a title that made
the emperor, from the Western perspective, sovereign.4
More than two millennia ago, in accordance with this philosophical view
and the way it was operationalized, China’s rulers ceased to inherit their
posts. Thus the Chinese political system became a meritocracy. Government
officials were picked by a national examination that any male could sit for.
It was a difficult examination and few passed. As a result, China’s imperial
court and the officials sent to the provinces, counties, and villages to govern
were its “best and brightest.” But China’s government officials were not only
intelligent; they were moral leaders as well. The content of the examination
was heavy on moral teachings. Moreover, even after candidates passed the
examination and entered government service they continued to receive edu-
cation-cum-training that was to a considerable extent ethical in content.5
The populace was regularly reminded, and most believed, that anyone
that could join this elite was fit to rule the nation or empire. Of course,
there were doubters: How could the people be sure that the emperor, much
less lower government officials, remained upright and were living up to
their ethical standards and were governing well? There was an answer, sort
of. The way to determine whether rulers remained morally qualified and
were doing a good job of ruling was the concept of t’ ien ming or heav-
en’s edict, usually called the Mandate of Heaven. This principle predates
Confucius, but was expounded upon in detail by Confucius and even more
by Mencius. It became one of the most basic principles in Chinese political
thought.6 The mandate gave the ruler the right to govern; yet it could be
withdrawn if he did not fulfill his duties and administer in a proper and
effective way. In other words the people decided in this sense if the ruler was
legitimate; moreover, they had the right to revolt if they deemed the ruler
had lost the mandate.7
While the Mandate of Heaven was in some ways vague and abstruse, in
other ways it was not. How was one to know precisely whether the man-
date remained with the emperor or had been lost? The most salient way
of comprehending whether the emperor had the mandate was to examine
the lot of the people he ruled. If the masses were well fed and secure, the
government was judged to be a moral and upstanding one. If they suffered
from starvation, pestilence, social chaos, injustice, and other ills, it was
said that the ruler did not hold the mandate and was not fit for office.
This resembled the popular ideal often heard during the Roman Empire,
vox populi, vox dei, or as the people see, god sees.8
Because of the centrality of the concept of the Mandate of Heaven, it may
be said the government in China was for the people, and in that sense it was
democratic. Indeed the emperor’s legitimacy depended on the “approval”
of his subjects. However, the government was not otherwise, in its opera-
tions at least, democratic. In fact, it was not supposed to be a government of
the people, a concept that is found in Western history. Hence, the Chinese
masses were discouraged from getting involved in politics or thinking in
terms of people rule.9 The government was ideally benevolent and respon-
sible; it was not participatory.
Naturally, the Chinese system, as it operated in the real world, was much
more complex than this. As political authority was exercised in practice,
the emperor used court propriety and etiquette to broaden the scope of
his power.10 Institutionalized divination, ritual, and superstition were addi-
tional means used to maintain political control. Propagating the ideas in
yin-yang and the five elements was at once a means of “peeping into” the
predestined world of t’ ien, which the rulers could reputedly do, and a way
of ruling by manipulation. Similarly, it served as a means of socializing
the population. Added to this were the magical and mystical qualities of
Taoism and Buddhism. Chinese rulers even perpetuated a belief in fatal-
ism and a moral connection to it.11 In China, the government, quite unlike
Europe, where the church took this responsibility, oversaw the education of
the masses.12 All of these things contributed to an authoritarian (though in
many respects mild) polity.
In 221 BC China’s various kingdoms were united under the Ch’in
(spelled Qin today in the People’s Republic of China) Dynasty. The Ch’in
Emperor used military force to unify China and created a system known as
“legalism” to govern. Laws, which were codified and strictly enforced, were
essential to Ch’in political control. Punishments were severe and the system
almost totally ignored extenuating circumstances or mercy. Exalted schol-
ars/advisors were buried alive when they protested against official policies.
Books were burned. Clearly legalism contradicted the ideal of ethical rule
and a moral government.13
The Chinese people soon came to regard Ch’in rule as cruel and anti-
thetical to Chinese tradition. As a result, say Chinese historians, the Ch’in
Dynasty did not last long—less than 20 years. Another problem was that
this extreme autocratic type of rule was not appropriate to govern such a large
area and so many people as China had at that time.14 The Han Dynasty that
followed, and which endured for more than 400 years, was one of the most
splendorous and perhaps the very best among China’s dynasties. Han rulers
abandoned legalism and adopted Confucianism. Confucianism, which

incorporated many of the ancient ideas, but notably moral rule, became the
state ideology.15
The main tenets of Confucianism, which became the intellectual base
of Han rule, were teh (morality), jen (benevolence), and li (propriety). It
may be said that these ideals interconnected or were mutually supportive
and conveyed the idea of morally superior governance. Nowhere else in the
world did a political system to this extent derive its legitimacy from the ideas
of one sage, and nowhere else ever did the political system last so long—
more than 20 centuries.16 Law was for the next 2,000-plus years held in low
esteem. Government of good, upstanding, and moral men was the ideal.17
The notion of government by ethically qualified leaders, the Chinese
people were convinced, applied not just to China. In fact, China viewed its
culture as being universal—a view that was found in other civilizations but
not so strong as in China.18 The Son of Heaven, or the emperor, theoretically
reigned over all human affairs and all people everywhere. To implement
or rarefy this view of the world, Chinese rulers assumed the right, indeed
the obligation, to teach non-Chinese people morality. And they did.19 They
used various means: benevolence, favors, pressure, force. The easiest and the
preferred means was benevolence.
How, more precisely, one may ask, did China’s emphasis on ethics in
government relate to its foreign relations? First, a moral “drive” lay behind
China’s dealing with foreign peoples. Many nations, of course, have been
influenced by humanitarianism to help others; but in China’s case it was dif-
ferent.20 The extraordinary importance placed on ethical government and
the goals of finding and cultivating fit (meaning moral) leaders connected
to China’s external policies.21 Benevolence at home meant benevolence else-
where, and vice versa. This led to China’s tribute diplomacy (foreign aid),
which became its way of conducting foreign relations (and will be examined
in the next section of this chapter).
These ideas did not die. In modern times when China was humiliated
during the onslaught of the West, Chinese scholars and officials struggled
bitterly with the prospects of discarding their ancient political ideals, espe-
cially their Confucian ideology. Chinese officials adhered with great per-
sistence to the notion that the state was one built on morality as opposed
to one based on boundaries, military force, and legal principles. In other
words, whereas China changed in some important ways to accommodate
the West, its leaders did not abandon the principle that right conduct gave
the ruler legitimacy.22
Chiang Kai-shek reflected this kind of thinking. In 1934, Chiang
launched the New Life Movement—a moral order based on Confucianism.23
In 1936, after he was kidnapped and held hostage for a short time in what
became known as the Sian Incident, he tendered his resignation. He said
that he had failed to lead by example. Later, in his book China’s Destiny,
Chiang wrote at length about the need for cultivating morality in order to
attain national salivation, citing the Four Cardinal Principles and the Eight
Virtues of ancient times.24
Mao was not very different. Even though he declared that he had hated
Confucius since he was a boy, he often cited Confucian proverbs and teach-
ings.25 He was also deeply influenced by Chinese history, including its
traditional diplomacy.26 More germane to the argument being made here,
though, very much akin to Confucianism, Mao’s thought served as a “moral
way” and under his rule officials were theoretically chosen by merit, defined
by their ability and willingness to “serve the people”—not dramatically dif-
ferent from choosing officials in times past.27 Mao, furthermore, intimated
that a Mandate of Heaven applied when stating his ideals for ruling China:
The peasants would give allegiance to the “emperor” (meaning Mao), who,
he said, was most likely to serve their wishes.28
Deng Xiaoping likewise propounded ethical government in a host of
ways. After his assumption of political power two years following Mao’s
death, he ended the persecution of intellectuals. He called for stability—
which was a criterion of upright rule in the past (and unlike Mao). In a
campaign of “reversing verdicts” of the Cultural Revolution, he rehabilitated
numerous party members and government officials. He proclaimed that he
sought to improve the lot of the people by reforms that brought prosperity
and well-being to citizens of China, which one might say, like the emperors
of old, “gave him a mandate.”29
Jiang Zemin, who assumed the position of head of the Chinese Communist
Party in 1989, the top leadership job in China (though he was still operat-
ing under Deng’s shadow), survived, some argue, by using a “Confucian
schema,” whereby officials could rise to the top through “making progres-
sively closer relations: learning, achieving, following and ruling.”30 In 1994,
when he was more confident of his position, he launched an official revival
of Confucian teachings and virtues, including thrift and but also respect
for teachers and the aged. Two years later, Jiang had a law passed requir-
ing advertising agencies to at least once a year promote “traditional virtues
of the Chinese nation.”31 It may also be relevant that Jiang was the first
Communist leader with a university education, which fit the Confucian
ideal (not the Communist one). He enjoyed literature and often quoted liter-
ary passages in his speeches.32
Jiang’s successor, Hu Jintao, went even further than his predecessors in
justifying economic growth, speaking of its benefits to Chinese citizens, and
showing concern for those who had been “left behind.” He also expressed
a new sympathy for those that had suffered in the past.33 Hu gave China’s
intellectuals a new role in the political process and, on the global politi-
cal scene, provided aid funds to establish Confucian institutes around the
world.34 He added Confucian terms to the nation’s official vocabulary. A
“harmonious society” and a “moderate well-off society,” favorite Jiang terms,
were very Confucian in tone.35
When China’s current leader, Xi Jinping, assumed the top job he spoke
of the “road to rejuvenation,” which, it was said, “tells modern history as a
morality tale.”36 He also spoke repeatedly of the “Chinese dream”—which
some defined as a statement of nationalism built around China’s past and its
important position in the world.37
Tribute as the Forerunner of Foreign Aid

As noted, historically Chinese regarded their ways as superior. In their
view other peoples enjoyed the privilege of visiting China and partaking in
China’s culture. In turn the Chinese government benefited from its subjects
perceiving their government as moral and universal.
For various other reasons this system lasted for centuries. First, China
was distant from other early civilizations in the world and did not inter-
act much with them; thus its cultural superiority was never challenged.38
Second, throughout most of its history China was rich; it was probably the
richest country (or empire) in the world until fairly recently—to the 1400s in
relative terms and to the mid-1800s in absolute terms.39 Hence China could
afford to be generous with nearby people and their rulers. Third, China
had everything it required in terms of resources and material goods. It was
an autarky. China did not need to engage in commerce with the peoples or
kingdoms throughout Asia. Trade was thus something China could grant
others as a favor or gift. And others so regarded it.
As noted above the “foreign” representatives who came to China brought
with them gifts showing respect for the emperor, as required. They departed
with “booty” of much greater value.40 The “economic aid” China gave the
tribute bearers included not only gifts but also as noted the right to do
business in or with China. This was very important to the people in the
surrounding areas.41 Those that sent tribute bearers used the things they
obtained from China to enhance their rule by distributing them to their sup-
porters and/or to make a profit. These who came to offer tribute in addition
obtained valuable knowledge from China: engineering skills, agricultural
techniques, weaponry, and inventions of all kinds.42 They were on occasion
afforded protection in the form of something that resembled today’s security
treaties.43 Last but not the least, their rulers were even given investitures by
China, which enhanced their legitimacy at home.
Tribute thus became a process whereby the people, tribes, or kingdoms
in East Asia literally gave China face in exchange for foreign assistance. One
can easily understand why the rulers of the peoples on China’s periphery
accepted this unequal, vassalage-style relationship: it had practical value.44
The tribute system also played an important role in domestic politics
in China. Tribute missions reinforced a view that the emperor sought to
perpetuate in China—that he was the universal moral governing authority.
Outsiders’ recognition of this made it easier for the emperor to convince his
subjects at home of his righteous rule and that he possessed the Mandate
of Heaven. In short, it rendered to the emperor prestige and enhanced his
ability to control his subjects.45 According to some historians, the Chinese
masses saw aid giving as both an indication that China was prospering and
that its rulers were practicing moral governance.46
China found other quite pragmatic reasons for tribute diplomacy. Wars
with neighboring people, especially the rugged nomadic people to the
north, were more costly for China, an agrarian society, than they were
for its foes.47 In other words giving foreign aid was cheaper than fighting.
Hence China’s generous gifts, extending trade privileges, etc. substituted
for it taking military action.48 Of course, China at times employed force
to establish its hegemony.49 But that was seen as a second option or the last
resort. Ruling through moral suasion and bribes was preferable. The tribute
system thus enabled China to project an image of a powerful yet benevolent
country and exercise control in a “light and relatively superficial way” (the
contemporary term being “soft power”) over a very large and diverse empire
for centuries.50
Over the years the tribute system became more formal and more refined.
It was even said that the ritual associated with paying tribute, managed by
the Board of Rites (China’s foreign ministry), was made “flowery and beau-
tiful”; thus it came to have great aesthetic value.51 The tribute system also
came to assume a truly vital role in the conduct of China’s foreign relations
because it crossed political, economic, cultural, and other boundaries. Thus,
according to one author, there is no word in Chinese for the tribute system.52
It was simply assumed to be the way of doing things. Another testament
to its importance was the fact that in the Chinese world perpetuity char-
acterized the universe; process, change, and relativism had no place. The
tribute system, which became the essence of China doing business with its
neighbors, was seen without question as being permanent.53 It was such an
integral part of China’s way of conducting foreign relations that almost all
foreign political, economic, and cultural relations were handled within its
framework. The tribute relationship even defined China’s borders, which

were not demarcated as territorial boundaries were in the West.54
In connecting this past world of tribute to Chinese leaders’ views of the
world now, it is important to realize that the tribute system increased in
importance through the later centuries of China’s history. It is estimated
that between 1662 and 1911, China received more than 500 missions from
62 “countries.”55 The missions even lasted into the period of China’s humili-
ation at the hands of Western countries following the Opium War.56 In
1873, ambassadors for England and France, after defeating China in three
successive wars, finally got an audience with the emperor; it took place in a
palace reserved for tribute missions from small states.57
As noted, the emperor informed his subjects of missions coming to China
to pay tribute.58 In fact, this was so critical to the emperor’s effective rule,
some historians argue, that many emperors exaggerated its scope and some
even faked it. In some cases, Nepal, for example, in communication with
China referred to an exchange of gifts and a relationship based on equality;
but the documents were translated into Chinese using the term “tribute,”
which suggested something quite different.59 In Ch’ing (Qing) dynasty his-
tory, it is recorded that in 1667 Italy paid tribute and that the Pope on at
least one occasion personally brought tribute to the Chinese court (which,
of course, is not true).60
The tribute system has thus been described by Western scholars as more
of an ideal than a reality: it had to be supplemented with considerable diplo-
matic flexibility on the part of China, which involved playing one barbarian
against another, sending Chinese women as “advisors,” paying (cum brib-
ing) some to perform the tribute rituals (or at least not denying the system),
and accepting nonperformance while recording it as compliance.61 Thus, for
some, China’s tribute diplomacy represented a view of what the world ought
to be and for centuries this worked quite well.62
The tribute system finally ended (or did it?) with the onslaught of the
West and China’s decline. Western countries were offended by it and delib-
erately sought to destroy it, and seemingly succeeded. More distant coun-
tries broke the tribute bond with China first. Closer ones broke later, with
the Opium War serving as a catalyst in a number of instances. Under British
pressure, Nepal ended the relationship in 1852. The Sino-French War in
1885 resulted in Vietnam gaining “independence” from China and the ter-
mination of its tribute relationship. Tribute relations were cut with Burma
about the same time. Japan caused the relationship between China and
Korea to be severed in 1895. Russia helped Mongolia end its tribute rela-
tionship with China in 1911. China did not accept this and called these trea-
ties “unequal”—viewing them as improper. Also, it is telling that from the
Chinese perspective, tribute bearers had simply changed suzerain or tribute

bonds, bonds that might one day be restored with China.63
Because of the centrality of its tribute diplomacy for such a long time,
a number of writers believe that the tribute system has not been eradi-
cated and, in fact, plays a “residual role” in the way the leadership of the
People’s Republic of China behaves today.64 For example, when the Ming
dynasty leaders faced problems on China’s northern and western borders,
the emperor gave more publicity to tribute bearers from the south. Similarly,
when Mao faced tensions to the northeast in the 1960s, he welcomed lead-
ers and representatives from underdeveloped African and Asian countries to
come to China and pledged aid to them during ceremonies that included
widely publicized photo-ops.65
One author even connects China’s decision to engage in war in Korea in
1950 with the past tribute system, describing what he called Mao’s effort to
“restore suzerainty” over a once tribute-bearing country.66 China’s military
actions against Tibet and its subsequent war with India in 1962 also appear
to have such a connection. And China’s support of North Vietnam may also
be seen from this perspective. It is likewise said that China’s military attack
on Vietnam in 1978 (over displeasure for its ingratitude toward China’s aid)
and China’s claims to territory in the South China Sea (based vaguely on
China’s history) have a background in the tribute system.67
The tribute mentality is also evident in various instances of China’s
diplomacy vis-à-vis Western countries. In 1971, when an Australian mis-
sion went to China, Zhou Enlai referred to one member as the “vanguard
officer,” a term used to designate a certain member of past tribute missions.
Some in the media in China quite astonishingly (in Western eyes) saw the
Nixon visit to China in 1972 as a tribute mission: the foreign power “sends it
ruler to China to show its submission . . . by bringing rare animals and other
products of the country . . . to ask for favors.”68
When President Clinton visited China in 1998, he was treated in ways
that, to some Asian observers, recalled the tribute bearers of the past.
Clinton was asked not to visit any other country on his visit, and he com-
plied. (American leaders as a rule stopped in Japan on Asian visits.) The
Chinese media made the visit look as though Clinton was coming for ask for
favors—which the Chinese government gave him. 69 President Jiang Zemin
told China’s state-controlled press that Clinton came to China because of
China’s greatness and to receive China’s “goodies.” Clinton was asked to say
things (praise that in some ways resembled comments tribute bearers made
in the past) that supported Jiang politically. After the visit, Chinese leaders
and spokespersons made remarks that seemed to revisit the tribute system.
These include statements (regarding the US trade dispute with China) such
as: “If there is a trade war between China and the U.S., the U.S. will lose.”
“Foreigners come to China because they need trade.”70
In late 2009, when President Barack Obama made his first trip to China,
his visit was in a variety of ways made to look (by his hosts) as if he needed
China—like the tribute bearers of the past. The United States was in the
throes of a recession; China wasn’t. It was thus natural to some degree that
the Chinese media portrayed the American president as “begging” for China’s
financial help.71 This scene was repeated in November 2014 when President
Obama visited Beijing for the annual Asia Pacific Economic Cooperation
meeting. President Xi arrived with his body “open toward the cameras.”
President Obama was required to approach Xi from the left presenting a side
view “as if paying tribute.” 72
In recent years, especially paralleling China’s economic boom, China has
talked less in the language of practical cooperation in its relations with other
countries and more about the other country’s friendliness and their accep-
tance of Chinese norms.73 Clearly China has given the impression that it is
moving away from practicing modern Western-style foreign relations and
instead favors its traditional style of diplomacy.
Some writers have gone so far as to opine that China may succeed
in reestablishing the tribute system.74 There are reasons to think so: the
Westphalian system (of sovereign nation-states) is under fire for not being
an equal system; for it being the cause of wars, imperialism, and colonial-
ism; and for a variety of other reasons. It may, in fact, be seen as witnessing
its demise in Asia, with European influence fast diminishing there, America
on the decline throughout the world, and Japan in economic difficulties.
China, in contrast, is on the rise. China’s rapidly growing economic and
cultural influences and its foreign aid prove this.75
China’s long dominance in East Asian international relations is some-
thing Asians were accustomed to and today seem to recall favorably, espe-
cially in the sense that it provided peace and stability to the region.76 The
Western system, which emphasizes power and balancing power and is a
zero-sum system that engenders violence and war, is not accepted by Asians,
who prefer a non-zero sum system that focuses on economic growth.77
There is still another reason to say that it holds promise for the future:
There have been fewer wars and greater stability during the time of China’s
rise than before. For all of these reasons Asians have reacted more favorably
than not to China becoming their foremost trading partner and provider
of aid and investments.78
There is another even more profound idea to ponder: Can China’s tribute
system be applied outside of Asia? Some think it can be.79 Indeed, there is
large and growing support among developing countries all over the world,
and even in some developed countries, for China’s development model that
emphasizes prosperity and stability and focuses less, or not at all, on democ-
racy and human rights.80
Mao’s Global Perspective

As its historical Sino-centric perspective and the moral/ethical prism through
which China viewed the world served as the philosophical foundation upon
which it conducted its diplomacy for more than two millennia, Mao’s world-
view or Weltanschauung profoundly affected China’s foreign relations dur-
ing the years from 1949 to 1979.81 One might say it served as the basis
or ideological framework for China’s foreign policy thinking as well as its
diplomatic decision making.82
Most observers suggest that Mao did not accept China’s past view of
the world.83 He rejected China’s past. He advocated revolution. However,
in reality Mao’s worldview was at its core a strange amalgamation of the
Communist worldview (revised over time) and his outlook of the world
selectively drawn from China’s past.84 As we will see later, in some impor-
tant ways Mao’s view of the world was similar to China’s historical leaders’
way of viewing the lands beyond China’s frontiers. Moreover, this became
more the case as time passed.85
To understand Mao’s worldview, it is important to grasp the fact that
he was at heart a philosopher and expressed grand (and universal) views
on many topics.86 But his “thing” was theory. He was China’s modern-day
Communist emperor. He assumed the responsibility of past Chinese lead-
ers for explaining the ways of the universe to his subjects. His theories were
official doctrine. Mao’s “thoughts” (a humble term for his theories or world-
view) were in fact assertive and dogmatic and gave foreign policy making
(and aid giving) a theoretical foundation.
Early on (in the several years after coming to power) Mao viewed the
world mainly from a Communist (though not exactly), perspective.87 He saw
world history as a process of struggle resulting from contradictions between
economically determined classes within a nation and externally among
nations as set by their economic/political systems. This, he perceived, gave
rise to an irreconcilable contest between capitalism (which begot colonial-
ism and imperialism) and socialism or communism. This “antagonistic con-
tradiction,” as Mao called it, split the world into two opposing and mutually
hostile camps.88
One may query further as to from where Mao ginned his ideas.89 Mao
claimed he developed his worldview inductively. But there were a host of
simply practical reasons for Mao to see the world as he did; this certainly
included his decision to join the Communist Bloc rather than (if it indeed
were possible) aligning with the United States and the West.90 Communist
ideology afforded Mao a blueprint for governing. More specifically it pro-
vided the sine qua non for his style of rule. And not of small consequence it
contained a formula for engineering economic growth. Last but not least it
provided Mao with an enemy to justify many of his policies.91 Thus Mao
needed communism for both domestic political and economic reasons and
for dealing with the external world.
In any event, consistent with his worldview that the “prevailing” con-
tradiction in the world was between capitalism and socialism, neutrality or
nonalignment was not possible. So there was no choice to be made in joining
one bloc or the other. In 1949 Mao proclaimed that China would “lean to
one side” and would join the Communist Bloc under Moscow’s leadership.92
The capitalist bloc, led by the United States, became China’s archenemy.
To Mao the struggle between the blocs was a deep and irreconcilable one.
Only one bloc would survive.93 Western scholars generally agreed with this
part of Mao’s view of the world and called it a bipolar system, one in which
two major powers (superpowers) dominated global politics resulting in a
two-bloc world.
In deciding to join the Communist Bloc, Mao did not mind that he
alienated the West. In fact, he did so deliberately. He, with some fanfare,
violated Western international diplomatic law in holding some foreign offi-
cials hostage in 1949 while rejecting practicing foreign affairs according to
established norms. This made sense both from the perspective of China’s
historical view of diplomatic practice (respecting the king and repelling the
barbarian) and ending the “curse of Western imperialism.”94
But there was a problem with this: Mao was a nationalistic Chinese and a
China chauvinist; this meant he was cognizant, perhaps even obsessed, with
the fact China was once the dominant power of the world (its world, Asia)
but had fallen from grace. Hence, Mao’s China could not be just an ordi-
nary member of the Communist Bloc and subservient to the Soviet Union.
Also, looking at the world from Mao’s eyes, his “revolutionary state” based
on Lenin’s thesis of the importance of the Third World was a way to restore
China’s historical greatness. This predestined the People’s Republic to play
the role in world politics of fomenting change and working against estab-
lished norms, but not just act as Moscow ordered.95
In the mid-1950s, China’s (Mao’s) worldview shifted (no doubt in part
due to differences with the Kremlin) from what Western writers called a
tight bipolar view wherein nations perforce had to chose which side they
were on to a more flexible view. In short Mao revised his perspective of global
affairs from a world clearly divided into two blocs—wherein Third World
countries that heretofore were described as stooges of American imperialism

that were “sitting on the fence and would fall off,” to something quite differ-
ent.96 Now Mao advanced the idea that a “third way” was possible.97 He thus
introduced the term “intermediate zone” or what in the West was called the
“non-aligned nations bloc.”98 In the eyes of Western international relations
theorists, Mao’s worldview shifted from what Western writers called “tight
bipolarity” to “loose bipolarity.”
What specifically caused Mao to change his worldview? Was it his read-
ing of Lenin’s theory of imperialism? Mao was certainly a follower of Lenin
on this subject. Or was it something else? There were several things that may
have influenced Mao. China was displeased with the Soviet Union’s policies
during the Korean War and the cost of the war China paid.99 The Soviet
Union (in China’s opinion) had pursued its own national interest rather
than giving primacy to bloc interests, and its policies in some important
ways contradicted and/or disregarded China’s interests. China was isolated
from the international community. Chiang Kai-shek’s Nationalist regime
that had relocated to Taiwan maintained diplomatic ties with most nations
of the world and represented China in most international organizations.
Then there was a UN boycott put in place against China during the Korean
War that remained after the armistice; this hurt China both economically
and politically. Last but not least, the two superpowers dominated global
affairs and neither gave China respect. Mao thus saw the need for China to
deal with non-aligned countries on its own.100
The first major new tenet of foreign policy stemming from Mao’s new
or altered worldview (there being an intermediate zone) was announced
in 1954 when, in a trade agreement with India, China adopted the Five
Principles of Peaceful Coexistence.101 The principles were as follows: Mutual
respect for sovereignty and territorial integrity, mutual non-aggression, non-
interference in each other’s internal affairs, equality and mutual benefit, and
peaceful coexistence. China subsequently used these principles in pursuing
relations with Third World countries, especially mutual respect for each
other’s sovereignty, and non-interference.102
Zhou Enlai cited the principles when he attended the Geneva
Conference on Indochina that year.103 He further advanced them at
the Bandung Conference in 1955 (the first Afro-Asian Conference).
Delegates to this conference represented one-half of the world’s popula-
tion at a time when the idea of a Third World bloc (intermediate zone
to Mao) was taking root.104 Clearly at this time China’s (cum Mao’s)
foreign policy thinking departed from one based on a strict two-camp
view and the Communist (Soviet at least) view of the world.105 China’s
foreign policy also took on a palpably more moderate tone.106 Whether
or not China’s shift of policy from a lean-to-one-side global perspective,

based on what some called Mao’s “epiphany,” was to be permanent or not
(or was intended to be) was difficult to say; yet clearly the world as it was
viewed from China had changed.107
At this time Mao adopted three distinct, even disparate, new precepts.
First, he accepted the West’s Westphalian (the sovereignty of the nation-
state) global system. This was traumatic for China as it meant giving up
its traditional Sino-centric view of the world. It also implied accepting an
international system China had no part in constructing.108 But it meant
Mao could use the West’s worldview against it: imperialism and neocolo-
nialism were condemned. He could deal with domestic politics theoreti-
cally at least without interference. He could make friends with Third World
countries on this basis. Two, Mao proposed what one writer calls China’s
“ethical diplomacy.”109 This harked back to China’s traditional way of see-
ing the world. It translated into China approaching Third World coun-
tries with advancing benevolence and friendship. This offered a promising
alternative to seeing Third World countries as puppets of the West. Third,
Mao spoke about his experience in defeating Chiang Kai-shek’s forces
by encircling them (in the cities) from the countryside, in other words a
rise of the masses inspired by Mao’s Communist movement to make the
revolution a success, and that China’s experience might contribute to the
pantheon of Communist ideas regarding the way world revolution might
happen, which was not in accord with Moscow’s view of the world.110
Proceeding from China’s (Mao’s) revised perspective of the world, Beijing
launched an offensive to win diplomatic recognition from more countries.
China needed these ties (which it lacked at the time) to enhance its global
image and escape from its isolated predicament. The Third World was the
place to start. There were many new undecided nations in Mao’s “interme-
diate zone.” Enlarging China’s foreign aid comported with these new views
of the world.
However, in 1957 China’s view of the world reverted back to a more
bipolar one accompanied by a hard line in foreign policy. The determining
event was the Soviet Union launching a satellite, Sputnik, into space, ahead
of the United States. Mao declared that the Communist Bloc had passed
the capitalist bloc in military technology and could defeat it in war—which
Mao thought was inevitable. An alternative explanation was that Mao was
impatient with the Soviet Union and perceived it was unwilling to take risks
in dealing with the United States, so China had to apply pressure.111 There
were, of course, other factors that shaped China and Mao’s global perspec-
tive at this time. The United States maintained its aggressive policies vis-à-vis
China as witnessed by its alliance building in Asia aimed at containing
China.112 Washington proved its mettle in 1954-55 during the Offshore

Islands (Quemoy and Matsu) crisis when the United States helped Chiang
Kai-shek keep these islands right off China’s shore, and then concluded
a defense treaty with Taipei.113 Mao may thus have reconsidered his new
thoughts about the world cited above. Whatever Mao’s thinking, he spoke of
there being “two winds” in the world today and argued that the “East Wind
would prevail over the West Wind.” He cited the larger population of the
Communist Bloc and its now superiority in strategic weapons.114
But this “phase” of Mao’s thinking didn’t last long. Mao apparently hoped
to push the Soviet Union into taking a tougher stance against the West; thus he
did not abandon his two-camps view of the world. But Mao was disappointed.
So, in 1958, Mao again made reference to an “intermediate zone.” He spoke
of the principal contradictions in the world being imperialism, nationalism,
and revisionism (italics added).115 (Revisionism was a pejorative for the Soviet
Union’s views and actions that China considered soft on the West.)
This marked, in retrospect at least, a serious and irreversible or final deci-
sion for Mao, to move away from his earlier two-camps view. At this time,
Mao spoke voluminously about correct ideology. In Communist parlance
he advanced supporting revolution and the united front doctrine (a “theory”
he developed during the Chinese civil war when fighting the nationalists
required strictly defining the enemy and aligning with friendly groups).
Mao linked this to Lenin’s doctrine of a two-stage revolution, a national
democratic one and a socialist one, arguing that his united front doctrine
accorded with implementing the first stage.116
In 1960, Sino-Soviet differences reached a snapping point. The two
Communist giants had never before to such a degree displayed their dif-
ferences in the open. The prelude to the public airing of their feud was
Moscow’s recanting its promise (in China’s view) made in 1959 to deliver
China nuclear weapons in response to the United States threatening China
with a nuclear attack during the second Off-shore Islands crisis the previous
year.117 What followed was the Soviet Union cutting aid to China in 1960
and the breaking of relations between the Communist parties of the two
countries in 1962.118
Related to China’s evolving shift away from a two-bloc world, in 1964
Mao elaborated further on his theory of an intermediate zone. He spoke
of two intermediate zones. The first was Africa, Asia (minus Japan), and
Latin America. The second included Canada, Western Europe, Oceania
(Australia and New Zealand), and Japan. China’s policy toward the first
intermediate zone, the underdeveloped countries, was to call for armed
struggle against imperialism and neocolonialism; its policy toward the sec-
ond intermediate zone, the industrial countries minus the United States,
was to promote resistance to the oppressive ruling classes and against

American imperialism.119
Mao didn’t say exactly where China fit into this schematic.120 Apparently
he could finally bring himself to completely abandon the idea of a two-bloc
world and/or forsake the Communist Bloc. Alternatively Mao did not see
any hope that he might gain leadership over the Communist Bloc by ousting
the Soviet Union from that position.121 In any event China single-handedly
took up the gauntlet to support wars of national liberation in the Third
World. That year Zhou Enlai, during his famous trip to Africa, spoke of an
“excellent revolutionary situation” there.122
Yet Mao did not make a claim to be the leader of Third World coun-
tries. Perhaps he hoped that the Soviet Union would repudiate its revisionist
actions and support China. Mao said at the time that the “forces of impe-
rialism” would not be able to exploit Sino-Soviet differences.123 Or Mao
recognized China’s limitations. In any event, Mao’s decision to support wars
of national liberation became a central tenet of China’s foreign policy and
aid was his tool.
In 1965, China moved another step away from Mao’s two-camp dictum
when Lin Biao (later to be Mao’s official successor) published a work depict-
ing the world as divided into “city” and “countryside” areas while describing
how the latter would “strangle” the former—just as the Communists did
the nationalists in China’s civil war.124 Lin made Mao’s strategy of encircling
the cities a global schema for defeating imperialism and social imperialism
(meaning the Soviet Union). It veered from Mao’s four-bloc typology of the
international system introduced the previous year. Most important it made
China the leading contender for leadership of the Third World and China,
in his (Mao’s in the sense Lin was speaking for Mao) view, a Third World
country rather than a “second world” or Communist country (thinking of
Mao’s two-camp view of the world).125 Foreign aid became a more impor-
tant instrument of foreign policy.
Lin also propounded what was known as the “dual adversary theory”—
whereby China would challenge strategically (cum militarily) with the
Soviet Union and the United States simultaneously. However, Zhou Enlai
and other Chinese leaders assailed Lin’s view as foolhardy and advocated,
especially after the Sino-Soviet border war in 1969, that China improve rela-
tions with the United States to fend off the Soviet threat. Anyway, Lin’s
“north-south polar” worldview subsequently died with him in September
1971, when, after allegedly trying to assassinate Mao, he attempted to flee to
the Soviet Union and was killed in a plane crash in Mongolia.126
Mao’s pre-Lin worldview (of intermediate zones) was quickly resurrected,
but then morphed into a worldview partly derived from the united front
concept the Chinese Communist Party had used against Chiang Kai-shek.
It was called a “united front view of the world” wherein China would align
with the Third World or developing countries (and would lead this bloc), the
non-superpower developed countries (meaning essentially Western Europe
and Japan, which were dissatisfied with their second-class status in a bipolar
world), and even (later) the United States (inasmuch as it had learned a les-
son from its defeat in the Vietnam War), against Soviet hegemonism.127
In fact, this united front construct seems to have been the foundation for
an anti-Soviet “alliance” even before it was announced and constituted in
effect China’s worldview after the Sino-Soviet border war and the announce-
ment of the Nixon Doctrine in 1969, signalling that America sought a rap-
prochement with China. Alternatively, Mao thought about linking the two
intermediate zones into a kind of alignment to deal with US-Soviet collu-
sion, though there is ample reason to believe he considered the Soviet Union
the more important enemy.128
In 1973, following the Tenth Chinese Communist Party Congress,
Mao, in accordance with decisions made (or confirmed) at that meeting,
gave even more attention to the Third World.129 The next year, in early
1974, Deng Xiaoping announced (and in the process praised) Mao’s new
“Three Worlds” theory in a speech to the UN General Assembly.130 In
Mao’s new (or revised) view, the world is divided into three camps: The
“first world” or the superpowers was composed of the United States and
the Soviet Union. According to this worldview, the first world seeks hege-
mony over the other two in an effort to dominate the world. The U.S.
and the Soviet Union were seen to be in collusion to perpetuate the bipo-
lar system. The second and third worlds should, and would, according
to Mao’s perception, cooperate against this “superpower hegemonism.”131
This worldview of course, was supplemented (revised) by the fact that,
according to China’s united front theory, the United States was the least
dangerous of the two superpowers (because its power had been sapped by
the Vietnam War and it had changed because of its defeat) and thus China
and the United States could (and should) cooperate (marked by Nixon’s
visit to China in early 1972) against the more aggressive and threatening
Soviet Union.132
China’s new worldview at this time did not have as much impact on
China’s foreign policy as it might otherwise have had. Chinese leaders had
to face the problem of Mao’s health and the issue of his ultimate demise.
They also feared external problems that did not fit into the mold of Mao’s
worldview. Thus it was left to Deng Xiaoping to revise Mao’s worldview or
discard it and devise a new one. He did both. More, however, he gave little
attention to the matter of a worldview theory.
Deng Xiaoping’s Worldview

Mao died in 1976. He personally (without any real input from the Party)
picked Hua Guofeng as his successor. Hua was a dark horse. He did not have
the allegiance of top members of the Chinese Communist Party. His claim
to be Mao’s heir was based mainly on a note Mao had written in his last days
saying Hua was his pick.133 At this time China’s two top leaders seen as likely
to follow Mao, Zhou Enlai and Deng Xiaoping, were not present. Zhou died
earlier that year. Mao purged Deng shortly after that.
As China’s new leader Hua took as his main role that of continuing
Maoist policies. Naturally he did nothing to change or revise Mao’s world-
view. In 1977, presumably at Hua’s instigation, Mao’s “three worlds” theory
was embellished and officially made the central document in the pantheon
of writings on China’s interpretation of the nature and structure of world
politics. It was labeled Chairman Mao’s “Theory of the Differentiation of
the Three Worlds.”134
However, late the next year, in December 1978, Deng Xiaoping wrested
the reins of power from Hua.135 Deng promptly launched what became
known as an “era of reform.” It was indeed reform; some called it earth-
shaking and even “revolutionary change.” Mao’s policies and his leadership
were labeled failures. They, it was charged, had led to chaos and the untold
persecution and killing of Chinese people, not to mention the decimation
of the Chinese Communist Party during the Great Proletarian Cultural
Revolution. Regarding Mao’s foreign policy, it was said the nation’s external
relations experienced repeated setbacks and pitted China unwisely against all
of the world’s major powers.136 Mao’s economic ideas became a special target
for criticism. Deng blamed Mao for China’s poverty and its low level of eco-
nomic growth and its consequent lack of respect throughout the world.137
But Deng’s criticisms in many respects were muted. Deng might have
charged Mao (as Stalin had been) of committing terrible crimes and of mak-
ing mistakes that irreparably hurt China both domestically and in foreign
relations. Astonishing to some, Deng made fewer and less-bitter-than-ex-
pected accusations against Mao. Concerning Mao’s worldview, Deng might
have charged that Mao was wrong and put forth a new worldview; he did
not do that.138
As a matter of record, Deng made no immediate changes to Mao’s grand
portrait of the world. He did not propose any new theory to undergird major
changes in China’s foreign relations that were to come.139 One writer explains
it this way: Deng sought to use Leninism to justify the state’s authority
while adopting capitalist economic reforms to make the economy work.140
In doing so Deng was at once coming from the right (in terms of capitalist
economic development) and the left (state political control), and this was
confusing in ideological terms. Another explanation was that Deng’s reform
policies that were to serve as the basis for China’s foreign policy did not con-
stitute an ideology in that they were too infused with utilitarian thinking.
Hence, they could not serve as a corpus of theory in the sense that Mao’s
thought had.141
There was another reason: among the terms or isms that Deng might
have used (and did) to constitute a “Dengist worldview” there were too
many and none was uniquely Chinese. Certainly they could not serve the
purposes that Mao’s worldview did. Globalism fit Deng’s global perspec-
tive. But to Chinese globalism fits everyone; it is not Chinese (though
China had historically espoused and practiced universalism). It did not
qualify to be an ism anyway.142 Furthermore, Deng’s globalism meant an
open world economy and world peace, not world government as it signified
to some in the West.
The term “mercantilism” was employed by some to describe Deng’s eco-
nomic policies. But mercantilism did not have good connotations and was
clearly Western in its origins. Anyway Deng denied practicing mercantilism.
China’s leaders advanced Westphalianism (or an international system that
gives prominence to the nation-state). But this was a Western idea and in
many places was no longer in vogue and, in any event, applied only partly
to China’s view of the world. Many also saw it as simply a defense against
criticism of a nation’s (China fit this charge) human rights abuses.143 Some
Chinese leaders advocated the political theory of realism; but realism was
again a Western theory. And while it fit China’s intentions it was not a com-
prehensive explanation of the world and China’s place in it.144
During the Mao period, Chinese leaders sometimes talked in terms of
what Western scholars call systems theory and cited, and even advocated,
multipolarity. Sometimes they spoke of a balance of power system. But
again these constructs were Western in origin and could not serve as a grand
Chinese worldview, though Chinese certainly understood the terms.145
Chinese scholars spoke of other global “systems” and even advocated one
or another (as we will see later in this chapter), but never promoted any as
China’s definitive worldview.
Some have argued that Deng’s ideology was nationalism. He nurtured
the growth of Chinese nationalism. In so doing he filled the vacuum he cre-
ated in abandoning communism and Maoism. Promoting Chinese national-
ism also fit Deng’s plan to make China a powerful nation. It clearly justified
Deng giving economic development his top priority to make, he said, China
great again. However, the nationalism Deng created, like most forms of
nationalism, was not easy to control. In fact, his “pragmatic nationalism,” as
it was sometimes called, was especially difficult to harness. Others, includ-

ing Deng’s opponents, could use it for different purposes, and did. Deng
thus sought to move his newly created Chinese sense of nationalism or patri-
otism away from it being either a nativist or an antitraditionalist one (both
tendencies that existed in China) and toward one that viewed past foreign
imperialism and Western cultural infiltration as a source of weakness, the
solution to which for Deng was modernizing China.146 In any event, Deng’s
nationalism did not fit the definition of worldview.147
In short, there was no overarching or grand theory of world politics that
was appropriate for Deng. Furthermore, Deng did not see the need to bother
with formulating or even defending his (China’s) worldview. Foreign policy
decisions were important, but they did not have to be based on anything
other than practical considerations, certainly not a broad theory.148 Perhaps
the best way to describe what happened (or did not happen) is to say that
Dengist China no longer adhered to (Mao’s) ideological pretenses. Deng’s
approach to foreign policy decision making thus skirted the matter of a
worldview of the kind expounded on by Mao. For that reason Deng’s view of
the world was called nonideological or even anti-ideological.149 Most observ-
ers labeled Deng’s “worldview” as simply pragmatism.150 Indeed, in the end,
under Deng the main criteria of making foreign policy decisions became,
with a few caveats, what made sense and what worked.151
Mao’s ideological prism, through which he and China viewed the world
and from which derived the main tenets of foreign policy, faded from view.
Sometimes with fanfare, Deng assailed Mao’s worldview, though generally
he did not. Rather he unceremoniously abandoned most of the central tenets
upon which it was built. He nixed global class struggle. He terminated
China’s support for revolutionary movements in the Third World.152 Thus
China ceased to be the sanctuary of revolutionaries from around the world
and Beijing stopped giving them help to overthrow the “imperialist inter-
national system.” Deng refuted Mao’s notion that war was inevitable.153 He
and other Chinese leaders no longer spoke of hegemonic powers.154 Under
Deng, China even joined the fight against nuclear proliferation; Mao had
said that the more the nuclear power in the world the better.155 In sum,
China no longer opposed the Western international order and no longer
suggested a substitute.156
Having said this, Deng was not without a “vision” applicable to China’s
relationship with the external world as well as its modus operandi in carry-
ing out foreign policy. In fact, for Deng there was one overriding concern,
and goal, for China: global stability.157 Deng constantly and with verve
lauded a stable global environment and its corollary peaceful international
politics. This comported with his paramount objective: to make China grow
economically and in that way become a powerful nation and a big player in
international politics.158 In other words, growth of China’s gross domestic
product was a sin qua non and the foundation upon which foreign policy
was founded. In the 1980s, Deng declared unequivocally that peace and
economic development were the two “great issues.”159
To even better understand Deng’s worldview it is necessary to assume
that his actions were to speak louder than words. Deng abolished Mao’s self-
reliance (economic) policy.160 Deng replaced Mao and other Chinese lead-
ers’ (notably historical ones) advocacy of autarky with the policy of opening
up the economy to the outside world. This was called Deng’s “Open Door
Policy.” Deng even proclaimed that China needed foreign goods; no Chinese
leader had ever said this.161 The Western definition of globalism (free mar-
ket, free trade—though not practiced in the West as they once were) also
described it.162 Deng went so far as to state that it was not foreign exploita-
tion (à la dependency theory) that had caused China’s economic backward-
ness; it was rather due to China’s closed door policy.163
To make his open door policy work, which was the key to his economic
growth strategy, Deng needed closer relations with the United States. The
United States controlled international trade and finance. America was the
world’s largest market. The United States, Deng calculated, wanted China to
pursue a program of economic growth.164 Anyway Deng had Washington’s
backing.165 Deng’s successes in improving relations with Washington and
the boost that gave to his economic policies reinforced the view that his
pragmatism and globalism were right for China and that devising and
propagating a worldview as Mao had done was unnecessary and, worse,
counterproductive.166
However, many in the Chinese Communist Party opposed Deng’s
aligning too closely with the United States. The United States had long
been China’s enemy, its archenemy. Diametrically changing this proved
difficult. Worse, in so doing Deng had sacrificed one of China’s central
policy objectives: the return of Taiwan to China. Deng’s opponents carped
that if his relationship with the United States was so good he should be able
to get the United States to help him realize the goal of Taiwan’s reunifica-
tion. In short, the “Taiwan issue” was a very sensitive one for Deng; some
said it was his Achilles’ heel. Also Deng’s opponents argued that with the
Reagan military buildup, China no longer needed to be America’s close
partner against the Soviet Union. In other words, the Kremlin was not the
threat to China that it had been.167
As a consequence of these two issues Deng faced more serious opposi-
tion to his foreign policy and had to make a strategic retreat. In 1982, Deng
announced what was widely seen as a major shift in China’s foreign policy.
He called this a new “independent” foreign policy. What Deng meant was
that he (China) had gone too far in aligning with the United States and
that China needed to assume a more balanced or neutral position vis-à-vis
America and the Soviet Union. Put another way, China was to be the “ful-
crum” in the triangular relationship, which Deng said would be advanta-
geous to China.168
China’s new role as a fulcrum or “big neutral power” indeed accrued
some noteworthy advantages. Beijing could claim a unique moral status in
the world, as it did historically. It could “stand above” the superpowers.
China could still advance anti-hegemonism as a tenet of its foreign policy
agenda and meld that with an advocacy of world peace. In short, China
could appeal to Third World countries to guard against hegemonism (and
align with China) in the name of global tranquility. This made China a
world leader while it enhanced the country’s global image.169
Deng’s new independent foreign policy appeared to represent a big change
in Deng’s view of international politics. It was not. It was in large measure
designed for domestic purposes: to stave off criticism of Deng for relying too
much on the United States and having allegedly gotten little for it. (Taiwan
remained separate.) Also Sino-Soviet relations remained strained. Though its
independent foreign policy gave China a new source of prestige and maneu-
verability, to Deng, China still needed the United States. America remained
the key to China’s economic modernization. In any event, fortunately for
Deng the Reagan Administration did not react in a negative way to Deng’s
pronouncement and thus little changed in Sino-American relations.170
In the ensuing years Deng often said that foreign policy should be based
on domestic politics and on China’s national interests.171 This comported
with Deng’s central goal of promoting China’s economic growth. It also
accorded with China’s realist perception (which predated Deng’s assump-
tion to power) that the nation-state was the supreme actor in world poli-
tics and the view that power relations had become more crucial, perhaps
all-important. Some observers called the latter as a shift to “defensive
realism.”172
Several Western scholars as well as government officials argued that
China’s view of international politics could best be described as realpolitik.
Clearly China supported the Westphalian system wherein nations are the pri-
mary actor in international relations, as witnessed by China’s strong defense
of its sovereignty and it giving very little support to multilateralism or inter-
national institutions, plus the fact that China no longer promoted its ideol-
ogy abroad and instead pursued its national interests more studiously.173
There seems, however, to have been a contradiction. The record showed
that China was not an anti–status quo power (as it pretended to be at least
under Mao) and that it supported, very strongly in fact, the current global
order. This can be explained, of course, by taking note of the fact China had
prospered and grown into a world power of consequence by operating within
that system. And more would come. This led some observers to think China
supported (and would continue to do so in the future) democratization, plu-
ralization, and harmony in international relations.174 Another conclusion
might be that China was seeking power and status through belonging.
Yet another explanation is that China was confused about what the inter-
national system was (including its structure and rules) and/or what China
wanted it to be and this in combination with the rise of Chinese national-
ism prompted China to think and/or behave as it did in the past: to see the
world as Sino-centered and seek to reestablish a kind of tribute relationship
with recipient nations.175 However, this was beyond China’s capabilities at
the moment. One may interpret this as China not wanting to admit to the
overwhelming superiority of US power, or it viewed America as destined to
decline (or at least China hoped it would).176
One of the central tenets of Dengist ideology thus was not to scare or
alienate other nations as China rose economically and in virtually all of the
other elements of power. Deng emphasized China should be humble. He
perceived that China’s rise would create fear and suspicion in other coun-
tries; China, therefore, had to play down its successes and hide its intentions.
He pushed the idea that China should demonstrate humility and self-re-
straint and cultivate an image of a benign China that is not a threat but an
opportunity for the world.177
Meanwhile a crisis in China, the Tiananmen incident, generated a chal-
lenge to Deng’s authority and his views. Many of China’s top leaders were
angry over foreign interference in China’s affairs, which they said caused
the “turmoil.” They blamed Deng’s open door policy. Some wanted China
to close its doors; others wanted China to be more assertive. Deng put for-
ward a 28-character message in response. It included the following: con-
ceal our capacities, be good at keeping a low profile, never become a leader,
and make contributions. This fit with Deng not explicitly formulating a
new worldview; it would have been provocative.178 Toward the end of his
tenure as China’s supremo, Deng issued two instructions. One was that
China should: “observe carefully; secure our position; cope with affairs
calmly; hide our capacities and bide our time; be good at maintaining a
low profile; and never claim leadership.” The other read: “Enemy troops
are outside the walls. They are stronger than we. We should be mainly on
the defensive.”179
After Deng passed away in 1997, there was some debate about whether
Deng’s pragmatism, his humility, and his peaceful approach to the world
would and should be maintained. That, of course, was for his successors to
decide. As it happened, it was more than a decade later, when China became
a much more powerful country as a result of Deng’s leadership, that the ques-
tion was resolved in favor of China acting somewhat more assertively.180
The Worldviews of Deng’s Successors

In 1989, as noted China experienced a major domestic crisis due to the
Tiananmen Square incident. While generally viewed as a democracy/human
rights issue, it was much more than that. It involved China’s economic and
political policies. At issue also were China’s place in the world and its future.
After the violence ended, Deng’s reforms came under intense attack from
hardline leftists in the Chinese Communist Party. Deng’s authority was
weakened and he had to sacrifice his chosen successor Zhao Ziyang.
Deng appointed Jiang Zemin, then party secretary in Shanghai who had
no involvement in the events in Beijing that had seriously polarized China’s
political leadership, to the position of head of the Chinese Communist Party.
This was the most important job in China.181 Jiang had not been at the top
before, he had no revolutionary experience, and he had no close ties in the
military. He took command of the party in the midst of political turmoil
and intense party factional infighting. He had Deng’s support, but had to
prove himself. Many thought the odds were against him.182
In 1990, Deng retired from the political scene, though in 1992 he
returned to make his famous “southern sojourn” to ensure that his economic
reforms were not marginalized by his opponents. He succeeded. Afterward
he returned to retirement again. Jiang still operated in Deng’s shadow,
though by 1996, or perhaps earlier, he was effectively “running” China.183
Jiang Zemin, like his mentor, showed little concern about formulating a
worldview.184 He regarded Deng’s humility as a good policy and played down
China’s rise.185 Jiang continued to nurture Chinese nationalism and patrio-
tism. But his first priority was to sustain China’s rapid economic growth and
he succeeded brilliantly in doing that. However, he also implemented some
new reforms to make China a stronger country, thereby paving the way for
China to realize a more important global role in the future.186
Following Deng’s death in 1997, Jiang assumed a more prominent lead-
ership role and with that a prominent philosophical or ideological role. He
promoted Confucianism.187 He advanced the concept of a “spiritual culture”
and established policies on poverty relief in China, which Deng had not
promised to do to any great extent. He promoted his ideas in a book called
The Selected Worlds of Jiang Zemin. He published other works. In so doing,
Jiang assumed to the role of a philosopher.188
But Jiang, in the final analysis, was a pragmatist like Deng.189 Jiang stuck
to Deng’s themes of peace and development; he even expanded upon them.
In 1999, Jiang introduced the idea of a “new security concept,” which was
designed to further promote peace and prosperity by, he said, “seeking trust,
mutual benefit, equality, and coordination.” In other words, China sought
to pursue new external partnerships while avoiding the impression that it
was seeking to build military alliances or was aligning against anyone, while
also demonstrating that China supported the international system, espe-
cially the free-market global economy.190
If Jiang’s ideas departed from Deng’s worldview or Dengist policies, it
was only at the margins. There was one exception: At times Jiang suggested
that China was a great power; Deng had emphatically played down China’s
global influence.191 In short, Jiang was visibly less humble about China’s
role in the world. The times, that is, China’s rise in terms of economic and
military power, had changed China and now it was participating in world
politics on different terms.
The first important global event Jiang Zemin had to respond to hap-
pened in 1991—the collapse of the Soviet Union. Jiang declared that the
Soviet Union’s leaders had made grave mistakes, notably in its dealing with
minority groups and the country’s approach to economic development (not
putting it ahead of political reform in setting priorities). But Jiang had to do
more than explain why the Soviet Union collapsed. He and other Chinese
leaders perforce had to revise their view of the structure of world politics.
They preferred a multipolar universe; but they also began to speak, that is,
they began admitting to the reality of the international system being unipo-
lar with one single, dominant superpower—the United States.192
The end of the Cold War should have been advantageous to most coun-
tries, including China, with more freedom of action in the international
arena. In China’s case the opposite was true since Russia joined the West on
many global issues. But the Third World had fewer options since there was
no longer any East-West competition and as a consequence aid and other
financial help diminished.193 This afforded opportunities to China.
As noted Jiang adhered to Deng’s view that China should focus on eco-
nomic development; in fact China in terms of growth in the gross domestic
product did better than during the 1980s. This allowed China to make
rapid increases in military spending, which engendered concern outside of
China. China had to respond. In 1995, China issued its first white paper
on national defense. According to the paper, China had “pacifist inten-
tions.” China would not become a hegemonic nation. The authors argued
that China’s military spending was low by international standards and other
countries should not fear China.194
The truth was a bit different. The military’s status grew after Tiananmen.
According to Deng the military had saved China’s leaders. Subsequently
military leaders pushed China’s civilian leaders to take a more assertive
stance on some foreign policy issues.195 Jiang did not always have sway over
the military. He had even more cause to be cautious and humble when talk-
ing about China’s view of the world or what role he sought for China in
international affairs.
At this time, Chinese leaders began to speak much more often about
principles that applied to the nation’s diplomatic relations. This, one might
suggest, was a substitute for a worldview.196 Citing principles also seemed
to be a way of deflecting criticism (or at least apprehension) about China’s
fast rise in economic and military power. In any event, while the adoption
of various principles did not constitute the building blocs for a Maoist-style
worldview, they did help coordinate foreign policy objectives with foreign
aid and foreign investments.
One author at the time described China’s “principles of the world” as
comprising the following four tenets: (1) the five principles of peaceful coex-
istence in governing imaginational relations, (2) Mao Zedong’s three worlds
view, (3) peace and development as the two major issues facing the world,
and (4) a “special” Chinese global view.197
The first principle may be taken as mirroring China’s perception that the
nation-state is the supreme actor in global affairs and that nations should not
interfere in the domestic matters of another country. This comported with
China’s stance that its internal matters are not the business of other coun-
tries and it does not welcome foreign interference in its domestic affairs. The
Chinese government associated any concern expressed about governance or
human rights in China with Western imperialism and colonialism. The
degree to which Jiang Zemin subscribed to this principle was reflected in
the hard stance he took toward the United States during the early years
of the Clinton administration.198 (During the election campaign Clinton
had criticized China for its record of human rights violations and Bush for
his close relations with China after Tiananmen.)
The second principle suggests that China saw a “great divide” between
the rich and the poor nations of the world constituting a major factor in
global politics. This was a “central influencing variable” in the international
system. In this context China looked to the Third World countries for allies
or at least friends. Chinese leaders may have also anticipated that China
would soon be able, given its economic boom, to help poor countries finan-
cially and thereby win their allegiance.199
Principle three meant that China, as Deng had frequently stated, no lon-
ger believed war was inevitable. China wanted peace so that it can develop
economically—the basis of it becoming a big power and its means to exert

influence in international affairs. Hence, China (at least its civilian leaders)
wanted to avoid giving the impression that its growing military would make
it a threat to others. Pursuing economic development and promoting it glob-
ally was thus to be the driver of China’s foreign policy.
Principle number four can be translated into the idea that China
espoused views about international politics that are not taken from the
Western playbook, and perhaps that are yet to evolve.200 In other words,
China’s view of international politics is not a static one. China’s leaders
were thinking about the now more fluid nature and structure of global
affairs and China’s role in that world. They were discussing both unipo-
larity and multipolarity. Chinese leaders may have seen multipolarity as
a view that accorded with what other major powers perceived, or more
likely wanted, and it was an expression of its hopes about the state of
international politics.201
Meanwhile China’s think tanks were feverishly working on calculating
what was called “China’s comprehensive national power.” 202 They hoped to
define China’s role or potential role in world affairs. China sought to play a
bigger part in international politics. Clearly its leaders did not entertain any
thoughts of isolationism, autarky, or disengagement.
From all of this one might conclude that Jiang and other Chinese leaders
did not espouse a worldview as did Mao or they could not settle on one view-
point. Alternatively, they believed so strongly in pragmatism and wanted to
take advantage of the very favorable international system (as it was) that they
did not wish to develop a worldview or chose not to express one.
Yet Jiang became such a strong advocate of globalism that it seemed
almost a worldview. In 1992, before the Fourteenth Party Congress, he pro-
moted the policy of “going out.” In the next four or five years, Jiang spoke
of it frequently and called upon businesses and institutes (research, etc.) to
engage.203 In 1997, Premier Zhu Rongji remarked that China never before
in its history had such “frequent exchanges and communications with the
rest of the world.”204 In 2000, Jiang discussed the concept at a Politburo
meeting.205 In 2001, Jiang made it official policy. This had a tremendous
impact on the tenor of China’s foreign policy and its relations with the rest
of the world, especially with the Third World.206 It was almost as if global-
ism had been made officially China’s ideology.
In late 2002 Hu Jintao assumed the all-powerful position of head of the
Chinese Communist Party and in 2003 he became president, according to
protocol the highest leadership position in China.207 Wen Jiabao became his
premier, or the head of government. Hu didn’t officially or in any theoretical
sense change Deng or Jiang’s vision of the world. He adopted both. Certainly
Hu did not want to get rid of (too quickly at least) the American-defined
and operated world system; China had gained too much from it and had too
much at stake in keeping it.208
Hu, on the other hand, in late 2003 and early 2004, introduced a new
construct into China’s foreign/security policy vocabulary: the “peaceful rise”
theory. The meaning of this “theory” was that China wanted to continue
to grow economically in a stable and tranquil world. China did not want
to replace the world’s hegemonic power (the United States) nor did it seek
confrontation. Specifically, China, Hu said, wanted to acquire capital, tech-
nology, and resources through regular channels and did not want to become
predatory or imperialist.209 The term “peaceful rise” was soon replaced by
“peaceful development”—an even less threatening term.
In 2005, marking the sixtieth anniversary of the founding of the United
Nations, Hu introduced the concept of a “harmonious world.” Hu said that
the concept has four dimensions: (1) multilateralism (meaning ending the
Cold War mentality and introducing a new security model based on trust,
mutual benefit, equality, and cooperation), (2) economic cooperation (based
on a global trading system that is open and fair, a world energy dialogue,
and fulfilling the UN’s Millennium Development Goals), (3) the diversity
of civilizations (with the central idea being allowing countries to choose
their own systems while making international relations more democratic),
and (4) reform of the UN (by rationalizing its principles of multilateralism,
diversity and democratic international relations).210
The concept of a harmonious world grew out of China’s domestic policy
(to maintain a peaceful society) and constituted an effort to dampen alarm
around the world about China’s “threatening” rise.211 Promoting a harmo-
nious world may also be seen as an effort by China to use its soft power
to enhance its bilateral and international relations and polish its global
image.212 But it could also be seen to embrace themes that reflect the fact
China is not really satisfied with the US-led world order and would like to
offer an alternative.213 Finally, harmony was very much a Confucian idea
and may be seen as a reflection of China’s thinking of recreating its histori-
cal position of controlling its known world.
Coinciding with Hu’s proclamation, Zheng Bijian, an influential policy
pundit, published an article in the US journal Foreign Affairs that elabo-
rated on Hu’s view of the world and China’s place in it. Zhen wrote that
China would not follow the path of Germany before WWI or Germany and
Japan before WWII. China, in his words, was not vying for global domina-
tion.214 Hu subsequently delivered a speech to the United Nations General
Assembly citing Zheng’s themes while advancing the UN system to be the

framework for global security and development. He said China supported
the democratization of international politics and multipolarity.215
However, some observers saw this as a smokescreen to cover a major shift
in perspective in China’s view of the world, or at least its foreign policy.
They cited the following as evidence: Hu viewed Jiang’s foreign policy as
too pro-United States and overly romantic. He spoke more of Europe and
Russia and put relations with them above dealings with the United States.
Many described him as Machiavellian and said he viewed dealing with
Washington as an exercise in bargaining: American acquiescence on China’s
harsh policies in Xinjiang and Tibet in return for China’s support on terror-
ism, for example.216
In any event, in 2004 and 2005 China became much more active and
in some ways aggressive (at least assertive) in foreign affairs. President Hu
announced a “new, historic” mission for the People’s Liberation Army: to
protect China’s national interests and assume a larger role in promoting inter-
national peace and security. Though couched in the UN system language it
signaled that China expected to play a much more muscular global role. 217
Soon Beijing challenged the United States over its war on terrorism policies
and on Korea and Iran. China used the veto in the United Nations to protect
allies, even Sudan. Some described Hu’s foreign policy as countering America’s
“anti-China containment policy” while promoting multipolarity.218
In 2007, Hu further elaborated on his concept of a harmonious world. He
spoke of economic globalization, diversity in culture, working together to
safeguard peace and stability in the world, and cooperation in conservation
efforts.219 Hu also expounded on democratic international relations (but he
did not mean promoting democratic regimes, which was the US definition
of this term), tolerance of different social systems and paths to development
(as opposed to Western universal values), multilateralism (rather than US
unilateralism), closing the North-South gap (which China was doing), and
an open global trading system (that China was promoting more than the
West). Hu was clearly criticizing the US-dominated global system.220 Some
even interpreted Hu’s “principles” as promoting the idea that a world order
Confucian in nature would be better.221
The global recession in 2008 produced a sea change in the way China
(and many others) viewed the world. It destroyed the mystique of Western
economic strength. Many Chinese, young people and top leaders alike, per-
ceived it as a game changer—“a fundamental shift in the structure of the
international system.”222 The reality was that this “swing” favored China to
the detriment of the United States as was attested to by the fact China’s fast
economic growth was sustained while the United States fell into a recession
accompanied by negative economic growth. In that milieu China was able to

play a major part in helping other countries avoid the “Western malaise.”223
Emblematic of the profound nature of the change that the crisis had
precipitated and how it benefited China were the Olympic Games held in
Beijing in March 2008. The awe-inspiring opening ceremony signaled to
the world that China had to be reckoned with, that its “long century” of
weakness had ended. China spent more than 40 billion US dollars hosting
the Games. This was tenfold what the previous host had spent. The United
Kingdom (once the world’s preeminent power, and the country that humili-
ated China repeatedly in the 1800s) would be the next host. London admit-
ted at the time that the 2012 games would be a modest affair, obviously
because it could not afford to do what China did.224
Zhang Yimou, who had directed a number of famous movies seen around
the world, organized 15,000 performers in what was by almost anyone’s
judgment a truly spectacular opening ceremony. China then topped the
United States (the world’s only superpower) with 51 gold medals, to 36 for
the United States. This was further evidence that China “had arrived.”225
In 2009, amid the continuing global recession, which Chinese leaders
attributed largely to shortsighted, if not incompetent, economic policies on
the part of the United States, Premier Wen Jiabao suggested building a new
international financial system by fostering new levels of financial and indus-
trial cooperation among China, Russia, and groups such as the Shanghai
Cooperation Organization. He also advocated giving developing nations
more say in the International Monetary Fund and like organizations.226
China appeared to be making a case for “a ‘new global financial architec-
ture’ shorn of U.S. domination.”227
Indeed China to a considerable degree succeeded in proffering a new
international financial system. Up to that time the G-8 was regarded as
the most important group or institution in international financial affairs.
Thanks to China the G-20 was now seen as more important.228 China
demanded and got changes in the World Bank and the International
Monetary System’s leadership and rules. Beijing put its own people in
important positions and oversaw the making of new rules, giving a louder
voice to Third World countries.229
Some observers said that China was promoting a China model, which
assumes a very different view of the world. It envisioned a world void of
Western values, liberal democracy, any connection between free markets
and democracy, standards of human rights that are history and culture
based, Westphalianism, etc. Some said that this should be called the “Beijing
consensus” and that China was promoting it to replace the Washington
consensus.230
Another interpretation of global power trends underscoring China’s

new role was the popularization of the terms “Chinamerica,” “G-2,” and
“superfusion” (meaning the world economic order depends on two coun-
tries, China and the United States), and “economic deterrence” suggesting
the world is evolving into a bipolar one, with the United States and China
playing the role of superpowers.231 It is noteworthy Chinese leaders did not
make any formal objection to the use of these terms.
In 2009 and 2010, two widely read and praised books were published in
China: Song Xiaojun, China Is Unhappy: The Great Era, the Grand Goal,
and Our Internal Anxieties and External Challenges and Liu Mingfu, China
Dream: Great Power Thinking and Strategic Posture in the Post-American
Era. The former assessed the danger the West posed to China. In the lat-
ter Colonel Liu (a professor at China’s National Defense University) cites
China’s “grand goal” as becoming number one in the world. This, he says,
requires “displacing the United States.” Doubtful these books, which con-
tradicted Hu’s peaceful rise concept, could have been published or at least
with the fanfare they were while allowing millions of Chinese to read them
if Chinese leaders did not approve.232
Alternatively Hu and other Chinese leaders sought to foster debate on the
subject. Anyway, contradicting the views of these two authors, Dai Bingguo,
a state councilor and considered the highest-ranking official in China man-
aging China’s foreign policy, wrote and published an article titled “Taking
the Path of Peaceful Development.” Dai noted that China’s relations with
a number of countries had deteriorated due to the perception China had
become stronger and more aggressive. He argued that China’s leaders needed
to deal with that. He further declared that the idea that China’s path to
peaceful development being a conspiracy is false.233
All of this suggests one of three things: One, China’s view of the world is
undecided and/or there is still more debate on the subject needed. Two, China
does not want to state its true perspective.234 Its leaders believe that advocat-
ing multipolarity is a more popular position to take since there has arisen con-
siderable global opposition, not to mention criticism at home, to the United
States being a dominant, hegemonic power in the world. Yet China believed
the world is still essentially a unipolar one. 235 Three, Chinese leaders perceive
America is a fast declining power that won’t recover and China will dominate
world affairs in the future, but for now it has to remain patient and humble.
In November 2012, Xi Jinping took over the helm of China’s leadership
when he assumed the positions of general-secretary of the Party and head of
the Party’s Central Military Commission. According to custom China’s ris-
ing leaders do not immediately make many of their views known or at least
not clearly; Xi was no exception.236
But Xi gave some hints about his view of the world. He did not want
to put his name to an elaborate worldview as Mao had done. He basically
agreed with Deng, Jiang, and Hu in terms of foreign policy basics. He sought
to deemphasize military power in dealing with the United States. On one
occasion he stated that the “Pacific Ocean is big enough to accommodate
two major countries.” Xi, however, let it be known that he is suspicious
of the West trying to decide China’s global role. He believed that China’s
importance in the world is growing and that other nations should recognize
and accept that fact. Xi on one occasion showed he could be defensive. On a
trip to Mexico, Xi said: “Some foreigners with full bellies have nothing bet-
ter to do than engage in finger-pointing at us. First, China does not export
revolution; second it does not export famine and poverty; and third it does
not mess around with you. So what else is there to say.”237
The Work Report published at the time of Xi’s top leadership appoint-
ments is more telling. Prosperity and stability were presented as the basis
of China’s domestic policy and China’s rise. In foreign policy, attending to
relations with the great powers was cited first. This meant not only seeking
better relations with the United States, but also seeing to it the United States
make accommodations to China’s growing power. Consolidating China’s
influence in Asia was also given prominence. Beijing, the report noted, seeks
a special role in Asia and views itself as the major regional power. The report
also gave “strengthening unity and cooperation with the developing world”
an important role. It mentioned sharing China’s dissatisfaction with some
facets of the current world order while suggesting China should have a big-
ger voice in global financial affairs. Finally, the report cited China using
multilateral venues more while protecting its maritime and other interests.
Clearly, if this report is instructive Beijing anticipates assuming a bigger role
in global affairs, especially financial matters, and believes that other nations
and the global community should grant China this place.238
Confirming President Xi’s determination to realize the Work Report’s
goals, he quickly consolidated political power and assumed a bigger lead-
ership role than his two predecessors. He also planned to be assertive in
foreign relations. In 2014 in a speech in Paris, he quoted what Napoleon had
said about China: that it is a “sleeping lion and when she wakes, the world
will shake.” But he also said, “China is a peaceful, pleasant, and civilized
lion.” Still Xi’s foreign policy has been described as “muscular.” He soon
worked toward establishing new financial institutions to replace those built
and controlled by the United States. He boasted of “linking up” the world
through infrastructure projects and trade. He suggested that Asians should
run Asian affairs and that the United States should butt out. He has bul-
lied some of China’s neighbors while being polite about China’s economic
policies. China is clearly to be a global power in Xi’s mind. He even made

mention of China being a “near Arctic” state.239
In 2014, Xi published a book made up of his speeches, reports, and vari-
ous writings titled The Governance of China. He wrote of politics in China,
the “China Dream,” and various problems. He forecast the following: The
military is to play a greater role but the Chinese Communist Party will con-
tinue to lead and govern. Relations with the United States are important.
Xi advanced peace, development, mutual benefit, and cooperation in world
affairs. He spoke of interdependence and the “global village.” His view was
optimistic. If he espoused a worldview it was globalism. He did not promote
a worldview as Mao did; but he did speak and write about the nature and
workings of the international system.240 His approach to foreign affairs was
pragmatism but assumed a bigger global role for China.
China’s Worldview and Its Foreign Aid Giving

Historical and other analysis of China’s foreign aid and foreign investments
afford very convincing evidence of a connection between its ancient tribute
diplomacy and its current foreign aid giving.241 Recent data add further
proof: China has given substantially more aid to nations that were former
tribute bearers than those that were not.242 This was quite apparent espe-
cially during period one of China’s aid giving. Moreover, recipients have
admitted to responding to China’s aid (to please Chinese leaders) by men-
tioning their former tribute relationship with China.243 Some observers have
also speculated that China has accrued a huge amount of foreign exchange
in recent years so that it can resurrect its ancient tribute system.244
However, the link between the People’s Republic of China’s stated view of
the world (Mao’s) and its foreign policy and even more its foreign assistance
was not so clear during the Mao period because Mao looked at the world
both as a Chinese and as a Communist. Also he often changed or revised his
worldview. Still there is a noticeable relationship. In fact, it is instructive to
examine the evolution of China’s leaders’ views of the world together with
Beijing’s foreign aid policies to demonstrate a nexus between China’s global
views both generally and at any specific time and its aid giving. Finally,
China’s economic ability to give aid did not explain its aid giving.
In 1949, the newly established People’s Republic of China under Mao
Zedong’s leadership sought to reclaim China’s once-dominant role in the
world. But, Mao could not do this given the state of China’s economy not to
mention its lack of military might, weak scientific and technological capabili-
ties, etc., in a world dominated by the United States and the Soviet Union. To
deal with this situation Mao adopted Communist ideology, which incidentally
linked domestic and foreign policies and which recreated the “hierarchic-
vertical mode of thinking so characteristic of the traditional order. Mao also
rejected the unfamiliar Western notion of equal sovereign states.245
The Communist Bloc became to China in some crucial ways what
China’s ancient world once was.246 It was China‘s “community.” Part of
the Communist Bloc was in Europe and distant from China; but this did
not really matter. Chinese leaders could communicate with them through
Communist parlance, ideology, and the Communist worldview. China
won kudos (face or respect, not unlike what it got from tribute countries in
the past) from members of the bloc (China’s world) for helping, with aid,
“fraternal” Communist nations.247
In consonance with Mao’s worldview, in 1950 and in the ensuing years
China provided huge amounts of foreign (economic and military) aid to
North Korea. China thereby demonstrated its generosity and its commit-
ment to the bloc. Mao provided both military and economic assistance to
North Vietnam for the same reason.248 For four years China’s foreign aid
went exclusively to bloc countries (that were also former tribute nations).
The subsequent expansion of China’s foreign aid giving to include non-
Communist countries coincided with a shift in Mao’s worldview away from
a world of “tight bipolarity,” (Mao’s lean-to-one-side thesis) or a clear dichot-
omy between the Communist and Western blocs, to a worldview in which
Third World countries were no longer regarded as unimportant and/or sim-
ply tools of American imperialism. Non-Communist developing countries
(Mao’s intermediate zone) became viewed as countries that China needed to
cultivate, and it did.249
China offered “generous” aid (gifts or no-interest loans) to several coun-
tries in Asia and the Middle East at this time. Among the recipients were for-
mer colonies and/or countries that China considered anti-imperialist. From
1954 to 1960, China granted economic aid to four new Communist coun-
tries but also eight non-Communist “intermediate zone” or Third World
countries.250 In short, China’s worldview shifted as did its foreign policy and
its aid diplomacy.251
Specific and more practical objectives of its foreign assistance were gain-
ing diplomatic ties, negotiating border agreements, and wining support for
the important tenets of China’s foreign policy. China was quite successful in
attaining these goals as will be shown in the Volume 1, Chapter 4.
China’s worldview shifted again in the early 1960s.252 China further
abandoned its bipolar perspective as Mao expounded on two intermediate
zones. China downgraded its loyalty toward the Soviet Union and its iden-
tification with the Communist Bloc and began to look elsewhere for sup-
port friends and allies. In fact, soon China’s foreign policy was influenced
more by its antipathy toward the Soviet Union than other variables. One
might say that China’s worldview became anti-Soviet; alternatively China
was reverting (or regressing) to its own, or to a more historical and a more
Chinese, worldview.253
As this happened China’s foreign policy goals changed and the number
of its foreign aid recipients increased even though the Great Leap Forward
hurt China’s economy badly and negatively influenced China’s ability to
give foreign aid (as will be discussed in the next chapter).254 China could
not afford foreign assistance; yet China gave more aid to show that it was
not hurt by the cutoff of Soviet financial help. In 1964 Zhou Enlai made
his famous trip to Africa and pledged an unprecedented amount of financial
help to Third World countries, almost twice as much as in any previous
year.255 How else can one explain this than to note the change in China’s
view of the world?
This coincided with China engaging in a serious round of aid competi-
tion with the Soviet Union leading up to the second Afro-Asian Conference
scheduled to be held in Algeria in 1965. Mao contended that the Soviet
Union was neither an Asian country nor a Third World country. In any
event, the meeting was cancelled due to due to special circumstances (a coup
in Algeria, the host country).256 Still Sino-Soviet relations remained cold
and aid competition between them continued.
That same year, coinciding with Lin Biao’s publication of a work in
which he described the world as comprising two camps: rich (and powerful)
nations and poor (or Third World) nations with China being in the latter
bloc (and contending for leadership of that bloc), Beijing expanded its inter-
ests in developing countries. Lin’s worldview (which was also Mao’s) obvi-
ously influenced China’s foreign aid policies toward spending more to do
this. The next few years China provided more economic help to its friends
and allies especially Third World countries.
As Mao moved further away from a two-camp (or bipolar) worldview in
the late 1960s and after he spoke of a united front against the Soviet Union,
China’s aid giving continued at a high level—especially considering the Great
Proletarian Cultural Revolution that paralyzed China’s decision-making
processes (in particular during the violent stage lasting from 1966 to 1969).
This trend accelerated in 1969, when Chinese and Soviet forces battled on
the Ussuri River and Sino-Soviet relations deteriorated to a breaking point.
To try to shift to a less dangerous form of conflict yet continue the struggle
against the Soviet Union, China again expanded its aid giving. The next
year, 1970, was the largest ever for China’s official aid giving.257 China more
than doubled the aid it had given in any previous 12 months.258 During this
time the leit motif of China’s aid giving, reflecting Mao ending China’s close
identification with the Communist Bloc and its growing enmity toward the
Kremlin, became promoting its development model while trying to under-
mine the Kremlin’s influence in the Third World.259 China’s foreign aid
giving continued at a high level; in 1972 it was the largest ever in terms of
the number of its aid recipients.260
To reiterate, China started giving foreign aid at a time when Mao and
other Chinese leaders saw world politics as revolving around a dichoto-
mous gap and mutual hostility between the capitalist and Communist
Blocs. Thus, Beijing sent economic aid exclusively to Communist nations
and most of that to border nations threatened by the United States. North
Korea and North Vietnam were the main recipients. When China shifted
its worldview from a two-camp world, Sino-Soviet economic and military
aid competition accelerated and China started giving aid to more Third
World countries, countries more distant from China and to nations that
Moscow aided.261 China’s aid followed China’s new view of the world and
its place in that schema. 262
After Deng Xiaoping assumed the role of China’s “strongman” in 1978,
his influence on foreign policy making or its aid giving soon became appar-
ent. Deng focused on China’s economic development like a laser and saw
joining the global economy as a great opportunity for China. China, he
reckoned would prosper because of globalism. His approach was pragmatic.
His ideas cannot be called a worldview from the Maoist perspective; never-
theless his views guided China’s actions on the global arena.
From Deng’s perspective China had been spending too much on foreign
aid.263 China had been too generous; the Chinese people had had to suffer to
provide aid often to those that weren’t in need or even deserving of help.264
China needed the money at home to foster its economic growth. Also for-
eign aid giving, it was said, had not been very effective anyway. Recent aid
failures were on the minds of Deng and other top leaders in China: Vietnam,
Albania, and in a number of countries elsewhere, most notably in Africa and
South Asia. So foreign aid giving was cut.
Also China’s foreign aid policies changed dramatically. Not only did
China cut its foreign assistance, but Beijing also sought grants and loans
from international financial organizations. As a result China was competing
with Third World countries for aid and investment capital.265 In fact, China
was soon taking much of financial aid and investment money that would
have otherwise have gone to other developing countries.
China’s new aid policies were explained (rationalized) in the language
of standards or principles (in lieu of a worldview). In late 1982, Premier
Zhao Ziyang visited Africa where he announced four principles that guided
China’s relations with developing countries.266 Zhao mentioned neither
China helping Third World countries or foreign aid.267 Later official state-
ments emanating from Beijing suggested even more explicitly that China
was demoting foreign aid as a tool of foreign policy. China’s aid would be
reduced. Its form or style was also going to change. As one official explained:
“Aid cannot be sustained . . . if it is limited to one-way aid.”268
But China was not going to cease giving foreign aid. Deng said that
“aid was the right thing to do in the past, the right thing to do now, and,
when China is developed, it will still be the right thing to do.”269 Not long
after this, the Central Committee of the Chinese Communist Party and the
State Council issued a joint opinion on China’s foreign aid: Deng’s view was
formally approved. The gist of the decision rendered was that China needed
a stable international (economic) environment in order to develop its own
economy. Giving foreign aid and making foreign investments helped realize
that goal. Aid would still be given, but at realistic levels; there would be no
more extravagant aid. China would give aid when it could afford it—which
it appeared would happen before too long.
In the 1990s, China’s economy continued to grow, driven by its boom in
manufacturing. China thus desperately needed to import increasing amounts
of energy and other resources and find markets for its products. It used aid
to realize these goals. It sought to use aid to enhance its security. Aid was put
back on track and was soon pledged again in significant amounts. In fact, for-
eign assistance was employed to a large extent to help China acquire energy,
resources and markets as well as to facilitate its security (now more defined in
terms of resource acquisition) and other foreign policy concerns.270
China’s renewed its foreign assistance giving while getting into the busi-
ness of foreign investments. The two grew fast and operated in tandem.
In terms of China’s worldview it coincided with Jiang Zemin’s “going out”
policy or what some called his “uber globalism.” China’s foreign investing
grew fivefold between 2000 and 2005, East Asia being the most important
destination, though this was to change soon.271
In 2004, the Ministry of Foreign Commerce and the Ministry of Foreign
Affairs published the Guidelines for Investments in Overseas Countries’
Industries and the Overseas Investment Guidance Catalog. Investment policies
were included in the Eleventh Five-Year Plan (2006–2010) and the Twelfth
Five-Year Plan (2011–2015).272 In 2010, according to official sources China
invested $68,81 billion abroad with total accumulated investment reaching
$317.21 billion.273 Since China was barely in the business of investing in other
countries before the 1990s, this represented a momentous change. China was
now competing in this realm with Western countries. More important it was
predicted that China’s foreign investments would increase by large amounts—
more than doubling by 2015 and reaching $1 to $2 trillion by 2020.274
Beginning with the new millennium China began to address the issue of
global governance. Many among China’s leaders saw the concept of global
governance and, in particular, the call for China to become a “responsible
stakeholder” as a plot to contain China. Others saw it as an opportunity
to expand China’s global influence by promoting the “Beijing consen-
sus.” China thus adopted a policy some called a “selective multilateralist”
one.275 China, in other words, would decide in what ways it would be a
stakeholder.
Foreign aid was an ideal way for China to demonstrate it was responsible.
Leaders of recipient countries applauded China’s aid. It facilitated Third
World countries’ economic health and development. China also found that
it could stick to its rules for giving aid (quick, efficient, development ori-
ented, but not linked to improved human rights and democracy) that were
supported by Third World countries, but condemned by the West.
At this time China began to “suffer” from a glut of foreign exchange.
Accordingly its foreign aid and foreign investments were increased by
huge amounts. China could now afford it and, in fact, arguably needed
to extend both. China’s economic development and its relationship to its
foreign aid and foreign investment diplomacy is a topic of discussion in the
next chapter.
CHAPTER 3
China’s Economy and Its Foreign

Introduction
Students of foreign aid routinely make the observation that aid giving
correlates to the level of economic development of the donor country, its
economic success at the time (usually measured in increases in the gross
domestic product), its foreign exchange position, and several other economic
variables. It is hence conventional wisdom that rich nations give foreign aid
and the richer they are the more they give. The same applies to foreign
investments. This doesn’t, however, quite fit China.
The author does not seek here to provide a detailed analysis of China’s
economic development efforts. Rather the aim is to delineate the course of
China’s economic growth and connect that to how Chinese leaders have per-
ceived (and also currently see) the relationship between China’s economic
conditions and it extending foreign aid and investments, and how during
the early period the two were not closely connected, objectively or rationally
speaking, but now they are.
Briefly, China’s economic history as it relates to its giving foreign assis-
tance can be described as follows: in its not too distant past China was a
wealthy country. In recent times, however, China has been poor. In fact,
when the current government came to power in 1949, China was impover-
ished. This changed in the 1980s and 90s. Now China may be described as
much better off economically than it was under Mao and even rich in terms
of its foreign exchange holdings.
Early on Mao espoused great ambitions to industrialize China and make
it a rich country. He anticipated expanding China’s influence in Asia and
the world through its economic prowess. But he failed. The fact that China
remained a poor nation made its foreign assistance necessarily limited. Yet
Mao believed foreign aid should be a tool of foreign policy as it had been in
he past. He also thought China could truly help poor countries, and should!
He and other China leaders likewise reckoned they understood the needs of
less developed countries better than the aid bureaucrats in rich countries.
Mao also said that the rich countries would exploit them. He preached anti-
imperialism and self-reliance. Thus China sacrificed and gave aid. Many
people, especially national leaders of other countries, were impressed.
From 1979 onward, under Deng Xiaoping, China grew very fast eco-
nomically. Deng discarded Maoist ideology and adopted the capitalist
model of growth. China boomed, and after a couple of decades could in
some ways be considered no longer a poor a rich country. In terms of foreign
exchange China became very well endowed. China’s aid giving, which had
declined markedly during the 1970s and into the 80s, was put back on track.
However, China’s foreign assistance mirrored new and different goals such
as acquiring energy and natural resources and gaining market access for
goods produced by China’s capitalist economy. China also had big power
ambitions and foreign aid and foreign investments were useful instruments
for realizing China’s foreign and security policy objectives.
During the latter part of the Deng period and after, China’s economic
success made it a nation that had surfeit foreign exchange, even excess of
money. What should be done with China’s immense newfound wealth? Aid
became an “outlet.” This made China a big-time purveyor of foreign aid
and foreign investments and a challenge to West’s foreign aid and foreign
investments.
China’s Economic Performance under Mao

When Mao assumed the mantle of power in 1949, China was poor. But
China had been a rich country in the past. In fact, China was probably the
richest country in the world up to the 1400s even in per capita terms. The
average Chinese was better off than the average resident of North America
until the 1700s. Until the 1800s China was still the world’s richest country
in absolute terms.
China’s prosperity was based on a number of factors. Owing to its fer-
tile soil, sufficient rainfall, and plentiful natural resources, the heartland of
China (what is now Eastern China), very early in Chinese history, developed
very well economically. In fact, this happened several centuries BC. It was
not earlier than when civilizations flourished and became wealthy in the
Middle East; but it was more expansive (covering a bigger area) when it
China’s Economy ● 85
happened and, at that time China was the most prosperous place on the
planet. In short, early in its history and for a long period of time China was
ahead of everyone in the world in economic terms.1
In addition to its physical assets economic growth was generated in China
early owing to its advanced agricultural techniques including special kinds
of planting, use of fertilizers, water control, and even use of hybrid seeds.
The growth of technology including the use of iron and other metals fol-
lowed. Commerce and trade came next and all of this contributed further to
China becoming rich and powerful.2
China’s economic development was further abetted by its unification
in 221 BC. At that point feudalism died (and remained dead); China was
subsequently ruled by officials who were selected by an examination in a
system one might call meritocracy—as opposed to inheritance that was the
basis for choosing political leaders in most of the rest of the world. This
ensured that enlightened policies that abetted China’s advancement were
practiced. In addition, China built an elaborate bureaucracy that oversaw
the building of public works (including dams, dikes, canals, roads, etc.) all
of which facilitated the expansion of commerce via internal trade and also
helped the economy grow.3
What China accomplished in terms of its economic growth had an
impact on its foreign relations. People outside of China wanted to engage
in commerce with China. As noted in the previous chapter China’s leaders
found trade an important instrument of foreign policy while the admiration
and respect for China it generated made their governance at home easier. In
other words, China devised a system for dealing with the peoples on China’s
periphery that reinforced Chinese rule domestically. This was the tribute
system. Chinese leaders not only enhanced their capacity to rule China they
also acquired some of the things the country needed and made profits from
foreign commerce. In other words, trade helped China’s economy grow and
increased its influence beyond its borders.
Today, the Chinese view China historically, even in its recent (by Chinese
standards) history, as the richest “country” in the world.4 They also under-
stand why this was true.5 However, in the past some Chinese leaders and
court factions saw China’s commercial relations with peoples and areas out-
side of China as good for those people (the tribute missions encouraged
this view) and not good, or not so good, for China. This was cause for a
troubled relationship for China with these areas on the periphery. It made
a few of China’s rulers espouse and encourage xenophobia. According to
them China should be self-sufficient economically and thus eschew trade.
Isolationism, which fit with this view, was a simple policy to follow and it
conveniently avoided external trouble.
This view and the belief that China should focus on domestic problems
reached an apex a few decades into the Ming Dynasty (1368–1644). China’s
exploration of the world ceased and its naval power, trade, and creativity
all declined. This situation lasted through the Ch’ing (Qing) Dynasty
(1644–1911). Mao also espoused the view that foreign commerce was bad
for China, based on his views of imperialism and colonialism, and he con-
tinued with this policy.6
Mao, however, was preoccupied with China’s immediate economic tra-
vails. China’s economy had just seen years of stagnation coinciding with
the end of the dynastic period, punctuated by some successful reform and
growth under Chiang Kai-shek’s Nationalist government, though after 1937
that progress was erased, and much of China was laid ruin by the war with
Japan. Additional destruction followed during the Chinese civil war from
1945 to 1949.7 Thus, in 1949 China’s economy was in very bad shape and
fixing it demanded emergency planning.
The infrastructure (throughout most of the country) was in disrepair
and/or was in shambles due to years of conflict. Agriculture consisted largely
of subsistence farming. China was a large country, but the amount of its
arable land was not proportional to its physical size or its population. In fact,
China’s land to population ratio was quite unfavorable.8 China’s industrial
sector was in ruins. Many factories were either not operating or were suffer-
ing from lack of resources, energy, and other inputs. Most of the population
was poverty stricken. China’s per capita income was in the range of $50 to
$65 per year.9
China’s leaders faced other grave and immediate problems. Inflation
had undermined public confidence. China’s currency was not stable. Black
marketeering was rampant. China’s industrial base, Manchuria, had been
largely destroyed by the war. The rest of the country lacked heavy industry.
When the Nationalists evacuated and moved to Taiwan, they took with
them most of China’s gold and foreign currency reserves.10
It was Mao’s plan, indeed his first priority, to rebuild the damaged econ-
omy and put it on course to grow and make China a rich and powerful
country again. To engineer economic growth he adopted the Communist
model of development. This meant that the government has to plot the
course of economic growth. Heavy industry would lead. Light industry and
agriculture were given a lower priority. Mao linked economic development
to political and social reforms; thus economic decisions were also political
decisions and efficiency and growth were not always the foremost goals.11
Western economists who could take a more detached and rational view of
China’s economic growth potential noted that China faced manifold advan-
tages and disadvantages.12 Assessing both, to them, gave a more accurate
picture of China’s economy and what needed to be done in terms of new

economic policies, many of which Mao did not consider seriously.
In 1949, China seemed economically advantaged by its population
size. This was thought to give China the potential to build large indus-
tries without having to fear there would not be enough local customers. In
other words, China appeared to have an advantage in promoting economic
growth because of its market size. However, for several reasons this asset did
not really obtain. China did not have a good transportation and communi-
cations infrastructure.13 Thus its economy was not a large one in terms of its
market; rather China’s economy was what was called a “cellular” one.14 In
other words, for China there was little or no benefit to be gained from the
scale of production for the time being at least.
Meanwhile China did not accrue any meaningful benefits to its develop-
ment efforts from international trade or access to foreign modes of produc-
tion (due to Mao’s unwillingness to adopt these) that might foster innovation
and greater efficiency. China thus had little hope of generating a surplus in
its production of goods that other countries might buy to help China obtain
foreign currency to purchase what China did not produce or have.15 In short,
this otherwise promising source of needed capital investment did not exist.
China possessed a vast array of natural resources and productive land.
But both of these assets were limited in terms of their facilitating rapid eco-
nomic growth by the fact that China was not well endowed in either in per
capita terms.16 Therefore, Mao could not base China’s economic develop-
ment on selling resources to obtain sorely needed capital. The same applied
to agriculture. Here the situation was even less promising: China’s growing
population required increasing amounts of food.17
Mao made the situation worse by rejecting the idea that China had a pop-
ulation problem. He believed, like Marx, that Malthus was a tool of Western
imperialism and that China’s “alleged” overpopulation was simply a matter
of maldistribution (in its heretofore capitalist system). Mao even contended
that a large and growing population was an economic asset. At one point
he asserted: “A man’s hands can produce more food than his mouth can
eat.” He thus encouraged women to have more children. As a consequence,
China was hampered in terms of capital accumulation and in some other
important ways by more mouths to feed.18
But, the most detrimental factor of all to China’s economic growth was
the fact that Mao’s approach to economic development did not comport with
China’s economic conditions. Mao adopted the Soviet, more specifically the
Stalinist, model of economic development, which was biased toward heavy
industry, leaving little help for small industry while virtually ignoring agri-
culture. Mao felt that he could, as the Soviet Union had done, develop a
modern industrial base that would grow the economy overall through spin-
off or seep-down effects and by doing so avoid the problem of dependency
on advanced capitalist countries.19
The problem, which Mao did not (or refused to) recognize was that in
the context of scarcity, which accurately described the economic milieu in
China at the time, his model was inappropriate. China needed to focus on
agriculture and basics manufacturing. In short, Mao’s economic ideas were
not right given China’s economic conditions at that time.20
As noted above Mao’s economic development scheme faced serious hand-
icaps in accumulating capital. This problem needs further elaboration. In
1949 and for a few years after that the major sources of investment funds
for Mao came from confiscating land from landlords and rich peasants,
“rent” in the form of goods produced in the state sector and sold to peasant
consumers, and from agricultural taxes. A second source of funds came from
nationalizing private enterprises. In fact, the government got 80 percent of
its capital investment from these sources during the first Five-Year Plan.21
But these were largely “one-time” sources. Where was future capital accu-
mulation to come from?
Mao could not, for ideological reasons, seek help from the United States
or other Western countries. He and other top members of the Chinese
Communist Party viewed the United States with hostility for helping Chiang
Kai-shek before and during the Chinese civil war. Mao also saw the United
States as the head of the imperialist camp and a nation that had exploited
China, and, if allowed, would continue to do so. Finally, Mao needed an
external enemy to justify his program for reforming-cum-revolutionizing
China socially and politically. That was the United States and its Western
capitalist allies.22
Remittances from Overseas Chinese provided China with some capital,
but it was not large and in many cases simply reduced China’s balance of
payments with the host country.23 China’s only other external source of capi-
tal was the Soviet Union, which was not a rich country. Moreover, the USSR
had suffered tremendous economic damage during World War II and sorely
needed what capital it had for its own reconstruction and development. Mao
got Soviet aid, but as we will see it was not close to what he needed in terms
of quantity or conditions.24
In brief, China’s economic situation in 1949 can be described as something
like this: Mao could not generate much investment capital from savings due
to scarcities that prevailed in China. He could not derive funds from a trade
surplus since he had limited China’s trade pretty much to other Communist
countries and most of that commerce was barter trade since these countries,
like China, did not have much capital (meaning foreign exchange). Mao’s
self-reliance policy kept trade to a minimum and precluded the possibility

of obtaining capital from a favorable balance of trade or via investments or
loans from rich capitalist countries.25
Having said this, Mao’s economic plans were at first less ideological and
focused primarily on rebuilding the economy and the results were fairly
good. At the time Mao assumed power, he encountered a situation that
was in some important ways similar to that in postwar Japan and postwar
Germany—which engaged in massive and successful rebuilding efforts (of
course, easier than building from scratch). He also found an economic situa-
tion that can be described as follows: resources were underutilized, labor was
inefficient, but the morale of the population was high (workers, peasants,
and the Communist Party after Mao’s victory over Chiang Kai-shek were
enthusiastic to repair China’s war damage and modernize the economy).
Mao was hence able to mobilize the factors of production and carry out a
fairly successful national reconstruction effort.26
Thus, for three or four years China’s economy in terms of growth per-
formed fairly well. However, by the mid-1950s Mao could see that while
economic recovery had proceeded well and the economy was expanding sat-
isfactorily, the growth rate was slowing, and the rate of economic expansion
was not as high as Mao wanted or what was needed to make China a pros-
perous nation.27 In short, the future did not look very promising.
So, in the late 1950s, Mao launched the “Great Leap Forward,” a revo-
lutionary plan to restructure the economy by merging the rural and urban
economies and reorganizing the peasants by moving them into communes
that were supposed to operate like factories. The Great Leap failed miserably
both as a political/social experiment and as an economic policy.28 As a con-
sequence China witnessed negative economic growth for three to four years.
In fact, as a result of the debacle China experienced the only large manmade
famine in modern history.29
Subsequently, with Mao losing his political influence as a result of what
he had done China’s leaders returned to more rational economic planning
and in a few years the economy began performing fairly well again. But
the constraints on economic growth cited earlier still prevailed. Moreover,
not long after this, in the mid-1960s, in an effort to reclaim his political
decision-making authority, Mao launched the Great Proletarian Cultural
Revolution. This led to another period of disruption, though this time it
was more political than economic and the fallout in terms of harm to the
economy was less severe.
Still, Mao’s economic planning, which embraced extreme egalitarianism
combined with Communist social and political goals, stifled productivity
and dampened China’s economic growth.30 After the Cultural Revolution
ended, economic growth again became respectable but was hardly what
one would call impressive. In ensuing years the government was preoc-
cupied with keeping order, while some of the ideals of the Great Leap
Forward returned.31
The Mao period is thus best described as one wherein the economy oscil-
lated between years of fairly good growth and periods of economic chaos and
slow or negative growth.32 Due to the fact that China’s economic data were
unreliable at this time and that the government frequently issued inflated
figures, it was difficult to say precisely how well or how poorly China’s econ-
omy performed. Many Western scholars took China’s data at face value and/
or were enamored by the Communist model and for that reason believed
China’s economic recovery and subsequent growth were quite good or even
better than good.33 However, in retrospect it is clear that China’s economy
after 1949 did not perform as well. In fact, if one begins after the period
of economic rehabilitation, which many economists feel provides a better
picture of China’s economic development, China’s economy grew at a rate
below the world’s average.34
In any event, it is obvious China did not perform economically as Mao
had called for in 1949 and that in 1976, when Mao died, China was still a
poor country. In fact, according to one Chinese leader, 100 million peasants
in China (a number nearly equal to half of the US population at the time)
did not have enough food.35 One writer stated that relative to the rest of
the world China’s citizens were poorer in 1979 than they were in 1950.36
According to a member of the Chinese Communist Party, China under
Mao did not make the transition from revolutionary struggle to economic
construction and thus wasted 30 years.37
Certainly China’s economic performance had not enhanced its status
in the world. At the end of the Mao era in 1976, China’s gross domestic
product was two-thirds that of India’s.38 America’s gross domestic product
was five times China’s (though China was almost five times more popu-
lated than the United States). The Soviet Union was economically two
and one-half times China.39 In foreign trade China did not rank in the
top 30 countries in the world. In fact it was astounding that China ranked
below Taiwan, and even lower than the cities of Hong Kong and Singapore.
In foreign exchange reserves China did not rank in the top 20 countries in
the world.40
Calculating China’s “economic power” (meaning its global economic
influence, including its ability to give foreign aid), China had historically
accounted for between 22 and 33 percent of the world’s total production of
goods and services. It declined markedly in the fifteenth century and more
so in the 1800s and after. It was around 4.5 percent in 1950. It remained
that to the time of Mao’s death.41 One source put China’s share of the plan-
etary product just after Mao passed away at even less—3.7 percent.42
Clearly China’s economic performance was not the basis for its establish-
ing and sustaining a meaningful foreign aid program. As will be seen in
following chapters, during the Mao era, China’s leaders were motivated to
purvey foreign aid for political and security reasons, and not because China
could afford it.
China’s Post-1978 Economic Boom

In September 1976, Mao died. After a brief hiatus during which time
Hua Guofeng served as China’s top leader, Deng Xiaoping (having been
purged by Mao in early 1976) returned to the political scene and by late
1978 had wrested political authority from Hua. Deng accomplished this
without bloodshed, minus anything like the painfully disruptive Cultural
Revolution, and no massive purges in the party or government.43
Deng reckoned that China’s (read Maoist) economic policies up to that
time had woefully failed. So did most of the top members of the Chinese
Communist Party, many of whom had seen Maoist policies at their worst
during the Great Leap Forward and, more recently, during the Great
Proletarian Cultural Revolution.44 More to the point the majority of China’s
top leaders, like Deng, were cognizant of the fact that economically China
had performed poorly during the Mao period in spite of what the govern-
ment had reported. They realized China had to change course.45 Hence
economic development became their top priority. They strongly believed
that reforms must be instituted otherwise China would not enjoy meaning-
ful economic modernization and would remain poor.46
Deng proceeded to change China’s economic system including the
Maoist principles upon which it was predicated. The reforms he proposed
and implemented were drastic yet calculated. More important, what he did
worked. In fact, what Deng accomplished in the next 20 years and after in
terms of making China grow economically was nothing less than phenom-
enal.47 He literally transformed China from a poor country into a country
that was in many respects prosperous.48 In the process China became a giant
in terms of its financial influence throughout the world.
How Deng did this is instructive. He began with reforms in rural China
where the peasants were anxious to enjoy the benefits of a free market.49 He
phased out the communes, 26,000 of them, along with the collective farms.
He allowed farmers leases (longer and longer ones) on land. He called on
the peasants to plant the crops that would be best suited to the soil, climate,
weather, etc. in their particular area, thus rationalizing farm production.
China’s peasants, dissatisfied with Mao’s agricultural policies (especially col-

lectivization, the communes, and the forced selling of their goods to the gov-
ernment), gladly complied. Productivity in the agriculture sector exploded;
incomes in rural China soon doubled.50 As a result, Deng won the support
of 800 million rural Chinese.51
Deng then took his reforms from rural to urban China where he encour-
aged the rise of small businesses, privately owned factories, and an entrepre-
neurial class. He shoved the cadres out of the factories and replaced them
with managers who knew how to run them effectively. Many of China’s
State Owned Enterprises (SOEs) were reporting an overall negative return
on assets; Deng got rid of most of them.52 The inefficient ones were sold to
local or in some cases to foreign companies; a number of those that were
not sold were (later) turned into very efficient large, and in some cases
giant, enterprises.
Deng promoted the ideals of productivity and efficiency.53 He allowed
workers to invest in their factory or enterprise. He let other Chinese citizens
invest.54 He created a stock market and a futures market.55 Deng enacted a
system of commercial laws, which had barely existed in China before. He
oversaw sweeping tax policy changes; taxes replaced fees that enterprises paid
to the government and the level of taxation was based on profits (encourag-
ing better performance since taxes were low and remaining profits could be
kept by the company). This was dubbed the “perform or else” policy.56
Deng created a labor market. Before this wage rates were set by the state
and there was very little labor movement in China. Labor productivity was
very low.57 With Deng’s reforms there was a spike upward in labor mobil-
ity; worker efficiency as a result skyrocketed. Another important effect of
labor reform, especially the lifting of restrictions on labor mobility, was that
workers, who at the onset of Deng’s reforms were concentrated in agricul-
ture (70 percent of the workforce), moved to manufacturing where labor
productivity grew as much as 16-fold in a decade or two.58
Observably China had suffered badly from central planning under Mao.
So Deng transferred economic decisions from Beijing to the provinces
and local governments.59 He favored certain geographic areas of China—
especially the southern coastal provinces that he reckoned could develop
faster than other areas of China.60 Deng removed party control (where ide-
ology prevailed) over economic decision making and transferred authority to
the government, thereby making the basis of moves to improve the economy
practical decisions that would improve productivity.61
What Deng did amounted to a massive privatization campaign.62 In
short, he turned China’s economy from a planned, government-controlled
one dominated by public ownership, to essentially (some caveats about
this will be discussed later) a free-market one based on private ownership,

incentives, and the like. By 1990, only 25.2 percent of agricultural sales and
44.4 percent of industrial products were subject to fixed prices or central
government price controls (compared to between 95 percent and 100 percent
in 1978).63 Deng called this “developing productive forces.” This resulted in
profound economic change and very impressive economic growth in China’s
industrial sector.64
Evidence of Deng’s success in transforming China’s economy from
a Communist one to an essentially free market capitalist one can also be
discerned from the fact that in 1978 before Deng instituted his reforms,
government (mainly from running state enterprises and government-owned
works) accounted for nearly 40 percent of the gross national product. By
1990, it was well below half of this figure, less than that of the United
States (16.6 percent compared to 19.7 percent for the United States).65
Subsequently, growth in the industrial sector came from individual (24 per-
cent) and foreign/and joint invested companies (55 percent); only a small
portion was from state (8.4 percent) and collective enterprises (16 percent).66
This represented a massive move toward private ownership. 67
Deng was not only a smart economist; he also displayed a high level of
political acumen that was needed to make his economic reforms work.68
He gave increased stipends and other benefits to students and intellectuals,
and they supported his reforms. He got the military on board by allowing
them to partake in the money made from tourism and a growing military
industrial complex. He encouraged the sons and daughters of top party and
government leaders to be “consultants,” middlemen, and advisors (many
working for foreign investors and foreign companies). Many of them got
rich. Doing this Deng was able to co-opt them and/or dissuade them from
opposing his economic changes.69 Deng appealed to the Chinese masses
sense of patriotism when he proclaimed that China was looked down upon
because it was poor; he said by making China rich he would make China
respected and turn it into a great nation.70
Deng had his economic development models. He cited the success of
Hong Kong, Singapore and Taiwan—Chinese entities that developed
economically through free market and free trade and became rich. Deng
needed to copy their economic systems and make Chinese citizens think
China could do what they had done. This helped promote public confidence
in Deng.71 But Deng also noted that South Korea, Taiwan, Hong Kong, and
Singapore accomplished miracle economic growth without natural resources
and were handicapped by being small; so China should do even better.
Two very important specifics of Deng’s reforms in terms of producing
China’s economic boom were his decisions to encourage foreign investment
and expand other external economic relations, especially trade. Under Mao,
China did not borrow (except from the Soviet Union and that did not last
long) and the government did not allow foreign companies or individuals
to invest in China. China was an autarky—in the name of self-reliance.
Mao feared external economic relations would lead to foreign exploitation
and dependency. Yet China sorely needed investment capital to make its
economy grow and required trade to help its factories specialize and produce
more efficiently.
In his efforts to find investment capital Deng first looked to the United
States. He reached a settlement on property claims, the unfreezing of China’s
assets in the United States, and most-favored nations’ status. By improv-
ing Sino-US relations Deng built confidence abroad in China as a place to
invest.72 Chinese officials also wooed Japan and Taiwan, the two leaders in
the world in foreign exchange holdings.73 And Hong Kong was approached
as well; it was the repository of huge quantities of private capital. As Deng’s
economic program gained credibility, and as his reforms appeared to be per-
manent, the flow of capital into China grew exponentially.74
Overseas Chinese were also a target. The largest migrant group in human
history and capitalists at heart, they owned and/or controlled large stores of
capital wherever they were, but especially in Southeast Asia. Some estimated
the Overseas Chinese in Asia generated a gross national product of $450 bil-
lion, bigger than China’s in the 1990s, and they possessed liquid assets (not
counting securities) worth $2 trillion.75 Deng convinced them there was a
golden opportunity awaiting those who wanted to invest and make money
in China. They had been investing in Guangdong and Fujian provinces in
the south during the 1950s and 1960s. Now they did much, much more. By
2003, it was reported that 70 percent of the externally funded enterprises
in China and 60 percent of incoming private investment capital came from
Overseas Chinese.76
The second major decision Deng made was to take advantage of the global
economy and engage in trade. This constituted a seminal decision and no
one would now deny that it was a correct one.77 Deng began by expanding
exports and imports as a core policy. Foreign trade more than doubled every
decade—rising from 5.2 percent (of the gross national product) in 1970, to
12.9 percent in 1980, and 44 percent in 2001.78 Soon as a component of its
economic output China’s trade reached 25.4 percent, compared to Japan’s
16.8 percent, the United States at 16 percent, and the USSR at 5 percent.79
External economic transactions grew to the degree that by 1990, trade was
more important to China’s economy than it was to most major capitalist
trading nations.80 Today, trade accounts for twice as much of China’s econ-
omy than it does for the United States or the European Union.81 China
is said to have benefited, and is benefiting, more from joining the world
economy, or from globalism, than any other country in the world.82
Exports were the main contribution trade made to China’s economic
growth. Exports rose from US$14.8 billion in 1979 to US$85 billion in
1992. In fact, the growth of China’s exports during the 1990s and after
was a whopping 18 percent annually—twice the world’s average.83 In 2006,
China overtook the United States in exports.84 By 2008, China’s exports
had almost doubled again.85 In the meantime, the makeup of China’s for-
eign sales changed from manufactured goods being half of exports in 1985
to three-quarters in 1991.86 Not only were China’s exports increasing in vol-
ume, their values increased markedly as Chinese companies moved up scale
in their products; and this meant accumulating still more capital.
As a result of Deng’s new economic policies and the Chinese peoples’
penchant to work hard and to sacrifice and its companies to innovate and
go upmarket, China’s economy from 1979 on grew at an astounding pace of
nearly 10 percent annually for a decade. Most economists called this “mir-
acle” economic growth. In 1988, China experienced serious inflation; this
and the Tiananmen Square incident, which caused political paralysis and
a decline in foreign investment and trade, caused the growth of the gross
national product to fall to 4 percent.87 Still, for the decade China was by far
the fastest growing of any important country in the world.
Sustaining China’s Economic Miracle

For some months after the Tiananmen Square Incident in June 1989, Deng
struggled to keep China’s political and economic reforms alive. (Some of
his policies were, in fact, reversed.) Deng’s priority was keeping China
open to foreign investment and trade while preserving its now largely free-
market economy. Above all he wanted to prevent a return to Mao’s policy
of autarky.
Deng appointed Jiang Zemin to the top political job in China—head
of the Chinese Communist Party. Jiang was an advocate of Deng’s eco-
nomic ideas and worked assiduously to protect his reforms.88 The economy
returned to rapid growth in late 1990. Yet Deng, who now sought retire-
ment, had to fear that his opposition—Chen Yun, Li Peng, and others—
might turn around or scrap the reforms. In 1990 and 1991, Deng’s policies
were being given a cold shoulder by the media in China, which was con-
trolled by Deng’s leftist opponents.89
So, in 1992, Deng came out of semi-retirement and made a trip to south
coastal China where his economic policies had had the most impact. The
trip drew nationwide attention to Deng’s miraculously successful reforms
and their benefits in terms of China becoming a strong and respected nation.
It was a turning point for Deng and his supporters; they parried their oppo-
nents’ efforts to reverse directions economically.90
In 1992 the economy grew even more impressively than it had. The gross
national product increased by 13 percent. Industrial output grew by 19 per-
cent; it was the dynamo of China’s economic expansion. As the manufactur-
ing sector in China continued to soar it accounted for a larger and larger
portion of the economy. Some observers expected China’s industrial growth
to soon peak. But for several reasons this didn’t happen.
Foreign investment, most of which went to the manufacturing sector,
continued to flow into China. The number of foreign investment contracts
signed in 1992 exceeded 40,000—more than the combined aggregate since
1978. In total foreign investors put US$11.2 billion into the Chinese econ-
omy while China signed agreements for US$57.5 billion more. That year,
the government approved 47,000 new investment projects.91 In October, at
the 14th Party Congress, most of the systemic obstacles to creating a truly
free-market globalized economy were removed. Deng had prevailed over the
hardline leftists in the party. His efforts destroyed what was left of Maoist
economics. There was no going back.92
Because of instilling confidence abroad that China’s manufacturing sec-
tor would continue to grow and be profitable, soon China ranked num-
ber two in the world in attracting foreign capital. Investment funds were
pouring into China, amounting to US$37.5 billion in 1995. The result was
that foreign trade jumped to $165 billion—up 22.1 percent from the previ-
ous year. The International Monetary Fund reported that China’s national
income was US$1.7 trillion—behind only the United States and Japan mea-
sured in purchasing power terms.93
In the late 1990s, China prepared to join the World Trade Organization
(WTO). Chinese leaders wanted China to be a member of the WTO for
the prestige it afforded. But there was another reason: membership required
Beijing to move even further in the direction of a free-market economy.
Doing what was required to join meant (or justified) pushing Deng’s reforms
still further. China became a member of the WTO in 2001. It witnessed
even faster growth after that.94 If there was any question about the wisdom
of China’s reliance on the free market for its development it was now gone.
Not only did WTO membership help China continue to grow because
of advancing the capitalist system in China, it also protected China from
unilateral trade sanctions by the United States and other countries (which
had been used to offset the advantages China’s exporters enjoyed vis-à-vis
Western countries manufacturers) or to avenge China’s intellectual property
violations. Now trade disagreements had to be resolved within the WTO’s
framework of rules. This was not a problem since China’s “unfair trade”
advantages came mainly from its cheap labor and domestic policies such as
low taxes, little welfare, few regulations, rare lawsuits, high savings rates, and
low consumption, and these were matters not within the WTO’s purview
(and therefore not considered unfair trade practices). Thus China’s edge in
global trade was legitimized.95
Investing in China continued to grow, reaching US$52.7 billion in 2002,
at which time China surpassed the United States to become the number
one destination for foreign capital investment in the world.96 In the ensu-
ing years foreign capital continued to favor China, reaching $92.4 billion
in 2008.97 China went on to receive large amounts of funds from Japan
and from international institutions. Japan’s aid, mostly loans, went mainly
for infrastructure, especially railroads and ports to facilitate the exports of
China’s oil and coal to Japan. Better infrastructure bolstered trade. Chinese
leaders considered this a good idea and negotiated similar deals with a num-
ber of other Western countries.98 Meanwhile, China obtained considerable
funding for infrastructure projects from the World Bank. Incidentally,
China would later put its experience to work in giving foreign aid: make aid
foster trade.99
Thus the same kind of spectacular economic growth, but even better,
than Deng had put in place in 1978 was sustained after 1990. A major
driver behind China’s success was the fact that members of the Chinese
Communist Party, which governed China, believed that economic growth
trumped everything else and that the party’s support among the populace
depended upon China’s economic performance. At the time Deng asserted:
“Development is the only hard truth.” Following this dictum the Chinese
Communist Party (which had abandoned Communist and Maoist ideol-
ogy) based the very reason for its existence (promoting communism wasn’t
anymore) on its promoting economic growth. Lower party and government
officials fell in line.100
Much was said about China’s industrial policy at this time. There was
serious debate about what strategy or strategies for growth China should
adopt other than simply free-market principles and trade. The truth was
China adopted multiple policies, including taking ideas from Japan’s and
the four Asian Dragons’ (South Korea, Taiwan, Hong Kong, and Singapore)
successful development plans. Some said competition for the best strategies
was a key to China’s economic success.101
Regardless of what was said about different economic growth policies,
top leaders saw a high rate of savings and a large amount of investment in the
economy as vital. Some of the specifics are telling. China’s level of savings
continued at a high rate and, in fact, went even higher. The low and even
falling rate of domestic consumption as a percentage of economic growth

encouraged savings. In the 1990s consumption dropped to 45 percent of the
gross national product. It fell again to around 35 percent by 2008. (In the
United States the rate was 70 percent.)102 In relative terms low consumption
(though increasing significantly due to rapid economic growth) and high
savings rates produced a level of investment in China’s economy of over
40 percent—an almost unprecedented figure and one that was higher than
any large country in history.103 Based on decisions from the top, China’s
financial institutions were geared to manage this.104
Party leaders experimented with economic policies, but did not veer from
the idea that growth was priority number one and that free market econom-
ics and globalism were the keys to growth.105 Meritocracy was lauded.106
Chinese leaders used incentives to encourage better work habits in the party
and government; that also helped to produce better economic growth.
The shift in China from a socialist planned economy to a free-market
capitalist economy continued. Employment in state enterprises, which was
45 million in 1992, fell to 17.5 million in late 2007.107 Private businesses grew
by 30 percent annually between 2000 and 2009 to account for two-thirds
of industrial output and 75 to 80 percent of profits in industry including
90 percent of profits in nonfinancial services. Among Chinese companies
93 percent were private, employing more than 90 percent of workers and
their return on equity was 10 percent above state-controlled ones.108 In
short, productive forces moved toward relatively small, private businesses.
But not everything was put into private hands. In fact, the Chinese lead-
ership transformed a number of China’s SOEs into dynamic multinational
companies that became some of the world’s largest. They nominally served a
dual purpose: to control certain sectors of the economy that needed govern-
ment supervision and to manage China’s greater participation (and competi-
tion) in the global economy.109
Keeping the best SOEs was a sine qua non in several other respects. They
supported the Chinese Communist Party and the Chinese government.
They were needed to compete with giant foreign businesses and, cynically
(or not), some said, to engage in intelligence collection, counterfeiting, and
technology theft.110 In any case, it was impossible to privatize all of them
inasmuch as their value was put at two trillion Yuan while the Chinese pop-
ulation was said to have only one trillion Yuan in savings.111
The World Bank incidentally assisted China in reforming and restructur-
ing the SOEs (mostly in secret because China was giving an impression to
the public, the Congress, and others that it was implementing pure capital-
ism and that its economy was being decentralized more than it actually was).
Justin Lin, a Chinese citizen (though one who had defected to China from
Taiwan) was one of the brains behind this process and helped make it work.112
Also Chinese leaders had studied the history of America’s economic develop-
ment and had noted the role of the government and huge corporations in this
process and felt it applied to China’s economic growth strategy.113
In 2003, the State Asset Supervision and Administration Commission
(SASAC) was established to oversee keeping some state enterprises while
making them strong and able to promote growth in certain sectors of the
economy. Some of the ones that survived privatization became the “com-
manding heights” of the economy.114 This marked somewhat a reversal of
the tide in the decentralization and privatization of China’s economy.
Eventually more than 120 very large nonfinancial companies owned by
the government were brought under SASAC control making it the world’s
largest holding company with funds over $1 trillion at the time of its cre-
ation.115 Not only were central government owned companies brought under
SACAC control, but so were 114,500 provincial and local companies.116
In the process the central government created what became known as
seven “strategic” areas and five “heavyweight” industries where it needed to
exercise direct control. The areas were armaments, power generation and dis-
tribution, oil and petrochemicals, telecommunications, coal, civil aviation,
and shipping. The important industries were machinery, automobiles, infor-
mation technology, construction, and iron, steel, and nonferrous metals.117
As we will see in following chapters these were economic areas and indus-
tries that became involved in foreign aid and many have played a vital role
in handling China’s foreign aid giving and China’s investments abroad. It
will become apparent in later chapters that what China learned in promot-
ing certain sectors of its economy and favored industries at home it used in
allocating foreign aid giving.118
It is uncertain to what degree China was determined to keep its foreign
aid giving (including investments) an important instrument of foreign policy
and how it drove the leadership to retain many of the SOEs and recentral-
ize the economy. But given the central role of it (tribute) in the past, Deng’s
statement that foreign aid would not be discontinued, and China’s dream to
become a big power, it would seem this connection was real.
Meanwhile manufacturing continued to account for the largest share of
China’s growth. In fact, it grew faster as China built new industries that
produced many things that the country had heretofore imported. From
2001 to 2009 China’s manufacturing output increased by 136.8 percent
(2.37-fold)—while all of the major European countries and the United States
witnessed a manufacturing decline.119 By 2007, manufacturing accounted
for nearly 40 percent of China’s gross domestic product.120 Globally China
passed Germany around 1999 and Japan after 2008 in terms of the size
of its manufacturing sector.121 In 2010, China passed the United States to

become the world leader in the gross value of its industrial output.122 As a
consequence China became what many called the “manufacturing house”
of the world.
One of the ways Deng accelerated the process of China becoming a
manufacturing colossus and building greater support for his free market,
free trade reforms was to create what became known as special economic
zones (SEZs).123 The idea was discussed in the late 1970s with Hong Kong
business leaders. Taiwan had made them work. Other Asian countries in
Asia had built them and they had succeeded.124 Chinese leaders saw them as
a mechanism for cutting taxes, eliminating bureaucratic regulations while
demonstrating that a less regulated, freer economy would bring more foreign
investment, especially from Japan and Overseas Chinese, and help make
China prosper.125
The first SEZs were launched on the southern coast in Guangdong
Province where the free-market economy and exporting were very popu-
lar. Deng sought to improve industrial productivity, foster the better use of
labor, use capital more efficiently, introduce new (especially foreign) produc-
tion techniques, and link China’s economy to the global economy. He also
sought more external participation in the economy and hoped to get Chinese
businesses more accustomed to thinking of exploiting export markets.126
Deng’s opponents portrayed the zones as resembling foreign concessions
during the 1800s when China was a victim of foreign imperialism. Deng
established them anyway, signaling his open door policies were popular and
were the way to go. The success of the first ones led to more and to greater
support for economic freedom and trade. “Open cities” followed applying
many of the same principles. Hainan Province in its entirety was made a
SEZ. By 2003 there were over one hundred “investment zones” recognized
by the government operating in China.127
In considerable measure, as a result of the zones China’s exports more
than doubled every decade. From 2001 to 2010, they increased by 5.9-fold
(compared to 1.4-fold for the United States, 1.9-fold for Japan, 1.6-fold for
France, and 1.5-fold for the United Kingdom. In 2008, China’s exports
reached 12.7 percent of the planet’s total and in the process China passed
the United States to become the world’s number one exporter. Meanwhile
transport equipment, machinery, and other high-value items edged out
household goods, textiles, and other cheaper items from the list of top export
items, thus bringing in even more money.128
In 2008–09 China’s economy weathered the global recession almost as if
nothing had happened.129 Chinese leaders quickly recognized the seriousness
of the problem. They stimulated the economy an equivalent of 4 percent of
gross domestic product. Banks were told to increase credit to nearly three
times what it would have been otherwise. The government provided large
tax breaks combined with rebates on a number of consumer items.130 China’s
rapid economic development thus continued unabated (though local gov-
ernments accumulated debts that became a problem later).
Looking at China’s economic growth from 1978 on, its worst year in
terms of the growth in the gross national product (the year of Tiananmen)
was better than America’s best year. In the first decade of the new millen-
nium China’s rate of economic expansion averaged 10.5 percent annually.
The United States averaged 1.7 percent, the United Kingdom 1.4 percent,
France 1.2 percent, Germany 0.9 percent, and Japan 0.7 percent.131 China’s
yearly growth rate was typically four times more than that of the United
States and even more compared to Europe, and, after 1991, Japan as well.
Some economists called it the most sustained period of very rapid economic
growth in human history.132
By 2005, China’s real per capita output was ninefold what it was in 1978
(Latin America increased by only 10 percent during that time).133 By 2007,
China’s economy, measured by its gross domestic product, was 14 times
what it was when Deng began his reforms.134 The only comparable rise of
any nation’s economy as a proportion of the world’s gross national product
was the United States at the end of the nineteenth century. In a 20-year
period between 1981 and 2001, 400 million Chinese were reportedly taken
from the poverty rolls. The portion of the population living in cities dou-
bled.135 China’s economy was modernized as it never had been before. In
short, Deng Xiaoping had launched economic changes that literally trans-
formed China into a global economic powerhouse.136
It is necessary to put all of this in perspective. As noted earlier, China
accounted for somewhere between a fifth and a third of the world’s produc-
tion and/or wealth prior to the 1600s, declining fast relative to the rest of
the world beginning in the mid-1800s. By 1950, China accounted for only
4.5 percent of the global product. It remained there until the 1970s. After
Deng’s reforms, China began catching up fast and by 1990 China accounted
for 5.61 percent of the world’s economy. According to the International
Monetary Fund, it reached 11.02 percent in 2000, 14.39 percent in 2005,
and 15.83 percent in 2007.137 From the 1990s on, China accounted for more
of the expansion of the global gross domestic product than any country in
the world, surpassing even the United States.138 The United States in the
meantime declined from accounting for 32.1 percent of the planet’s produc-
tion to 23.1 percent.139
China’s success naturally engendered a reaction, in considerable part neg-
ative, elsewhere in the world. In fact, Deng anticipated foreign opposition to
China’s economic rise. So, unlike most developing nations, and even many
developed ones, China did not engage in blatant protectionism—at least in
terms of preventing the volume of its imports from increasing. In the 1990s,
China’s imports reached 30 percent of the gross domestic product compared
to the United States at 14 percent and Japan at 8 percent.140 Hence, China
was not widely criticized at this time, at least not for closing its market
or shielding its producers (most of them) from foreign competition.141 The
government also allowed foreign-owned companies to operate in China (in
terms of manufacturing output twice the United States) and let them sell in
the domestic market.142
Yet China’s economic growth model has been called a mercantilist one.
China’s economic planners did, and still do, utilize a number of non-tariff
barriers to impede imports, such as limiting credit in China (to force savings
and dampen consumerism), restricting the size of houses with “anti-con-
sumer” land policies, keeping many goods high priced (thereby discouraging
consumption), and regulating travel (again limiting spending and encourag-
ing savings).143 In short, the Chinese government forced high savings rates,
high investment, and greater productivity while it limited consumption and
promoted exports.144
As a result of this situation, while viewing internal problems generated
by China’s rapid economic growth as very serious, some China experts and
a number of economists came to doubt (and still do) that China’s economic
growth could be sustained. Some have even predicted, for various reasons
including such problems as the poor banking system, the credibility of the
Communist Party, and other factors, that China’s economy will slow down
quickly and may even collapse.145
China’s growth model is, of course, unsustainable in some ways. Its
growth, as noted, was based on a very high rate of savings and investment
while promoting exports to maintain employment in a capitalist system.
The global economy cannot continue to handle this, much less China’s
major trading partners (especially the United States).146 To resolve this
imbalance China needed to stimulate domestic consumption and export
excess savings and surplus production.147 In fact, China is already doing
this to a considerable degree.148 Domestic consumption is up markedly
in China, though it needs to continue to grow. “Exporting” capital and
Chinese products have increased very fast via the extremely quick expan-
sion of foreign aid and foreign investing, both of which will likely continue
to grow rapidly.
The pessimists who predict that China’s economic growth will decline
precipitously and the Chinese economic miracle will stall and come to an
end have been wrong so far. And there are good reasons to think that the
“crises” they forecast will not happen or at least will not derail China’s econ-
omy and China will continue to experience very good economic growth,
better than most nations in the world, for a considerable time, though its
growth rate will certainly slow down.149
If China’s economic growth slows to 6 percent GDP growth annually
(which is considerably lower growth than its growth in recent years) or even
below that figure the Chinese economy will still double in size every seven
years. At that rate it will take a decade or two to pass the United States.
Goldman Sachs predicts that China’s economy will surpass the United
States in gross domestic product (not using purchasing power parity or PPP)
in 2027. Using PPP China already passed the United States. Some say sur-
passing the United States may happen before that if one factors in an appre-
ciation of China’s currency.150 One Nobel Laureate economist estimates that
in 2040 China will have passed the United States by a large margin and at
that time will produce 40 percent of the planet’s product.151
Supposing China’s growth falls to 5 percent it will still overtake the
United States and become the world’s largest economy in the near future.
Even if it falls to 4 percent, annual growth China will pass the United States,
given the projections on the US economy for low growth, 2 to 3 percent, in
the not too distant future.152
There are a number of reasons for optimism regarding China continuing
to grow economically. These include the following: One, China was once an
economic giant (the largest economy in the world for centuries, not only in
absolute size but in per capita income as well); it simply needs to continue
to restore that position. It is close to realizing that goal in terms of the abso-
lute size of its economy (which is most relevant when talking about global
influence). Two, the “four dragons”(South Korea, Taiwan, Hong Kong,
and Singapore) are still outpacing the rest of the world; they were models
for China’s economic boom. They are Confucian, like China, and three
of them are Chinese.153 Why should China not be able to follow in their
paths and continue to do well as they are still doing? Three, Chinese are an
entrepreneurial people, which some believe is the key to economic success in
the future—especially with globalization and democratization being impor-
tant international trends.154 Four, the length of China’s economic boom, if
compared to the United States, at the beginning of the nineteenth century
and into the twentieth century still has a considerable way to go. Thus one
should not think that China’s boom will peter out soon since it is now just
30 some years since it started.155 Finally, China’s economic growth over the
past four decades has simply been part of the pattern of developing countries
growing faster than developed ones (though China has grown much faster
than other less developed countries).156
The reasons for the latter trend, which includes 75 to 90 percent of

developing countries from 1960 to 2000 and their growing at even higher
rate since then, are that these countries have learned that macrostability,
access to technology (especially in the realms of information and commu-
nications), and sustaining economic growth momentum are the keys to
economic development.157 China’s leaders understand this. It seems likely
that China will continue to do even better than other developing countries
because of the size of its market, which facilitates its pursuits of investment
capital and technology, and since foreign businesses cannot afford to not
partake in the China market. Last but not least Chinese leaders as well as
the populace of China seem to have the willpower to become the dominant
power in the world (which its competitors such as Europe and Japan do not
have and the United States appears to have lost); this will spur its push to
grow further.158
China’s investment in and its building an excellent education and research
base, as reflected in the number of foreign students it sends and receives, the
upward movement of its universities in the world ranks, its now large and
still increasing spending on research and development, its production of sci-
entific articles, and its building a sound modern high-tech infrastructure all
suggests China’s economy will continue to modernize and do well.159 Good
governance that has credibility with its citizens is also considered by some to
be an economic advantage accruing to China.160
It is worth repeating that China facilely weathered the 1997 Asia eco-
nomic meltdown and the 2008–09 global recession; in fact, it continued
to grow economically at a fast rate through both. Thus its fast economic
growth seems to be resilient to external shocks including fluctuations in
the global economy. If this proves incorrect and China does experience a
serious economic downturn it will engender a worldwide recession of such
magnitude that other major economic powers and global institutions will
likely come to China’s rescue to prevent a world economic catastrophe.161
However, before this happens it is likely China will be able to cushion any
downturn because of its large foreign exchange position and its ability to
some degree to recall capital it has invested in other countries in the form of
aid and investments.
Finally, it is also noteworthy that China has taken steps to again decen-
tralize the economy, deal with the debt problem, rid the system of corrup-
tion, improve the environment and much more.162 Reforms are still going
on in China.
If China sustains its rapid economic growth, or even moderate growth, it
is reasonable to assume its foreign aid giving and foreign investing will con-
tinue on its present track and/or will grow. (This issue is discussed further in
the concluding chapter of Volume 3.) However, more relevant to explaining

its foreign aid and investments to date is how China’s economic growth has
contributed to its much-improved financial situation, especially the money
it has on hand.
China’s Accumulation of Foreign Exchange

As discussed earlier, in 1949 Mao’s government quickly took measures to
increase capital accumulation in China; it deemed this critical to economic
growth and to national recovery. By the mid-1950s, the rate of savings had
increased noticeably, albeit the benefits in terms of more available invest-
ment capital were offset to a considerable degree by the need to import
many goods, including weapons and other military equipment (a lot of
which was given to North Korea during the Korean War), and by China’s
growing population. Also, making its efforts to raise capital less successful
than would have been the case otherwise (especially in comparison to other
developing countries); several common means to do so were not employed
or were limited owing to China’s policy of self-reliance, including, and espe-
cially, not accepting aid or loans from Western countries and not engaging
in trade (except with Communist Bloc countries that did not have much
foreign currency).163
Capital accumulation abetted by economic growth was set back when the
economy was derailed in the late 1950s by the failed Great Leap Forward,
which made China’s economy contract badly and, of course, caused the
savings rate to plummet. Worse, mass starvation ensued requiring the use
of precious foreign exchange to buy grain and other food commodities
from Western countries. Even though Great Leap policies were soon aban-
doned, Maoist egalitarian ideals kept wages low for people with skills that
might have contributed to China’s economic growth through higher rates
of savings.164 A continuation of the policy of autarky, which after 1960 now
applied to trade with the Soviet Union and pro-Moscow Communist coun-
tries, meant China could not add meaningfully to its small currency reserves
through a favorable trade balance or loans. Thus, as previously noted, China
had little foreign exchange when Mao died and Deng subsequently took
control of the country. In fact, China possessed a meager $2 billion in gold
and foreign currency at the end of the Mao era.165
Deng changed this situation dramatically by first generating very fast eco-
nomic growth. This served as the precondition or the milieu to accumulate
capital. As noted, three special factors helped facilitate the growth of China’s
monetary holdings: a very high savings rate (by both companies and individ-
uals); foreign investment flowing into China, including aid and loans from
other countries and from international organizations and investments from

various sources; and an expansion of trade accompanied by a favorable bal-
ance of exports versus imports. Each of these factors needs further elabora-
tion here, as they were central to China becoming rich in foreign exchange.
Not long after Deng launched his economic reforms, China’s domestic
savings rate skyrocketed to between 30 and 40 percent. China’s level of sav-
ings soon surpassed Japan’s, thought to be the world’s best savers (at between
30 and 35 percent). America’s rate was 15 percent.166 Reaching this high
level of savings, because most of it was invested in manufacturing, ensured
China’s continued high economic growth rates. But it also (later) made for-
eign aid giving and foreign investing a lot easier.
The high rate of saving was sustained through the 1980s and 90s and
after. In fact, it increased during those years and continued to rise. In 2001,
the rate of saving in China was 38 percent; in 2004 it was 44.2 percent.167
Individual Chinese and families contributed, accumulating $500 billion in
household savings.168 By 2005, the official savings rate had risen to 45 per-
cent overall while it was reported the domestic or household rate of savings
was 50 percent.169 By 2006, China’s savings had reached close to 60 percent
of the gross domestic product and was accompanied by a rate of investment
of around 50 percent. These were arguably the highest rates ever achieved
in human history, at least for a big economy.170 By 2010 China’s households
in terms of financial assets were worth $5 trillion.171 A good portion of this
went into government-controlled funds.
In addition to an unprecedented rate of savings within China, the coun-
try attracted large sums in financial support (grants, loans, and investments)
from external sources. There were two important macrovariables involved
in this process. One was the much better relations Dengist China estab-
lished with the United States. Washington helped China borrow from vari-
ous sources, including international institutions and other capitalist nations.
Two, Deng produced a credible plan for China’s development. China was
thus able to attract capital in the form of investments like a magnet from
international financial organizations, foreign governments, corporations,
and private sources.172
International financial and aid giving agencies, in fact, became quite
attracted to China. China was very credit worthy, since under Mao China
had not borrowed much, almost nothing from global financial institutions.
(China had belonged to only a few of them and had for a considerable period
distrusted them.) Since lending by international organizations was based on
the previous borrowing of that nation (almost none in China’s case during
the Mao era), its per capita income, and its population, China was eminently
qualified.
The World Bank, the International Monetary Fund (IMF), and the
Asian Development Bank (ADB) were among international financial insti-
tutions that China established relations with and which helped China obtain
investment capital. In 1992, China became the world’s largest borrower
from the World Bank, displacing India that had held that rank for nearly
two decades. China remained the World Bank’s largest borrower for some
years after this even though China did not qualify as well as it had earlier.
This was so in some measure because China gained a solid reputation for
using financial help efficiently and for completing projects on schedule and
generally according to plan. China learned from the International Monetary
Fund how to manage reforms and best use funds for economic growth.
China also got funding for many projects from the IMF. Meanwhile the
ADB provided considerable capital especially for China’s energy sector.173
Because China found friends among aid-allocating officials of various inter-
national agencies that appreciated China abandoning Maoist policies and it
responding well to aid inquiries and advice, they favored renewing requests
for more aid.174
China also attracted aid and investment capital from other countries.
Japan, which extended credits to China worth US$1.5 billion between 1979
and 1983, was the biggest bilateral provider. Hong Kong was the main source
of private investment capital. In 2003, the world took notice when China
became the world’s number one recipient of foreign investment, attracting
US$53 billion (surpassing the United States at US$40 billion).175 At this
time, the city of Shanghai alone brought in US$14 billion—more than
the fourth largest country in the world (Indonesia) and more than Mexico
(which was, according to the North American Free Trade Association’s plan,
to be a magnet for foreign direct investment).176 That year foreign invest-
ment in China as a ratio to its gross national product was 35 percent; Japan
was 2 percent.177
China continued to lure capital from other countries because so many
foreign companies and individuals considered it was a good place to
invest. According to the OECD, China averaged attracting external capi-
tal from other countries amounting to $2.6 billion each year during 2006
and 2007.178
There were a number of other reasons for China continuing to receive
financing in various forms, a significant portion in low interest and other
concessionary loans (which can be called aid) in large amounts, even though
it was no longer short of capital. One was that China still had 200 million
qualified poor. It also had energy and environmental challenges, which was
where a lot of international agencies’ aid went. Another reason was that China
was a favored place because its efficient provincial and local governments
made it ideal to try out aid projects. Finally, there was considerable aid in
the pipeline, and many aid-providing organizations, because of their slow-
to-change bureaucratic decision making, continued aid to countries that
they gave to in the past.179
Also the Chinese government facilitated the process of obtaining and
using aid and investment funds by establishing the China Investment Bank
in 1981, the China Trust and Investment Corporation for Foreign Economic
Relations and Trade in 1987, and some other organizations (discussed in the
next chapter). In addition, at this time the People’s Bank of China was made
ready to deal with global financial institutions. By the end of 1996 China
had issued $12.4 billion in international bonds.180
Deng’s China borrowed extensively, but did this in a very conservative
way, meaning that money borrowed or obtained in the form of grants
had to be used for development projects or put in places that would help
China expand economically; hence, it did not create debt that was dif-
ficult to repay and/or was burdensome in terms of not sustaining China’s
economic growth.181 Rather it facilitated faster and faster growth. Also
important was the fact China had a significant advantage in obtaining
capital because of the perception held by many businesses as well as indi-
vidual investors that Deng’s reforms were producing an economic miracle
and foreigners had to get established in China in order to have access to
its boundless market.182
China’s third source of capital came from a favorable balance of trade.
Under Deng, China adopted a policy of promoting exports. China’s entre-
preneurs had learned how to make products that other countries, especially
Western countries (the United States more than any other), would buy. Low-
cost labor, of course, helped. Low taxes and the near absence of social ben-
efits such as health insurance and retirement benefits kept production costs
low and contributed to China’s success in exporting.183 Domestic consump-
tion was discouraged. The government kept China’s currency below par and
controlled its foreign exchange.184
As a result of these three factors, its high savings rate, borrowing from
international financial organizations and from other countries (both gov-
ernment and individuals), and massive exporting, China’s foreign exchange
holdings grew very rapidly. By 1991, China possessed US$43.7 billion in
foreign currencies and US$4.5 billion in gold. This was offset by some
debt, but it was small relative to China’s large and growing economy.185 By
2002, China’s foreign exchange reserves had increased 17-fold in a dozen
years—from US$15 billion at the end of the 1980s to US$259.4 billion by
September 2002—at which time China became the second largest holder of
foreign exchange in the world (with 11.3 percent of the global total).186
In 2004, China’s foreign exchange holdings equaled US$460 billion—

which was larger than Brazil’s gross national product (the fifteenth larg-
est economy in the world).187 In 2006, China surpassed Japan to become
the world’s number one holder of foreign exchange reserves. At that time
China’s reserves were still growing at a much faster rate than any country
in the world.
By the end of 2006, China had added another US$247 billion to its
reserves. In 2007, it doubled that. By the end of the year, China’s foreign
exchange position was US$1.53 trillion, or 61 percent larger than Japan’s,
having increased by more than sixfold since 2001.188 One reason for the sud-
den large increases in foreign exchange from 2004 on was the fact that there
was a drop in China’s imports due to the fact that Chinese factories began
producing steel, machinery, and many other goods that had heretofore been
purchased in large volumes from foreign countries.189 In addition, some
of the growth of foreign exchange came from hot money that was being
invested in China in anticipation of China’s currency going to be revalued
upward. Some say that it accounted for as much as 60 percent of the new
foreign exchange.190
During 2008, China added US$1 billion a day to its foreign exchange
holdings. In mid-2009 China’s foreign currency and gold reserves passed
$2 trillion.191 Around 70 percent of this was in US dollars, the rest mainly
in Euros and Yen.192 In October 2010 China’s foreign exchange reserves
reached $2.65 trillion.193 By early 2011 China’s reserves amounted to $3.05
trillion—nearly threefold that of any other country in the world. It was
one-half of China’s gross domestic product. China was in a “position of
riches.” By mid-2012 China possessed $3.24 trillion in foreign exchange—
nearly threefold what Japan had and almost four times Europe. Projections
of China’s economic growth and other factors led to predicting that soon
China’s foreign reserves would pass $4 trillion (in 2007 dollars).194 In 2015,
they nearly did.195
China’s newly acquired wealth was a godsend. Yet it also made China the
target of criticism. Some observers carped that China was consuming only
about one-half of what it was producing—a small figure even compared to
other countries that pursued export promotion policies. The main reason
cited for this were Chinese mercantilism: a policy designed to sustain a high
level of employment in order to prevent domestic instability and preserve the
power and authority of the Chinese Communist Party.196 Put another way,
the Chinese Communist Party, which ruled China, depended on managing
growth and creating prosperity to maintain its credibility and its reputation
in view of it abandoning Communist ideology (which it was the interpreter
of before Deng’s reforms) and adopting capitalism.
Meanwhile China’s trade with the United States had created a very dif-
ficult (meaning unsustainable) situation. Since most other Asian countries
employed similar policies or have been even more protectionist, while most
of the rest of the world, including Europe and Japan, used various kinds of
protectionist methods to prevent a serious trade deficit with China, and the
United States did not, China recorded a huge trade surplus with the United
States. In fact, America almost alone became the source of China’s huge
accumulation of foreign exchange.197 It was even said that America made it
possible for China to open its market to other countries (a form of financial
help) and that the United States provided the money for China’s foreign aid
and external investments.198
Many economists opined this could not last. They offered two main
reasons. One was the backlash caused by loss of the manufacturing base
and jobs in the United States. This was bad enough when it was mainly
unskilled or semi-skilled workers; but following the revolution in informa-
tion technology revolution, it also involved high-tech employees that were
much better educated, more affluent, and closer politically to decision mak-
ers in the United States, and thus more dangerous.199 Two, China’s foreign
reserves were mainly in US dollars that were a depreciating currency.200 This
was a vulnerable point for Chinese decision makers since they were oversee-
ing huge financial losses from their dollar holdings.
But the reality was this: continuing the huge US annual trade deficit
with China was possible to a degree because of China’s holding US dollars
via its purchasing American debt instruments, especially treasury bills. The
United States was thus both the major market for Chinese products and the
depository of China’s excess capital. There was a mutual advantage in this
situation for China and the United States. Nevertheless it was an embarrass-
ing situation for Chinese leaders when critics (in the Party and elsewhere in
China) made light of the depreciation losses and US leaders talked about the
unstable, unsustainable, and unbalanced US-China trade relationship.
Chinese leaders knew this well; but they faced a serious dilemma: They
could not dump China’s holdings in US dollars since doing even a small
amount of cashing in would quickly reduce the value of what it still held and
China would lose even more. It would also make China’s currency appreciate
quickly and cause the prices of China’s exports to rise markedly and likely
contribute to an economic crisis—high unemployment, inflation, and other
undesirable consequences.201 The Chinese government issued sterilization
bonds to keep the money out of circulation in China; but this was not a real
remedy.202 Chinese leaders were thus in a dilemma.
Basically China’s leaders were put in a position of being labelled stu-
pid for losing so much money due to its foreign exchange being housed
primarily in depreciating US dollars. But what could they do? One way
out of this dilemma was to invest abroad. But this also created controversy.
When China purchased or tried to purchase large or well-known companies
in another country, especially the United States, there was a backlash.203
One controversial case was on the minds of Chinese leaders: In 2005, China
tried to buy an American oil company, Unocal. This generated alarm in the
United States and elicited strong criticism of China by the US Congress.204
China withdrew from the deal and looked elsewhere. Beijing subsequently
invested $3 billion in Blackstone and Bear Stearns and in so doing lost a
large amount money.205
It was subsequently reported that China lost as much as much as $450
billion investing in Fannie Mae and Freddie Mac.206 Chinese regulators,
who seldom make denials, said this was not true—causing many to believe
that it was. A Chinese newspaper in China, The International Financial
News, reported the story, stating that the Obama Administration planned
to “phase out” the two organizations, which could lead to almost total losses
for China.207
Meanwhile China investing in Europe became less and less popular with
fewer local residents espousing a favorable attitude about it. In fact, in the
major European countries more than half of the citizenry expressed negative
views about China’s enhanced economic power.208
For China a way out was to buy businesses, resources (such as oil conces-
sions and mines), and other assets in less developed countries, where China’s
foreign aid and investments could operate in tandem or where it was uncer-
tain which was which and in most cases it did not matter. In 2007, the
Chinese government established the China Investment Corporation, a new
government entity funded with $200 billion, to purchase various assets in
less developed countries. But there were a host of issues involved in doing
this. One solution was to invest more in energy and natural resources. China
could purchase and stockpile raw materials, and it did; but this risked creat-
ing a possible scenario where the bottom would fall out of the commodity
market when China found it had more than it could use. Anyway other
countries, including the United States, were not happy with China buying
commodities in such quantities that it drove up prices and created trouble-
some market volatility.209
China also established sovereign wealth funds, essentially state-owned
investment funds, to serve as a depository of large amounts of capital.210 In
1997, China created the SAFE (State Administration of Foreign Exchange)
Investment Company and in 2007 the China Investment Corporation.
They soon became the world’s number two and number five largest such
funds.211 But they also encounter the problems just mentioned.
Another choice for China was to increase its foreign aid and other kinds
investments abroad. China did both. Chinese leaders were motivated to a
considerable extent to do this because of its situation of having too much
money and too few good places to put it. In short, China faced a “problem”
of a glut of money.
Aid Giving and the Chinese Economy

Earlier in this chapter China’s aid giving was assessed together with the
development (growth) of China’s economy or lack of it. This relationship
needs to be looked at in more detail while examining some of the interven-
ing variables and some factors that simply coincide with China’s foreign
aid and investments.
As noted in the preceding chapter, during period one of China’s aid giv-
ing Beijing was motivated to get into the foreign assistance business because
its leaders were aware of the traditional use of aid to conduct foreign rela-
tions, i.e. tribute diplomacy. In addition, they associated the tribute system
with a time in Chinese history when China was powerful and respected.
Later Chinese leaders sought to restore the country’s greatness or fulfill the
China dream (which some writers associate with China’s strategy to become
the world’s dominant power) but knew that China still lagged behind the
United States in military power. Therefore China had to challenge America
with its economic might. Chinese also needed to think long-term.212 Back
to that point a little later.
It was also observed that China began giving foreign aid not because of
its successful or growing economy, but in spite of it or even because Mao
failed in engineering good economic growth and sought to hide this fact.
Thus one can argue that there was an inverse relationship between the
two during period one. In other words, China gave aid when it could not
afford it.213
Why was this so? Mao was prompted to give foreign aid in the early years
both to advance Communist Bloc solidarity (the bloc being China’s “world”
as East Asia was in ancient times) and respond to a security threat from the
West in Korea and Vietnam (not unlike threats China faced historically,
especially in Korea). Hence Mao saw no contradiction in receiving foreign
aid from the Soviet Union while at the same time giving assistance to bloc
countries. In fact, to some degree Soviet aid to China made it possible for
China to give aid to Korea and Vietnam. In other words, China served as a
conduit for aid (though as it turned out China paid for most of it). China’s
aid was called “bloc aid.”214 It was also wartime aid. China, as a member of
the Communist Bloc, was at war with the West, mainly the United States,
and was threatened by what was going on in these two countries. Whether
or not it mattered that Korea and Vietnam were former tribute nations is
difficult to discern; looking at events then and later it certainly seems so.
In any event, China was determined to maintain bloc unity and defend its
borders (conflated with the defence of the nation) and generally placed that
in an order of importance equal to or above advancing China’s economy.215
But that situation changed, notably the high priority Mao gave to bloc
unity. In 1960 and in ensuing years, China’s (Mao’s) ire with the Soviet
Union after the Kremlin cut its aid to China, competition with the Kremlin
became a prime driver in China giving foreign aid. Mao pledged large
amounts of aid to prove Soviet aid had not been important and to show that
China could be more generous and more effective in helping poor countries
develop. The scope of China’s foreign aid giving thus expanded.
The Soviet Union’s foreign aid to China deserves further comment. Was
it generous? Did it help China economically? These may appear sidebars in
analyzing China’s foreign aid and investments; but they help explain Mao’s
not basing China’s aid giving on the health of China’s economy.
A number of analysts have argued that Soviet foreign aid to China played
a critical role in China’s economic development.216 Did it? The facts present
a mixed picture. During World War II, the Soviet Union provided China
some economic aid. However, that was not large. Anyway Mao stated plainly
at the time that China should not expect much economic aid, that Japan
would be defeated anyway, and that his economic development strategy was
by necessity one of self-reliance.217
Soviet aid to Mao’s Communist movement arrived for the first time in
any meaningful sense in the form of Japanese weapons and equipment cap-
tured by Soviet troops at the close of World War II and turned over to Mao.
This had a significant (favorable for Mao) impact on the course of the civil
war between Mao’s Communist forces and Chiang Kai-shek’s Nationalist
armies, even though Moscow’s motives were suspect.218
What can be labeled the first official foreign assistance the Soviet Union
provided Mao’s People’s Republic of China came in 1950 after Mao went to
Moscow and concluded a treaty of mutual defense and friendship. In accor-
dance with this agreement, the Soviet Union promised, and delivered, what
was by some accounts a considerable amount of economic and technical
assistance. However, the monetary value of this aid was not disclosed and to
this day is not known precisely.219
Soviet foreign aid may be considered to have been helpful and even
generous in view of the fact China had no other sources of financial help
and because it facilitated China’s economic development plans—which
emphasized building an economy based on developing heavy industries. In
particular it was valuable in helping modernize China’s transport sector and

it made possible the quick rehabilitation of Manchuria’s economy.220 Finally,
it included needed arms to help upgrade China’s military and even eventu-
ally build nuclear weapons.221
Nevertheless, Soviet aid in terms of helping China economically and
what China paid for it, even before 1960, became the subject of considerable
derision by Mao. Mao came to view Moscow’s financial help as disappoint-
ing and worse. He asserted that it was not only not very helpful nor generous
and that it was a tool of Moscow’s manipulation and exploitation of China.
There is certainly evidence that Mao had a point.
What are the known facts?
Soviet aid to China was reported by an official Chinese source to have
totaled $2.24 billion, though much of it was not identified specifically.222 It
may have been inflated for strategic or propaganda reasons. It probably was,
and it included, for example, things the Soviet Union took from China dur-
ing and after the war and then returned. In any case the amount of Soviet
aid that was documented was much less. The records show Moscow pro-
vided $300 million in aid to China during the period 1950 through 1954,
an average of $60 million annually.223 But after 1954 China began repaying
this aid (which was a loan with interest) until it was fully paid off in 1963.
A second loan of $130 million began to be drawn in 1954 and was soon
used up. The first donation appears to have included military assistance the
Soviet Union provided to China, which China in turn gave to North Korea
during the Korean War.224
Some other figures are perhaps more germane. The aid that the Kremlin
provided to China during the period from 1950 to 1954 covered but 11 per-
cent of China’s imports from 1950 to 1957 and accounted for just 3 percent
of China’s state investment funds.225 This would indicate Soviet aid did not
have much impact on China’s economic development (though there are dif-
ferent accounts about this).
According to one author, China paid a “steep price” for the 1950 aid
agreement in the form of mining, railroad, and other concessions in
Manchuria and Xinjiang, not to mention recognizing the independence of
Outer Mongolia (which had previously been part of China), and granting
the Soviet Union use of Dalian harbor and the Lushun naval base in China.
Later Mao complained bitterly of Stalin’s attempt to establish “semi-colo-
nies” in China using these concessions.226
In 1960, the Soviet Union severed its aid to China. Making matters
worse Soviet advisors departed without warning, tearing up blueprints and
sabotaging aid projects as they left. This was very hurtful to China’s eco-
nomic development efforts. In fact, Mao and other Chinese leaders saw the
Soviet Union’s acts as vindictive and worse, viewing them a deliberate effort
to damage China’s economy. In any case this deeply influenced Mao’s views
about foreign aid giving. In fact, it may be said to have very much impacted
China’s foreign aid policies (a point that will be discussed in greater depth
in the next chapter).
Some of Mao’s criticisms were certainly valid. Soviet aid, even its techni-
cal assistance, had to be repaid (except for blueprints, licenses, and some
documents).227 Soviet aid was a net help (in terms of its balance of pay-
ments) only before 1956, since China began repaying earlier aid while get-
ting new installments after that and the former was likely larger than the
latter.228 Very little aid was given in the form of free grants. There were
other downsides or caveats: Some of the aid was used to rebuild factories
that were dismantled (looted) and the contents transported to the Soviet
Union in 1945. The value of Soviet aid was calculated based on an over-
valued ruble. It had strings attached. It was small in terms of what China
needed, providing only 5 percent of China’s foreign exchange acquired dur-
ing the period. Finally, it was a pittance, when compared to what the United
States provided to its allies.229
Mao later asserted Soviet aid was overpriced and said it was nevertheless
repaid in full at very considerable sacrifice to China. In addition, Mao con-
tended Moscow used offers of aid to pressure China to adhere to the Soviet
line on matters ranging from it economic development planning to global
political and strategic issues.230 Mao refused to toe the line on these matters,
which is why Moscow cut its aid to China in 1960.
Subsequently Chinese leaders had other negative things to say about Soviet
aid to China. The amount was small relative to what China needed. The
loans were mostly short-term ones.231 The amount of Soviet aid to China, it
was reported, was less than Moscow gave to Eastern Europe (that was less in
need), and was but a fraction of what it gave to other countries if comparing
these nations to China by population (58 percent of what Moscow provided
to East Germany and 86 percent of what it gave to Poland). Even more gall-
ing, Soviet aid to China was 3 percent less than its aid to India (which China
noted was a bourgeois country).232
According to Chinese figures, the Soviet Union provided China with
only $50 million in aid in 1956, $10 million in 1957, and nothing in
1958.233 During those years, China’s payment on Soviet loans amounted to
$260 million in 1956 and $271 million in 1957.234 Thus from the mid-1950s
on China was spending a lot more money repaying the Soviet Union for its
aid than it received while it provided much more aid to other Communist
countries than it got from Moscow. China extended aid to North Korea and
North Vietnam in the hundreds of millions plus it gave significant foreign
aid to Outer Mongolia and several East European countries.235 No wonder

Mao stopped seeing aid in terms of Communist Bloc solidarity!
Further regarding the repayment of Soviet aid, China sent raw materials
and food that were in short supply in China. Mao and other top leaders even
talked about peasants in China starving so that the Soviet loans to China
could be paid on time.236 China made similar sacrifices so that it could
deliver food and other aid to Eastern European bloc countries, North Korea,
and North Vietnam.237
Top Chinese leaders were thus understandably resentful over Soviet aid
that they considered stingy and given for political (a desire to control China)
motives. This prompted Chinese leaders to criticize Soviet aid to other
countries. And, as attested to by Chinese leaders in their often-expressed
statements of bitterness toward Moscow because of its withdrawal of aid,
this encouraged China to adopt different aid policies—policies that were
generous, including giving aid mostly in the form of funds or goods that did
not have to be repaid, low or non-interest bearing loans, etc.
Likewise it hardly seems a coincidence that Mao began giving more aid
to non-Communist countries at the same time it started repaying Soviet aid.
He wanted to demonstrate that China did not need Soviet money and that
it was not very helpful in any case for China to develop its economy. In fact,
China increased its aid giving precisely when the Soviet Union formally cut
its aid to China in 1960. Mao sought to convey the impression that China
was not hurt by the cutoff of Soviet aid and its industrialization and eco-
nomic expansion subsequently proceeded apace without Soviet help.238
More needs to be said about the costs the level of sacrifice China made
to give foreign aid at this time. The details of this are at once appalling and
instructive.
In July 1953, China provided East Germany with 50 million rubles
worth of food. At the time Mao said: “They are much harder up than we
are. We must make it our business to take care of them.” East Germany, of
course, had a standard of living much, much higher than China.239 China
donated cooking oil to Romania, when China’s peasants (who produced
the oil) survived on but one kilogram a year.240 In 1956, after the revolt in
Hungary, China sent 30 million rubles worth of goods and extended a loan
to the Hungarian government for 3.5 million British pounds that Mao said
did not have to be repaid.241
In 1958, mainly as a result of Mao’s Great Leap Forward debacle, famine
struck China, killing as many as 43 million people.242 In 1959, the govern-
ment asked its citizens to alternate liquid and solid meals.243 The average
caloric intake in China fell to between 1,300 and 1,600, an amount that
makes survival questionable.244 China was in dire straits.
In 1959, Defense Minister Peng Dehuai visited several European coun-

tries and tried to renegotiate food aid that China was promised. The East
German response was to quote Mao about the plentiful harvests in China.
They ignored Peng’s plea that China’s harvests were bad and China did not
have enough food. Poland’s representative expressed some “understanding.”
In Czechoslovakia he got little response to his appeal to cancel the aid prom-
ises. Peng was reportedly downcast. East Germany took literally Mao’s false
statements at the time about the success of the Great Leap Forward and even
asked for more food so that meat consumption would equal that of West
Germany and later asked for even more food—at a time when China was in
the throes of famine and tens of million of people were dying.245
None of this bothered Mao. He continued to increase China’s foreign
aid giving. In fact, in January 1960 a new government organization was
created, called the Foreign Economic Liaison Bureau, which ranked on a
plane with the Foreign Ministry and the Foreign Trade Ministry, to handle
the increases in China’s foreign assistance.246 At this time China was the
poorest country in the world giving economic aid and its aid, according to
some observers, was the highest given by any country as a percentage of its
per capita income.247
Moreover, China extended aid mostly in the form of grants. In November
1969, when China gave Cuba a US$60 million loan, Zhou Enlai told Che
Guevara that it “does not have to be repaid.”248 When Albania experienced
economic difficulties China came to the rescue with food aid. Thus Albania
did not need to ration food. An Albanian official, when learning of the
starving people in China, said that he was ashamed.249 Mao, it was said,
was so recklessly generous that some foreign political groups that opposed
Beijing’s policies reportedly got money from China, and one European
country’s intelligence service even set up a phony pro-Mao group specifi-
cally to get aid grants from China.250
Many of China’s top leaders did not approve of what Mao was doing, but
could say little or nothing. Mao was in command and was willing to force
the Chinese population to make extreme, even life-threatening, sacrifices in
order to give foreign aid to other countries. In the years 1971 to 1975 (a year
before Mao’s death) China’s foreign aid amounted to an average of 5.88 per-
cent of government spending—reputedly the largest of any country in the
world when measured that way and allegedly 70-fold or more that given by
the United States.251
A debate on the issue of foreign aid giving ensued in the early 1970s when
Mao’s health was failing. The thrust of the argument was that China’s for-
eign aid was too generous especially when given during times when China
was suffering grievously at home. Further it was not effective in promoting
international communism and/or the Maoist model of peasant-based social

construction, and in the future should be given mainly, or exclusively, to
advance regime stability in China and/or when it specifically furthered
China’s national interests. In other words, China’s aid should be more frugal
and more pragmatic.252
This debate coincided with a feud with Albania over China’s changed
policy toward the United States and disagreements with Vietnam over this
and other matters, especially Hanoi’s efforts to become the dominant coun-
try in Southeast Asia (a role which China sought). The expansion of Soviet
influence with Hanoi was also a factor. In any event, China terminated its
aid to two of its biggest recipients.253 This caused China’s foreign aid to
decline markedly.
Subsequently, realizing Mao’s foreign aid policies had required too great a
sacrifice and Deng’s development scheme required a large amount of capital
to implement, China’s foreign aid policies were drastically revised.254 China’s
foreign aid giving was now to be based on some new thinking, namely real-
ism and pragmatism. Put another way, if China could grow its economy it
would become a powerful country and its influence would increase more
than by simply giving foreign assistance. It was also said that extending
meaningful foreign aid would come only at some future time when China
could better afford it.255
As discussed, earlier at the onset of the Deng era China made economic
development its top priority; China thus sought large amounts of grants and
loans from international organizations. In fact, China suddenly became an
aid-seeking nation. This was first seen in China’s successful application for
economic aid from the United Nations Development Program (UNDP).
China then solicited aid and investment funds from a host of nations that
found China either deserving or a good place to invest their capital. All of
this worked to the detriment of poor countries China competed with for
money. In 1989, China became the world’s biggest recipient of foreign assis-
tance (both bilateral and multilateral) worth US$2.2 billion a year or about
6.5 percent of the world’s total.256
The first decade after 1978, China received a cumulative US$7.5 billion
in various types of development assistance from other countries (meaning
developed Western countries) and international organizations.257 By 1997,
the Chinese government had signed agreements for more than 300 thousand
projects worth over US$517 million of which more than US$206 million in
externally acquired funds had been used.258 And China continued to receive
a huge amount of financial help. As a consequence Beijing was vying with
other developing countries for grants, loans, and investment money. Thus
the question was asked in decision-making circles in China: Why should
China give foreign aid to poor countries at the same time it was competing
with them for aid? Indeed, this did not make sense.
But this view did not persist; in fact it did not last long. In the 1990s,
Chinese leaders perceived that China would soon no longer need and could
no longer continue to get funding from international organizations and, in
any case, it would no longer require large amounts of foreign investment
to fuel its economic growth. At this time, as noted earlier, China had also
begun to accumulate capital in large amounts via domestic savings and a
large favorable trade balance. This prompted China to get back into the
business of giving foreign assistance and in a fairly significant way.
Yet Chinese leaders were cautious. So China at this time gave aid spar-
ingly and combined aid pledges with promises of support of other kinds to
developing countries. One is especially worth mentioning: China had veto
power in the United Nations Security Council and used it to help friendly
Third World countries. Meanwhile Beijing gained an advantage at the end
of the Cold War; with the collapse of the Soviet Union its aid dried up
while Western aid giving, due to a desire to “collect” a dividend for ending
the bipolar struggle, decreased. Yet Chinese leaders were still uncertain if
China’s miracle economic growth could be sustained; there was still opposi-
tion to Deng’s capitalist reforms. Thus China proceeded with caution. Aid
did not drive China’s Third World policies. Its policies were instead founded
on a combination of aid and other help and verbal and other support.
In 2004–05 China made the transition from being a net aid recipient to a
net aid giver.259 This came at a time when China no longer needed to import
so many goods from the West (due, as noted, to advances made in its manu-
facturing sector) and when China’s foreign exchange position (partly as a
result of this) became huge. China thus became much more able to give aid.
In fact, this is just what China did. China began to extend aid in the billions
of dollars instead of millions. It became a competitor for aid influence with
the United States, Japan, Europe, and international aid-giving agencies. In
a host of ways China became the world’s predominant aid giver—a point
elaborated on in the concluding chapter of volume 3.
But one cannot simply say that China had gotten rich and had plenty of
money to spend and that determined the amount of financial help China
dispensed and the way it did it. Much of China’s money was kept in the
People’s Bank of China and China’s sovereign wealth funds and was regarded
as the people’s money—the fruits of the hard work of many poor people.
When it was poorly invested, as it was in some instances in some firms in
the United States such as Blackstone, Morgan Stanley, and Fannie Mae and
Freddie Mac, there was an outcry by Chinese citizens. Mirroring feelings of
disappointment and anger some members of the Chinese Communist Party
leveled criticism at their top leaders for aid and investment mistakes.260 In
short, China’s use of its vast foreign reserve riches was subject to public scru-
tiny.261 Chinese leaders and their followers did not yet, not exactly anyway,
have an awareness China was swimming in money and, therefore, needed
to find an outlet for it.
The situation may be described this way: China had lots of cash. But
China was impeded from investing in the United States, a favorite place
to put capital—in certain industries at least. Conservative investments lost
money owing to changes in the valuations of the US and Chinese curren-
cies. Risk investments often went bad. Chinese leaders dared not put large
amounts of money into the domestic economy, as this would have caused
inflation. There were other concerns: Allowing its vast holdings of foreign
exchange to enter the domestic economy would have caused other problems.
It would have meant China’s currency would need to be revalued upward;
yet this would have caused a spike in labor costs and some of China’s indus-
tries would have lost customers.
China had to think of other strategies and go elsewhere with its money.
It renamed much of its aid investments; there was still opposition to foreign
aid because of the way it had been misused under Mao. In fact, Chinese
leaders shifted to speaking much more of “foreign investments”; but by
their own admission there was little or no difference between the two.
Investments were loans as most of China’s “aid” had been and continued to
be. Meanwhile China had developed a desperate need to import energy and
raw materials to fuel its continued industrialization and it needed markets
for what it produced to keep its factories going and to stave off unemploy-
ment, which its leaders feared would engender social and political instabil-
ity. China could no longer think in terms of economic self-sufficiency. Its
economy was global and trade was its essence. But trade had to be guided
or regulated. China also needed to import food; Deng’s free market econ-
omy had rationalized agriculture production, which instantly created higher
yields and a more productive rural sector of the economy. The agricultural
sector boomed. But this did not last and a $4.2 billion surplus in agricul-
tural exports in 2001 turned into a $4.6 billion deficit in 2004. 262 China’s
foreign aid policies reflected these needs. (These issued are discussed further
in the next chapter.)
China’s SOEs came to the rescue. They became joined at the hip with
China’s sovereign funds, state owned or government controlled banks and
other large, many huge, financial organizations. In concert they helped
Chinese leaders cope with an overheated economy, unemployment, excess
money, a backlash among Western countries to China’s new economic
threat or perceived threat, and more. They also facilitated China’s growing
(desperately so) need for energy, resources, food, and markets. Emblematic
of this was Premier Zhu Rongji’s call in 1999 for China to “go out” (to the
world) and do business: invest, find energy and resources, open markets for
Chinese goods, and much more. For China this was globalization on ste-
roids. It was also a way for China to use its financial resources to accomplish
a multitude of other objectives, including enhancing its national security,
burnishing its global image, and struggling for great power status.263
Meanwhile, in the eyes of many China watchers, more important than
any other consequence of China’s economic rise and prosperity was China
becoming a big and aggressive power. Various commentators observed that
rapid economic growth, especially that generated by industrialization, is
inevitably followed by outward expansion, aggression, and imperialism.
Modern history, they said, showed this to be true. The United Kingdom,
France, Germany, the United States, and Japan all fit this model. China,
many said, is not likely to be an exception. China’s pursuit of global hege-
mony was thus to be expected.264 As one writer puts it: “Economic growth
tends to encourage expansion, which leads to insecurity, which feeds the
desire for more power.”265 By the early 2000s this metric appeared to describe
in color China’s economic rise.
There was a special point to China’s growing power that needs to be
cited; China was building roads, railroads, and big projects everywhere
in the world such that “all roads lead to Beijing” was becoming a reality.
China had become the world’s biggest exporter. It was number one in global
trade. Its foreign aid and investments made China the choice among many
developing countries. China was exercising vast global influence through its
commerce and aid and investments, much more than through its growing
military might.
The crux of the matter was this question: Will China, in its drive to
grow and become a global power, favor hard power (military force) or soft
power (foreign aid, investments, and other economic instruments of foreign
policy)? So far China has been biding its time while it continues to grow and
catch up with the United States. It yet has time to decide to what degree
foreign aid and foreign investments is the key to it becoming a true world
power. Considerable evidence indicates China prefers soft power.
To answer this question more precisely one must examine China’s para-
mount foreign policy goals and proceed from there and look at how foreign
aid and foreign investments (as opposed to other tools of policy) serve to
realize these goals. The details of China’s aid and investment policies and
the thinking of Chinese leaders about them clearly relate to China’s main
external policy objectives. It is in this context China’s use of both as instru-
ments of foreign policy needs to be assessed further.
The context is this: China’s current leaders have without any doubt
grasped how important it is for China to continue to grow economically to
be strong and respected. They understand the dynamic nature of globalism
and its benefits to China. Deng Xiaoping preached that. He praised global-
ism; he did everything he could to promote trade and commerce. Chinese
leaders have since Deng linked globalism to a prosperous and strong China,
and the Chinese people generally believe this is so.266
The final word then is that China seeks to be the predominant power in
the world—by the one hundredth anniversary of the establishment of the
People’s Republic—in 2049. One writer calls this the hundred-year mara-
thon.267 China expects to accomplish this by becoming a commercial giant
that purveys aid and investments around the global courtesy of its formi-
dable economy—which has already made China the foremost commercial
power in the world. The details follow in the next chapter.
CHAPTER 4
China’s Foreign Policy Goals and

Its Foreign Aid and Investment
Diplomacy
Introduction
The main purpose of China’s foreign aid and foreign investments was, and
is, to help Chinese leaders realize foreign policy objectives. Hence, taking
cognizance of and assessing China’s external goals, complex as they are,
makes its aid and investments more comprehensible.
As soon as Mao assumed power he found dispensing foreign aid com-
ported with his efforts to advance Communist Bloc solidarity and oppose
the Western capitalist/imperialist bloc led by the United States. Aid also
proved effective in realizing specific foreign policy aims such as: conclud-
ing border treaties, winning diplomatic recognition, and finding supporters
of important tenets of Chinese foreign policy among poor or underdevel-
oped countries.
As bloc solidarity faded in importance and hostile Sino-Soviet relations
replaced cooperation, China gave considerable aid to demonstrate that Soviet
help to China was neither generous nor helpful to its economic develop-
ment. China, therefore, employed foreign assistance to compete with Soviet
influence in the Third World.
In the second period of China’s aid giving, the Deng era and after, China’s
assistance, now in large part foreign investments, was given more, in some
cases exclusively, for the purpose of obtaining sources of energy and raw
materials and finding markets for China’s products (ironically much like
the aid programs of capitalist nations). Both were vital foreign policy goals
wherein aid served as an effective instrument of policy.
Some of the motives for China’s aid giving were identical during the
second period or changed very little: enhancing China’s security inter-
ests (though defined differently) and isolating Taiwan (though not after
2008) were constants. China’s search for diplomatic relations and procuring
its borders, and its desire to build a favorable global image, served as moti-
vation for extending foreign assistance during both periods. China’s goal of
undermining US influence was an early goal and was again a late one during
period two, though there is a caveat: China needed the United States to sus-
tain its economic growth upon which both depends.
Generally speaking, one can say that assessing China’s foreign policy
means grasping its reasons for giving foreign assistance to other countries.
Yet it also works the other way: China’s foreign aid and foreign investments
confirms foreign policy shifts and at times anticipates them. Often both
afford quantifiable proof that one objective is more important than another.
Certainly foreign aid and foreign investments can be seen as instruments
of China’s diplomacy that both complement and supplement other foreign
policy tools, usually with considerable salience.
In this chapter the author will first examine the administrative units and
the decision-making processes connected to giving aid and making invest-
ments in the context of assessing its the main foreign policy concerns. There
is an elaborate bureaucratic system in China wherein these decisions are
made. Understanding it tells a lot about the how, why, and when of China’s
foreign aid and investments. From there China’s core foreign policy issues
will be analyzed along with the question how foreign aid and foreign invest-
ments help fulfill these important goals.
The Foreign Policy/Foreign Aid Apparatus

It is not possible to discuss in detail either the units of party and government
bodies in China that formulate foreign aid or foreign investment policy or
how they work. However, some mention of the loci of decision making is
in order to provide the reader a better understanding of how foreign aid
and foreign investment decisions are reached and how they relate to various
objectives of China’s diplomacy. Having said this it is necessary to point out
that the decision-making processes in China are for the most part opaque,
some would say shrouded in secrecy. Moreover, foreign aid and foreign
investment decisions mirror acts of a hierarchical bureaucratic system that is
in many ways diffuse; this makes the process difficult to understand.1
In any event, at the top of the foreign policy making hierarchy (in terms
of setting principles and goals) is the Politburo (in particular its Standing
Committee) of the Chinese Communist Party. Important decisions on
China’s Foreign Policy Goals ● 125
foreign policy matters and foreign assistance are made here, in particular
by an ad hoc body called the Leading Small Group or the Foreign Affairs
Leading Small Group.2 This body is said to be made up of less than a dozen
members who are top Party leaders plus some other high-level officials with
expertise in foreign affairs. They meet two times a week or so.3 It is not
known for sure who heads or convenes the Leading Small Group or even if
it is always considered a Party body.4 By intention how it renders decisions
it not clear.5 Likewise, how its members are selected is hidden from view.6
It is not a standing body and, therefore, it must be seen as an informal
entity even though it is considered to sit at the apex of the policy-making
process.7 What is known is that decisions made by the Party’s Leading Small
Group, while carrying great authority, are considered theoretical or general
in nature, and implementation is left to other bodies mostly those in gov-
ernment. In other words, it may be said this group makes foreign policy,
security policy, and economic policy “directional decisions, which set the
course others follow.”8
The State Council (or China’s “cabinet”), which is a government organ,
also has a related Leading Small Group. Since the government in general
terms implements decisions made by the Party, this body is said to be respon-
sible for implementing or operationalizing policy.9 There are other leading
small groups, including one very connected to the oversight of foreign aid
and foreign investments called the Central Financial and Economic Affairs
Leading Small Group. It has been reported that it became more impor-
tant in the late 1970s as China’s economy became more open and as China
entered phase two in its aid giving.10 Another small group that appears of
specific significance to foreign policy making and aid and investment deci-
sions is the one dealing with national security.11
It is said that there are altogether eight “primary” or important leading
small groups. If these bodies function in ways similar to interagency bod-
ies in the United States and are headed by top leaders (foreign affairs and
national security officials and recently by the Party General Secretary) and
are avenues for promotions, they must be of very great importance.12 In this
sense there seems to be some similarities to the US system.
The Ministry of Foreign Affairs (MOFA), under the State Council, is, of
course, empowered to implement foreign policy decisions, and foreign aid
and foreign investments are considered to be under its purview. Its involve-
ment, moreover, has expanded in recent years due to the fact that the Foreign
Ministry has become more professional and can better relate aid giving and
making foreign investments to general foreign policy objectives than other
bodies of government.13 On the other hand, MOFA lacks a “bureau” or
section dealing with business and economics (as is present in the US State
Department and counterpart ministries in most other countries).14 Instead,

MOFA’s Department of Policy Planning is said to play an important role
regarding economic issues and in aid programming. Regional differences
in the focus and style of allocating aid (as will be noted in subsequent chap-
ters) may result from the MOFA’s organizational structure, which is divided
along area or regional lines. This, in fact, offers evidence of its having con-
siderable influence over decisions relating to aid and investments.15 On the
other hand, the ministry often must rely on other agencies for expertise due
to the increasing complex nature of foreign relations as China has become
a global power.16
The Ministry of Commerce has a special decision-making role on eco-
nomic matters, including foreign aid; in fact it is said the MOFA delegates
it authority in the latter realm.17 The Ministry of Commerce is also said
to be the main “location of responsibility” for aid giving. China’s 2011
White Paper on Foreign Aid states that the State Council authorizes the
Ministry of Commerce to “oversee” foreign aid. Presumably this includes
foreign investments. It mentions the Executive Bureau of International
Cooperation, the China International Center for Economic and Technical
Exchanges, and the Academy of International Business Officials in the
Ministry as “implementing” projects in the areas of technical cooperation,
material aid, and training programs connected with foreign aid.18 One
might conclude that China is unique in that it puts foreign assistance deci-
sions in a ministry of trade or commerce; most countries do not. However,
giving the Ministry of Commerce a central role in aid decisions makes
sense, especially given the increased use of aid and investments in recent
years to create markets for Chinese products.19 But there is also a downside.
This arrangement seems to be a source of bureaucratic tension and infight-
ing. Some writers even suggest that this is a font of dissatisfaction within
the Ministry of Foreign Affairs.20
Specifically, the Ministry of Commerce is said to do the following: con-
duct feasibility studies for aid projects, coordinate decisions with implement-
ing agencies, and handle disbursement, monitoring, and evaluations.21 The
Department of Aid to Foreign Countries within the Ministry of Commerce
is mainly where “basic” aid work is done.22 It drafts laws and regulations
relating to foreign assistance giving and puts together budgets working with
various ministries.23 The Ministry of Commerce’s Bureau for International
Economic Cooperation reportedly manages the direct implementation of
aid, reviews qualifications of Chinese firms that bid on contracts, checks on
the quality and suitability of materials for aid projects, and conducts prefea-
sibility studies.24 The ministry’s Tendering Board for Foreign Assistance
Projects establishes rules for bidding.25
When the Ministry of Commerce was created in 2003, a report pub-

lished concerning its duties and the scope of its authority indicated it was
the most important agency of government involved in foreign aid decision
making. According to this source, it is the component of the State Council
“in charge of foreign trade and economic cooperation.” It also “takes respon-
sibility for foreign aid work and executes aid programs and policies.”26 It has
been reported that the Ministry of Commerce “allocates” most foreign aid,
and this is a source of contention with the Ministry of Foreign Affairs.27
The Ministry of Commerce works with and/or delegates authority to
various other ministries in its role of overseeing aid giving. These include,
of course, the Ministry of Foreign Affairs and the Ministry of Finance, but
also the Ministry of Science and Technology, the Ministry of Agriculture,
the Ministry of Transport, the Ministry of Health, the Chinese Academy
of Sciences, and some other agencies. The Ministry of Education and the
Ministry of Culture are responsible for overseeing exchange programs,
scholarships, and to some degree technical aid.28
The Ministry of Commerce also liaises with the Exim Bank (or the
Export-Import Bank of China) and the China Development Bank, China’s
so-called policy banks that respond to China’s geostrategic interests as well
as its commercial relations with other countries. The 2011 White Paper
states that the Export-Import Bank of China is responsible for the “assess-
ment of projects with concessional loans and the allocation and repay-
ment of loans.”29 The Ministry of Commerce also coordinates aid work
with the International Liaison Office of the Chinese Communist Party
Central Committee.30 It has been reported that the Ministry of Commerce
“administers” 90 percent of all grant aid while the Ministry of Science and
Technology handles 10 percent.31
The Ministry of Finance, one of the government’s most important
cabinet-level bodies, is also involved in the aid business. It, among many
other duties, prepares a budget for foreign assistance.32 Here decisions are
both made and implemented concerning loans, investments, and aid China
receives from international institutions and other countries, as well as the
aid it gives to foreign countries. The ministry conducts research on finan-
cial issues and facilitates cooperation with the World Bank and other global
institutions.33 The Finance Ministry is thus said to both manage and over-
see China’s foreign aid as well as appropriate funding.34 It also has special
authority in the realms of granting reduced tariff benefits to developing
countries and contributing to multilateral aid-giving organizations both of
which are growing components of China’s foreign assistance.35
Some changes have been made in recent years in the decision-making pro-
cesses regarding foreign financial matters. In 2003, the Ministry of Foreign
Trade and Economic Cooperation was given the job of handling the inspec-
tions of goods leaving China, including those that are for foreign aid. It
was also assigned the function of administering quality control measures.36
This indicates it may be involved to some extent on the logistical side, or
at least the delivery, of aid. In 2008, in order to strengthen coordination
among various ministries, agencies, and departments, an interagency liaison
“mechanism” was established involving the ministries of commerce, foreign
affairs, and finance. In 2011, this was upgraded into an “inter-agency coor-
dination mechanism.”37
The Ministry of National Defense is also intimately involved in decision
making relating to picking recipients of military aid as well as the scope,
delivery, and the end use of Chinese arms. It also handles, in conjunction
with the Ministry of Commerce, humanitarian aid in cases where logistics
may be critical and/or the delivery has to be quick. However, it has been
stated publicly that the MOFA is where decisions are made on military and
emergency aid and it coordinates aid policy in these realms with the various
branches or divisions of the military.38
China’s Export-Import Bank is another player, its role being larger in the
case of the country’s foreign investments (even though many are regarded
as aid or at least very concessional loans as will be seen in later chapters).39
The Exim Bank was established in 1994 as a government-owned institution
to be overseen and to a large degree controlled by the State Council. That
remains true. The stated missions of the bank are implementing policies in
industry, trade, diplomacy, the economy, and finance. But it is also said to
be the sole lending bank for the government’s concessional loans.40 It gives
what some call “concessional loans with governmental interest-rate subsi-
dies.”41 The Exim Bank raises money by issuing bonds and it receives funds
from the government.
The Exim Bank is heavily involved in investing in overseas projects,
especially construction, and it provides short-term and medium-term loans
dominated in Yuan.42 Its overseeing role seems to explain why China’s aid
and investments favor Chinese equipment, products, and technical help—
thereby helping the Chinese economy while bolstering employment.43 These
practices are supported by and are carried out in coordination with the
Ministry of Commerce.44
While the Exim Bank strictly speaking should not be called an “aid
agency” (technically being a commercial institution), many of its activi-
ties, by its own admission, relate to foreign assistance.45 In 1997, China
Daily reported that it had provided $138 million to fund 15 (aid?) projects
in 10 countries. In 1998, the same paper stated that China’s concessional
loans had funded “nearly 30 projects.” In 2001, People’s Daily mentioned
72 concessional loan projects in 36 countries. Toward the end of 2002,

Chinese officials cited 90 projects in 41 countries. From 2004 to 2006 the
government listed 21 new ones.46 Some say this is the product of the Exim
Bank working closely with China’s large state-owned corporations.47 Others
suggest it is a consequence of the size (in money terms) of the Exim Bank.
In 2005, it held $15 billion in capital, which dwarfed its nearest rival cohort
anywhere by 30-fold.48
The China Development Bank is also involved in giving loans. In fact, its
role in this realm is special. Observers say it is one of China’s banks that is free
from pressure to undertake politically favored projects; thus it can fund, it is
said, large-scale infrastructure projects in an “aggressive and entrepreneur-
ial way.”49 It has sponsored the China-Africa Development Fund, which has
recently become the main conduit for China’s very large assistance to African
countries, It has also been behind the establishment of special economic
zones in Africa and elsewhere patterned on SEZs in China and for which it
reportedly allocated $5 billion when the zones were launched in Africa.50
The People’s Bank of China is not directly involved in foreign assistance,
including technically speaking, either foreign loans or investing. But due to
its financial size ($2.4 billion in 2009—the largest of any central bank in
the world) and the fact that it provides funds for China’s other banks as well
as institutions that are in the foreign aid giving business, it needs to be men-
tioned. It clearly has foreign assistance related functions in that it purchases
foreign currencies, bonds, and securities in other countries.51
In addition to China’s banks that provide funding for much of China’s
foreign aid (broadly defined to include investments), its sovereign wealth
funds play a role in foreign assistance. One of the main reasons for this is
they are very large in terms of the capital they control. Three are among the
world’s largest funds: SAFE (State Administration of Foreign Investment),
China Investment Corporation, and Hong Kong Monetary Authority
Investment Portfolio. China International Fund is another; it focuses on
overseeing large-scale infrastructure and other construction projects in
developing countries.52 China’s sovereign wealth funds originally served
the purpose of finding places to invest China’s huge and growing foreign
exchange reserves. Later more funds were put into “alternative” investments
that went to developing countries that were essentially foreign aid.53 Giving
foreign assistance under the rubric of investing was in large part done by the
sovereign funds to disguise their nature from the Chinese public.
China’s SOEs also play a role in foreign aid policy and implementation,
especially the latter, since they are very large and dominate certain aspects
of the economy. As noted in Volume 1, Chapter 3, they were largely sold or
revamped during the early years of Deng Xiaoping’s free-market reforms.
Some, however, were kept due to the need for government control of cer-
tain parts of the economy. They subsequently grew in importance. In fact,
in some respects some replaced the work of China’s government minis-
tries. However, in 2003 they were put under the purview of the Ministry
of Finance and/or the State Owned Asset Supervision and Administration
Committee. Further reflecting the importance of the SOEs, in 2011 54 were
listed in the Forbes Global 500. Sinopec, China National Petrol, and State
Grid were ranked among the top ten largest enterprises in the world.54 As
will be seen in following chapters they play a very important role in China’s
aid projects abroad, especially in financial aid or investments purveyed to
acquire energy resources and markets.
There are, of course, numerous other government and nongovernment
agencies in China that influence aid and investment decisions. Provincial
governments maintain offices dealing with economic and technical issues
and often send aid teams to foreign countries to dispense aid and invest-
ment funds. This reflects Deng Xiaoping’s effort to decentralize political
and economic decision making.55 Local embassies, generally through an
economic councilor or the ambassador, receive, process, and send on many
aid requests.56 Chinese companies, both government-controlled ones and
large and small private ones, have inputs into decisions about aid, especially
when they have contracts for projects or when Chinese labor is involved.57
Finally, China has a number of charity and similar organizations that are in
the business of giving foreign aid. This does not, of course, exhaust the list
of organizations in China involved with foreign assistance. There are too
many sources of input to mention all of them here.58
Bloc Solidarity
For a number of years after Mao ascended to power in 1949, fostering bloc
solidarity and maintaining it were paramount among his new regime’s for-
eign policy objectives. This lasted for around a decade. This being the case
we must inquire why Mao considered it important that China should be
a committed member of the Communist Bloc. The answer, as noted in
Volume 1, Chapter 2, lies in large part in China’s recent history, Mao’s style
of rule, and his and other Chinese leaders’ views of the world. However,
more needs to be said about this since for some years during period one of
China’s foreign aid giving, the nature and scope of its assistance is largely
explainable in terms of its relations with the Communist Bloc.
Central themes pursued by an overwhelming number of scholars who
have studied the matter of China joining the Communist Bloc include the
breakdown of China’s traditional view of the world (as noted in Volume
1, Chapter 2) and China’s humiliation at the hands of Western countries.

One can add to this the largely dysfunctional nationalism that grew out of
China’s confusion about its role in the world and its low international sta-
tus before 1949.59 The debate that transpired in China about these matters
was both vigorous and painful. The ultimate solution to its dilemma, some
scholars contend, was its accepting Communism, which was a Western, but
an anti-Western, ideology in its tone and content.60
There is certainly much to be said as well about communism’s appeal to
Mao and his cohort in terms of Communist ideology providing the map
for establishing the type of government and rule Mao wanted—one that
included a highly disciplined party (which Mao had already organized),
decision making by the center (democratic centralism), a potent ideology
that justified revolutionary change and also extreme political and economic
ideals.61 This, of course, is not to mention a political system that controlled
and planned the economy, took charge of the media and used it to enhance
regime control, and that established and used a ubiquitous thought-control
police system.62
But just as important, or more important in terms of China’s rela-
tions with other countries, was the attraction of the Communist view of
the world, which in most ways comported with Mao’s global perspective.
This, however, requires some explanation. Mao had not read much of
Marx’s works, as they were not yet translated into Chinese during his
formative years (and Mao did not read any foreign languages). He, never-
theless, accepted the ideas of the dialectic (though Mao adopted more of
a Chinese version), historical materialism, and worldwide class struggle.
Lenin’s writings had a greater impact on Mao and other Chinese lead-
ers, especially the notion put forth in his Imperialism: The Highest Stage
of Capitalism that the colonial (and semi-colonial) countries were the
weak link in the global capitalist system and critical to the global struggle
against imperialism.63 Lenin’s worldview at once explained China’s unen-
viable conditions and gave China a new importance in world politics.64 It
also fit with Mao’s proclivity at this time to see the world as made up of
friends and foes with little, if any, room for neutrals.65 Hence, combat-
ing imperialism became the Chinese Communist Party’s “primary foreign
policy preoccupation.”
The alliance between America (the leader of the Western imperialist bloc)
and Chiang Kai-shek was likewise a factor. It made China’s struggle against
the United States a personal one. Mao had been engaged for two decades in
a bitter, protracted struggle for power with Chiang, something he was not
going to forget easily. Furthermore, Chiang (with support from the United
States) continued to threaten Mao’s rule for some years after 1949.66
In a more realist vein, Mao may have thought that his alignment with
the Soviet Union would prevent another sellout of China as had happened
at Yalta in 1945. Joining the Communist Bloc, Mao calculated, might also
cause the United States and its allies to focus on Europe and the Middle East
since China’s aligning with the Soviet Union allowed the Kremlin to devote
more attention to these areas.67 Finally, bloc membership directly offered
China protection against the United States that Chinese leaders thought
they had to fear given the hostile statements made about China emanating
from the Congress at the time, the shift in US occupation policy in Japan
(away from other goals and toward rearming), and later the US-inspired
United Nations economic boycott of China.68
Mao’s decision to join the Communist Bloc was also economic—arguably
largely so. As observed in Volume 1, Chapter 3, Mao plotted a strategy
for China’s economic development based on the Soviet Union’s economic
growth model. Mao felt the Soviet Union’s experience was instructive for
China. The Soviet Union was a poor country when it launched its develop-
ment program. It faced many of the same problems China now faced. In any
event, to adopt the Soviet system Mao needed Moscow’s advice, economic
expertise, and aid.69
In counterpoint, Mao did not think the West would help China. In fact,
he declared unequivocally that China did not expect, and it even rejected,
Western economic help.70 As noted in Volume 1, Chapter 3, Mao similarly
eschewed globalism and the advantages that specialization and foreign trade
offered. These were the central tenets of the West’s development model.
In short, Mao perceived that Western imperialist countries controlled the
international economy and involving China in it would be to China’s det-
riment in a host of ways as it had been in the past.71 In other words, Mao
accepted the arguments of dependency theorists.
In any event, China joining the Communist Bloc had great significance
for the Soviet Union and for the future of communism. It made the bloc
much bigger in area and three times larger in population. The Communist
Bloc, as a result of China joining it, also became part Asian, and thus truly
global, and more an economic bloc or community. Mao was certainly aware
of all of this.72 Thus Mao had something to offer the bloc, more than what
China could have contributed had he aligned with the West.
Though some have argued that while Mao reportedly made the decision
in 1949, he may have decided well before defeating the Nationalists and
creating the People’s Republic of China. As early as 1940, Mao divided the
world into the imperialist and socialist camps and declared that China should
join the socialist camp—an idea that if nothing else fit with Mao’s theory of
a single major contradiction in any historical period.73 In November 1948,
Liu Shaoqi, who was second to Mao in the Chinese leadership hierarchy and
may have been speaking for Mao, supported publically and formally the
Soviet Union’s view of the world, including issues such as Moscow’s relation-
ship with both the West and other Communist countries. Liu conflated the
Soviet’s worldview with China’s.74
In June 1949, four months before Mao defeated Chiang Kai-shek, he
stated that China would “lean to one side”—meaning China would become
a loyal and devoted member of the Soviet bloc. In October 1949, when
he proclaimed the establishment of the People’s Republic of China, Mao
declared unabashedly his fealty to the Communist Bloc led by the Soviet
Union. Two months later, in December, Mao left China for the first time
in his life and traveled to the Soviet Union. In February, while in Moscow,
he signed a treaty with the Soviet Union called the Thirty Year Treaty of
Friendship, Alliance and Mutual Assistance. The treaty read that if either
was attacked by Japan “or any state allied with it” (meaning the United
States) the other would “immediately render military and other assistance
by all means at its disposal.” This had great significance.
Whether there was any chance for cordial Sino-American relations before
or after signing this treaty is uncertain. This has been intensely debated in
the academic community and among foreign policy wonks and diplomats
without reaching a consensus. Given the emphasis Mao placed on the role of
the Soviet Union in deterring an attack on China by the United States and
his views on global politics and economics, one would think that Mao did
not give much thought, if any, to seeking cordial relations with the United
States.75 In any case, after the treaty was concluded China was firmly in the
Soviet camp.76
According to observers at the time, the alliance was successfully put to
the test when the Korean War erupted in June 1950. One must bear in
mind that both China and the Soviet Union thought (and feared) Japan
would rearm.77 During the war, China provided the soldiers to fight the war
while the Soviet Union supplied the weapons and other war material. In the
process Moscow helped China modernize and strengthen its army and air
force.78 Chinese leaders stated that China and the Soviet Union worked in
tandem to fight the United States and that the alliance prevented the United
States from extending the war to China.79 As a result of its engagement in
the war, China gained status within the Communist Bloc for helping North
Korea with financial assistance, military arms and supplies, and soldiers. All
were provided in the name of bloc solidarity.80
In ensuing years, China participated heartedly in Communist Bloc
affairs, traded mainly with other bloc nations, established diplomatic rela-
tions with them, and generally eschewed commercial and political relations
with non-bloc countries.81 Given China’s bloc orientation it is reasonable

then that Communist countries became the major recipients of China’s for-
eign aid. In fact, North Korea, North Vietnam, and later Albania were far
and away China’s largest foreign aid recipients. But some other European
countries received China’s aid. And Mongolia got significant aid from
China, as did Laos, Cambodia, and Cuba after they became Communist
countries or when China assumed they would.
In the early years, as noted China’s military aid, which most of China’s
aid to bloc countries was, accounted for the lion’s share of its foreign assis-
tance. In aid broadly defined and actually delivered, including arms aid,
in the early years and for some time after, two-thirds to three-fourths of
China’s total foreign assistance went to “fraternal” Communist countries.82
North Korea and North Vietnam were China’s two biggest recipients. Aid
to these two countries was large and was a heavy financial burden on China.
But it had a tremendous impact.
China, as noted in Volume 1, Chapter 3, made tremendous sacrifices in
giving economic help to bloc countries. Mao gave economic aid to coun-
tries much better off economically than China. He sent aid to fraternal
bloc countries when China was experiencing economic travail and even
famine at home. Mao sent aid to Hungary after the revolt there in 1956
followed by the Soviet invasion. He supported the Kremlin’s policies.
That applied to Moscow’s relations with other East European countries.
All of this suggests China was very committed to bloc solidarity and that
keeping the bloc unified and strong was foremost among China’s foreign
policy objectives.
But soon Sino-Soviet differences affected the actions of Chinese foreign
policy makers more than the goal of building and nurturing bloc unity. This
marked a major shift in China’s foreign policy and its aid giving.
The Sino-Soviet Split

It is a matter of conjecture exactly when China became less concerned with
bloc solidarity or when Chinese leaders stopped identifying China’s national
interests with Communist Bloc goals. Some say it started with China’s dis-
satisfaction over Moscow’s policies and actions during the Korean War.83
Others say it came later—with Stalin’s death and the de-Stalinization cam-
paign that followed in the Soviet Union.84 Some argue the Soviet Union’s
withdrawal of its aid to China in 1960 was the turning point. Some say the
break in party-to-party relations in 1962 was the final straw. Still others
argue it grew out of China’s perception, following the border war in 1969, of
the Soviet Union being a greater military threat to China than the United
States.85 In any case, the dispute was serious and affected the foreign policies
of both countries as well as the structure of international politics. 86
A salient factor laying the groundwork for the dispute as it relates to
China’s distrust of the Kremlin was China’s economic nationalism. Mao
had long believed that without economic independence China could never
attain complete national sovereignty. This was China’s motive for joining
the Soviet bloc: gaining economic independence of the West. But, from the
mid-1950s on, Mao and other Chinese leaders began to perceive that eco-
nomic ties with the Soviet Union created another, perhaps worse, form of
dependency. China and the Soviet Union sharing the same ideology and
development model, Mao believed, made it easy for Moscow to penetrate
China’s economic decision-making processes.87 Chinese leaders thus con-
nected China’s economic reliance on the Soviet Union to the latter’s “unrea-
sonable demands” made upon China.88
Anyway major sore points in Sino-Soviet relations soon became public.
One was China’s aid to North Korea during the Korean War. This aid
was given without conditions and probably all or nearly all of it took the
form of grants. Much of it was given in weapons China purchased from
the Soviet Union, via loans, which China later repaid. If the Soviet Union
and North Korea made the decision to launch the Korean War without
Mao’s participation, or did so with little Chinese input as it appeared, it
is natural that Chinese leaders felt slighted and were bitter over having to
pay for this aid.89
In 1953, ideology, the prism through which both looked at the world,
became a central factor in the dispute. Sino-Soviet ideological differences
appeared in the early 1950s but became serious following the death of
Stalin. So did leadership style. Stalin’s successors severely criticized him and
his hard authoritarianism. Mao viewed the attack on Stalin as also aimed at
him. Mao, like Stalin, had built a “cult” of (his) personality. Mao believed in
a great leader (himself). He opposed Moscow reorganizing the government
and the party to extinguish Stalin’s legacy since China’s government and
party were patterned after Stalin’s.
The Sino-Soviet split became serious, arguably beyond repair, during
the years between 1959 and 1969. In 1959, the Soviet Union refused, after
promising (in Mao’s view) to provide China with nuclear weapons after the
United States intimidated Beijing by broaching the possibility of a nuclear
attack on China during the second Offshore Islands crisis in 1958.90 In fact,
Mao was vexed by Moscow’s “false promises” and as a result decided China
would build its own nuclear weapons.91 In 1962, a formal break between the
Communist parties of the two countries showed their differences could not
be repaired.92
In the mid-1960s, their common border became an issue that further

marred relations, as did the conflict in Vietnam and Mao’s rejection of
Moscow’s stance against American imperialism. Similarly, Mao’s Great
Proletarian Cultural Revolution launched in 1965–66 had a very deleteri-
ous impact on Sino-Soviet relations.93 Thus, from the perspective of both
domestic affairs and foreign relations, China step by step came to perceive
the Soviet Union as no longer an ally. As a matter of fact, China’s leaders in
the 1960s came to view the Soviet Union as a competitor if not an adversary
or even an enemy.94
In 1969, the militaries of the two countries engaged in combat on their
mutual border—over an uninhabited island in the Ussuri River. The clash
was preceded by escalating differences over Vietnam during the period
1965–68 and Moscow’s invasion of Czechoslovakia in 1968, followed by
the Kremlin issuing the Brezhnev Doctrine that in essence declared the
Soviet Union assumed the right to intervene in Communist states where
Communist rule was threatened (which might have included China) by
“subversive forces.”95
The border fighting involved the use of heavy weapons (not just border
guards firing rifles at each other as had been going on for some time). More
importantly, it signified escalating strategic differences between Beijing and
Moscow. After the “border war,” relations between the leaders of two coun-
tries did not return to normal, and China, throughout the 1970s, did almost
whatever it could to undermine Soviet influence throughout the world.96
The Soviet Union was China’s de facto enemy.
Notwithstanding the number of critical events in Sino-Soviet relations
that generated antipathy between the two, a strong case can to be made that
the turning point was in 1960 when the Soviet Union terminated its aid to
China and with calculation and malice sought to hurt China’s economy.
This, according to a host of Western scholars, caused greater resentment in
China than any other action taken by the Kremlin.97 Certainly, to a large
degree it explains why the two engaged in aid competition after that.98 It
also says much about the nature and direction of China’s subsequent foreign
aid giving (as will be evident in subsequent chapters of this book).
To elaborate briefly, in July 1960, following an escalation of personal
attacks on each other by leaders on the two sides, much of it aired in public
to the embarrassment of both, Moscow announced without warning (unilat-
erally China said) it was withdrawing its advisors and experts from China.
Within a month, 1,390 aid personnel left, while 11 agreements on economic
and technical aid were scrapped and 200 scientific and technological proj-
ects were cancelled.99 The Soviet Union in taking such actions seriously set
back China’s economic development. The timing was especially bad insofar
as this happened at a time when China was experiencing natural disasters

“without parallel in the past century” including drought, typhoons, floods,
and plagues of locusts and other insects.100
Chinese leaders met in emergency sessions to discuss the situation. They
asked the Soviet Union to reconsider its actions. Moscow refused.101 China
subsequently, seemingly in desperation, reoriented its defense and foreign
policy using the term “war preparations” in so doing.102
The economic costs to China and the suffering Chinese citizens expe-
rienced as a result were not discussed openly. This may have been because
Mao had talked so much, and in effusive terms, about Sino-Soviet friend-
ship and had designed China’s foreign policy (including its aid policies)
based on China being a happy member of the Communist Bloc. For Mao,
pride and freedom of action were of the utmost importance.103 In any case,
the break created deep bitterness on the part of Chinese leaders after which
they, notably Mao, cast doubt on the generosity and usefulness of Soviet aid
to China whenever he could.
The depth of China’s resentment, for those who failed to see the events
of 1960 as reflecting irreconcilable differences, was revealed at the 22nd
Soviet Party Congress of the Communist Party of the Soviet Union the next
year. China’s representative to the meeting, Zhou Enlai, openly criticized
Khrushchev and left the conference before it ended.104 China subsequently
vented its anti-Soviet feelings by giving more foreign aid. That year, China’s
official aid to less developed countries grew to three times any year prior to
that notwithstanding the fact China was in the middle of the largest famine
in recent world history.105 China’s aid specifically to Third World countries
had averaged, according to one observer’s calculations, $30 million a year to
7 countries; after that it had averaged $115 million to 21 countries.106 The
explanation, some say, is that Chinese leaders saw aid as buying support
for its foreign policy views that contradicted those held by the Kremlin.107
China was determined to engage in aid competition with Moscow and in a
host of countries did exactly that.108
In 1962, in response to the “ugly” (as China called it) termination of Soviet
aid two years earlier, Premier Zhou Enlai ordered the State Administration
of Foreign Economic Contacts, the Ministry of Trade, and the Office of
Foreign Affairs of the State Council to conduct a study on how China
could best “use its foreign aid to socialist and independent countries to its
advantage.”109 From that study came China’s “Eight Guidelines on Foreign
Economic and Technological Aid”—the first and still-cited statement of
China’s foreign aid policies.110
Zhou Enlai announced the guidelines while on a trip to Africa (an
appropriate venue in China’s view given the intensity of Sino-Soviet aid
competition there and questions China had broached about Soviet motives
in giving aid to African countries). They were patently anti-Soviet in their
tone. Specifically mentioned were respect for the sovereignty of recipient
countries, eschewing conditions on aid, the preference for interest-free loans,
and concessions on repayment. Putting forth these principles constituted a
slap at Soviet aid-giving practices and mirrored China’s displeasure with the
aid it had received (and repaid) from the Soviet Union.111
In ensuing years, China and the Soviet Union used foreign aid on numer-
ous occasions to undermine the other’s foreign relations. In the 1960s, says
one observer, the “main objective” of China’s aid was to compete with the
Soviet Union.112 This was especially apparent in the cases of Albania and
Vietnam. Albania, it was said, became a Chinese “aid satellite.” This hap-
pened because Beijing sought to “encircle” the Soviet Union as the Kremlin
had allegedly done to China. Vietnam, not unlike North Korea, was a nation
whose loyalty and its stance on Sino-Soviet relations might be influenced by
foreign aid—and it was.113
In October 1964, Soviet leader Nikita Khrushchev fell from power.
There followed an effort by Beijing and Moscow to patch up their differ-
ences. Chinese leaders called for reversals in Soviet policy concerning peace-
ful coexistence, revisionism, Titoism, and more. China wanted Moscow to
support revolutionary movements. Soviet leaders wanted China to end its
criticism of Moscow’s foreign policies and its competition with the Kremlin
in the Third World, in exchange for the resumption of economic assistance.
However, China was thoroughly disappointed with the Soviet response,
specifically its offers of financial help, or did not believe them.114 China
announced that the Soviet Union’s new leadership was no different from
Khrushchev and rejected the offers.
Soon there was another escalation in Sino-Soviet tensions and the two
engaged in what some called a “foreign aid war.” Both sought to win sup-
port for their respective positions regarding the second Afro-Asian con-
ference scheduled to be held in Algeria in 1965. Chinese leaders visited
15 Afro-Asian countries from April to June that year; Zhou Enlai vis-
ited 8, some on more than one occasion.115 Moscow and Beijing gave
aid to some 20 countries to influence their votes for the Soviet Union’s
participation or its exclusion from the conference.116 China’s official aid
to less developed countries in 1964 and 1965, as a consequence of this
aid giving “dual,” exceeded by a significant margin any year prior to
that.117 A coup in Algeria, the host of the conference, during which its
president, Ben Bella, was overthrown, caused the conference to be can-
celled. Both China and the Soviet Union experienced serious diplomatic
embarrassment as a result.
The three years following the Sino-Soviet border conflict in 1969 also
saw China’s aid surpass previous levels. Part of China’s motivation for
expanding its foreign assistance was linked to its effort to get into the
United Nations (a point discussed in the next section of this chapter and in
Volume 2, Chapter 4). One of the main reasons for its seeking UN mem-
bership related to very tense relations with the Soviet Union, which China
thought it could better cope with (or dampen) in the United Nations and/
or the international community.118
Throughout the 1970s and into the 1980s, the Sino-Soviet rift remained a
core driver of China’s foreign policy and its aid giving. It had staying power.
One issue was a clash of personalities. Mao despised Soviet leaders and he
influenced others in the top leadership hierarchy in China to think likewise.
The Kremlin had hoped that after he died in 1976 relations with China
would improve. This did not happen; China’s new leaders, including (and
most important) Deng Xiaoping, were also hostile toward the Kremlin.119
In addition to personal matters, cultural, ideological, territorial, and geopo-
litical matters were all sources of friction.120
As will be seen in following chapters, the three geographic areas where
antipathy showed the most were Southeast Asia, South Asia, and Central
Asia. Vietnam comprised a core issue of disagreement not only in terms of
ideology but also power politics.121 China’s aid to Pakistan and the oppo-
sition to Soviet activities in Afghanistan and Moscow’s eventual inva-
sion increased China’s anti-Soviet sentiments. Here and elsewhere China,
increased the amounts of aid it provided to “allies” in order to “break out of
what it called Soviet efforts to contain China.”122
Sino-Soviet hostility diminished in the mid-80s. As a result aid com-
petition faded. Of course, after the Soviet Union collapsed in 1991 their
relationship was no longer a major factor that motivated China’s aid giv-
ing. Thus the “aid war” between the two ended and, what followed may
be regarded as an irony among ironies: President Jiang Zemin traveled to
Moscow shortly after the Soviet Union’s collapse to sign an agreement on
border issues and at the same time extended $1 billion in commodity credits
to Russia.123
China’s Search for Global Status

As discussed in Volume 1, Chapter 2, in the past China’s conduct of foreign
relations entailed a concerted effort to promote its image. Its rulers used
respect for China’s greatness externally to garner public support for the gov-
ernment at home. Tribute diplomacy (cum foreign aid) became central to
this process.
The West’s encroachment on China ended what was known as the

“Chinese universal kingship.”124 Yet China’s view of its cultural superior-
ity and what that implied, especially China preoccupation with building
an exalted image of itself both at home and elsewhere, were never really
abandoned.125 In fact, many scholars regard the success of Mao’s struggle
against Chiang Kai-shek, the broad support that Mao and communism had
in China, and even the creation of the People’s Republic in considerable part
as reflecting a latent but strong yearning among Chinese to restore China’s
historical global standing.126
Thus, in 1949 when the People’s Republic was established, in a gesture of
fulfilling his promise to enhance China’s status, Mao stated: “We have stood
up.” He went on to say: “Our nation will never again be an insulted nation.”
What Mao meant by this was that China would, under his rule, achieve
self-respect and international prestige.127 It would not be off the mark to
say that Maoist ideology, because of its alleged universal character and the
potential for (and fear of) China becoming a great power again gave China
global significance in some ways similar to what China had in its traditional
Sino-centric world.128
But first Mao had to explain China’s current dire circumstances. Mao
had a ready-made explanation for China’s low global status: imperialism.
Mao blamed foreign exploitation for China’s poverty and much more.
What he said had resonance.129 Mao boasted that he could enhance
China’s global image by ridding China of Western influence. He expelled
foreigners, condemned their heretofore privileged status in China, rejected
Western diplomatic rules and (as he labeled it, Western) international law,
and much more.130
Mao also sought to promote Chinese nationalism. During his rise to
power he effectively harnessed and nurtured Chinese patriotism.131 After
October 1949 Mao infused the population with Communist-cum-Maoist
ideology (both of which fed nationalist sentiment). This at once bolstered
China’s pride and helped realize its need for a better global image. China’s
“revival” attracted attention for good reason: Mao established control over
the largest population in the world and regimented the Chinese people into
a seemingly fearsome force that was unified and determined to change the
world. He created a strong authoritarian government of the kind that in the
past made China dynamic and respected. He engaged in ambitious nation
building.132 China, as a result, gained, in some ways at least, a special posi-
tion in the world.133
Seconding Mao’s calls to glory, Zhou Enlai stated that China must be
heard in the “settlement of major international issues.”134 The Chinese media
said something similar: “No solution of international problems . . . is possible
without the participation of the Chinese People’s Republic.”135 Observers

noted that China even proclaimed its own “Monroe Doctrine” for Asia.136
But, in most respects the West was strong and China was not. Mao thus
needed allies to enhance China’s standing in the world. His solution was to
join the Communist Bloc. The most important advantages China accrued
were discussed earlier in this chapter. But Mao also tried to convince other
countries, in fact the whole world, that the forces of history favored com-
munism.137 He declared that the socialist political and economic systems
(meaning communism) would replace the capitalist system worldwide.
Reactionaries, he said, could not stop this “advance of the wheel of history.”138
As a Soviet ally and member of the Communist world, China became noticed.
China likewise gained attention, though largely in a negative sense when the
United States and the West labeled China a “giant enemy and a threat to
world peace.”139 Negative in character or not, China won face.
Relating this to foreign aid giving, Beijing answered the negative views
of “Communist China” by giving economic and arms assistance to other
nations. China, seen as a poor country pledging aid, won a reputation for
generosity. Many saw Mao’s China as successful and important because it
gave aid. As noted in Volume 1, Chapter 1, aid-giving nations were deemed
rich and successful. China’s foreign aid influenced a number of nations to
take look at China’s development model and support Beijing’s stand on for-
eign policy issues. In short, its financial aid garnered Beijing a new and dif-
ferent image around the world.
Initially, in terms of its strategic value China’s foreign aid was known
mainly for its impact on the United States. Beijing supported “anti-US wars” in
Korea and Vietnam. In underwriting these two conflicts China won acclaim
(as well as notoriety). Many observers made this interpretation: China caused
the United States to end the war in a stalemate and then lose its first war ever.
In both wars, but especially Vietnam, the United States was humiliated, its
global image was sullied, its popularity affected adversely, and its role in the
world diminished.140 For China this was a tremendous accomplishment.
China’s aid to North Korea and North Vietnam had a compound effect.
China’s policy of providing succor to fight wars against the United States was
compounded by the fear of China stemming from its military strength.141
Many viewed what happened this way: the two together led to the undoing
of American post–World War II world dominance. China was applauded for
this in many quarters; in fact, it won acclaim as being the only country that
could have accomplished this.142
China’s aid did more. Aiding these two anti-American wars was part of
Mao’s larger plan to advance China’s global image by promoting revolution
in poor countries, and it was widely seen as that. According to Lenin, the
capitalist West’s exploitation (through colonialism) made the Third World

the area ripe for revolutionary change.143 Someone, meaning some nation,
might break those ties. Hence, China supported virtually all anticolonial,
anti-imperialist movements in Asia, Africa, and Latin America. Beijing ren-
dered tangible help in both economic and arms aid. As a consequence many
Third World leaders in Asia and later elsewhere looked to Beijing for both
inspiration and help.
Mao boasted that China was “uniquely qualified” to promote “wars of
national liberation.” His defeat of Chiang Kai-shek constituted a model. In
1965, as noted in Volume 1, Chapter 2, Lin Biao formulated a new Chinese
worldview based on this concept. The poor nations of the world would rise
and challenge the rich (capitalist) ones in the same manner Mao’s forces
took control of the countryside and strangled the Nationalist-held cities in
China during the Chinese civil war.144 China would thus be the leader of
the Third World.
China received kudos for Mao’s “great ideologically based worldview.”
In particular China was admired for its sacrifices in giving foreign aid to
support the cause of world revolution. If Lenin was right about imperialism,
China not only helped poor countries but also its assistance broke the impe-
rialists’ ties with Third World countries.145 Theory and actions appeared to
work in tandem to China’s credit.
Meanwhile China built a strong (or at least large) military that garnered
the respect of its neighbors and even countries afar. China boasted of the
world’s largest standing army. Becoming a nuclear power furthered China’s
aim of building the image of a great nation. Few could ignore the fact China
was determined to be a world military power. Foreign Minister Chen Yi said
(in the midst of famine in China) that China would become a nuclear power
even “if Chinese had to pawn their trousers.” He later declared that having
produced nuclear weapons and missiles, I can now “straighten my back.”146
Chinese leaders equated nuclear status with being a power others feared,
contrasting China now to the post–Opium War period when China was
weak and the victim of the predatory Western powers that designed a global
system based their military prowess.147
It was in October 1964, when China tested an atomic bomb, that it came
to be viewed as a “big power.”148 In 1966 it tested a nuclear armed mis-
sile and in 1967 a hydrogen bomb. The United States and many Western
countries labeled China an “existential threat.”149 Foreign observers called
China an anti–status quo power. Some called China a renegade and danger
to world peace. In response Mao proclaimed that the more nuclear powers
the better (since it would break the big powers’ nuclear monopoly). Many
believed him. He then offered “nuclear aid” to other countries.
The West and many other countries (including the Soviet Union) con-
tinued to vilify China for going nuclear. The United States, the United
Kingdom and the Soviet Union had just signed a non-nuclear testing agree-
ment (to prevent nuclear fallout that was endangering the environment and
people worldwide).150 China “violated” this. But Mao argued his case: The
world was in more danger due to a few countries having a monopoly on
nuclear weapons. Western scholars argued nuclear proliferation was danger-
ous. As will be discussed in later chapters, China used foreign aid to win
support for its views on nuclear weapons and found supporters among Third
World countries. In any case, China gained global attention (both positive
and negative, but either may be considered status) by going nuclear and later
when it provided aid to other countries to build nuclear weapons.151
From 1960 on Mao’s struggle for global image was impacted by dete-
riorating Sino-Soviet relations. Mao made himself an alternative leader
of the Communist Bloc. He offered a different form of communism, one
that appealed to many Third World countries. Foreign assistance was used
as an instrument to compete with the Kremlin for influence abroad and
make China the leader of Third World countries. Mao regularly met with
the representatives of foreign aid recipient countries. China’s media gave
publicity to their comments about China not putting conditions on aid it
provided—as the Soviet Union did. They praised China for its generosity
in giving aid.152
But China’s global status improved only in certain ways. As noted in
Volume 1, Chapter 3, owing to China’s mediocre or worse economic growth,
Mao did not realize his goal of making China a genuine global power.153
In fact, there was a strong awareness among top members of the Chinese
Communist Party that Mao had used a host of means to gain international
prestige and had not succeeded to any great extent because China was a
poor country. After Mao died China’s new leaders said that China’s global
reputation was much less than it might have been because China was still a
backward nation economically and thus it had little (positive at least) impact
on global affairs.154
Hence, the task of making China a nation that would be truly respected
throughout the world fell to Mao’s successor Deng Xiaoping. As discussed
in Chapter 3, Deng realized that Mao failed in his efforts to improve China’s
lot largely due to central planning and the policy of self-reliance (a form
of autarky that imposed an essentially isolationist policy on China and
deprived it of the advantages of globalism). Deng thus focused on mak-
ing China’s economy grow and the country prosper using free-market, free-
trade principles. Deng succeeded. In fact, China soon became a model for
other would-be developing countries. Chinese leaders promoted China’s
successful economic development experience whatever it might be labeled

(capitalist autocracy, state-controlled capitalism, or what some call “market
Leninism” or free trade mixed with mercantilism).
China’s rapid economic growth amazed observers. So did its remark-
able success in eliminating poverty, helping Asia during the 1997 “Asian
meltdown” (causing it to be viewed in the region as reliable in contrast to
Western countries and various international organizations), avoiding the
global recession in 2008 (while helping other countries financially much
more), and surpassing the United States in one category of economic prow-
ess after another. This convinced many in the non-Western world (and
some in West) that the Western model (the Washington consensus) had
failed or at least was not what it once was and that there were alternatives.155
China thus made a successful bid for the status of global power via the new
and widely heralded “Beijing Consensus.”156 In the ensuing years as politi-
cal paralysis and poor economic performance continued to plague Europe,
Japan, and the United States, many even began to believe that the Chinese
model of governance was much better.157 Many observers also believed that
China’s rise was the most salient factor in international politics and that the
twenty-first century would be China’s century. China’s global image thus
improved tremendously.
But this situation had a flip side. China had to deal with the matter of
its fast increasing power causing apprehension and fear in many quarters. In
fact, it engendered a backlash. China had to explain its intentions. China’s
leaders needed to “manage” its search for image and its bid for great power
status to avoid generating opposition and even enemies.158
Deng proceeded cautiously. He was leading a country that was said to
be the most status-conscious country in the world.159 Deng had to prevent
blowback from China’s fast-growing military strength and a more aggres-
sive foreign policy that was linked to that.160 So he professed China must
be humble. He declared: “We should count as a great power, but this great
power is also a small power.”161 Deng’s task, as one writer put it, was “balanc-
ing acceptance and autonomy, compliance and revisionism, power and legit-
imacy, and globalization and nationalism.”162 Put another way, Deng had
to create “an environment supportive of his agenda for engineering orderly
modernization at home and a steady great-power rise abroad.”163 Deng had
one big advantage: money. Foreign aid and foreign investments created pos-
itive international interactions for China and expanded its participation in
global politics in a good way; this also helped China avoid conflict with the
United States and other Western countries.164
In 1993, Wang Huning, a member of the Chinese Communist Party’s
Secretariat and an advisor to the president, wrote an influential article
propounding the use of soft power to cope with America’s global influ-
ence.165 In 2002, the Ministry of Foreign Affairs organized a conference
on the topic focusing on how China might learn from America’s use of soft
power.166 Subsequently there was frequent mention in Chinese academic
journals and elsewhere of expanding China’s soft power.167
In 2007, President Hu Jintao announced that culture had become a fac-
tor in the competition for national power and that China needed to further
enhance this facet of its soft power. In 2011, the Party’s Central Committee
made a formal decision of “deepening reforms of the cultural system.”168
Where, more precisely, did China’s foreign aid fit into this picture? In
other words: what were its roles? Indeed some new and special uses of China’s
financial help were forthcoming. Aid funds were to be used both directly
and indirectly to promote China’s culture. Unlike its attitude toward aid
in the past (that it is a state secret and should not be discussed) Chinese
officials, even its top leaders, boasted about the scope, effectiveness, and
generosity of China’s financial help to other countries. China’s foreign aid
officials at lower levels became less reticent in talking about its foreign assis-
tance. They also challenged the negative portrayal of China’s foreign aid in
the West. Chinese officials began to treat foreign assistance as a soft power
that should be used to improve China’s global image.169
Meanwhile, in 2004 the Chinese government, through the Ministry of
Education, the Hanban (Office of Chinese Language Council), and local
universities began funding the establishment of Confucian institutes and
Confucian classrooms abroad. The purpose was to promote Chinese lan-
guage and culture. They were also to serve as a tool of China’s cultural diplo-
macy, a form of soft power. For the first three years of sponsoring Confucian
institutes a new one was established every four days. As of 2010, there were
322 institutes in 94 countries and it was projected there were would be a
thousand by 2020.170
Though the funding did not come from foreign aid budgets, as noted
earlier in this chapter, the Ministry of Education was involved in making
and expanding China’s soft power that had become a major objective of for-
eign aid giving. There was another linkage: many Confucian institutes were
established in aid-recipient countries. Aid giving provided a favorable milieu
for setting up the institutes. China also used aid to finance communications
and media projects in these and numerous other countries (as will be seen in
following chapters) while China’s foreign aid agencies gave publicity to the
Confucian Institutes and to China’s other cultural activities.
In September 2005, President Hu addressed the 60th General Assembly
of the United Nations in New York. His speech was titled “Build Toward a
Harmonious World of Lasting Peace and Prosperity.” One of his points was
advancing beneficial cooperation to achieve common prosperity—one of

the themes of China’s foreign aid and foreign investments. His ideas were
incorporated into white papers issued over the next six years.171
In 2007, President Hu stated that culture was a significant factor in
China’s overall national strength. Subsequent to his announcement the Party
announced a formal decision on “deepening” culture. The government, in
response, began sending Chinese historical artifacts to other countries to
put on display.172 Capping a push to advertise Chinese culture, in 2008
China hosted the Olympics as no other country had ever done in terms of
the efforts and costs incurred. Two-thirds of Americans watched the games
on television. An estimated 4.7 billion worldwide saw the games on TV173
The next year, as part of the continuation of the rise of China’s cul-
tural diplomacy, China’s leaders announced new concessional aid to African
countries, forgiving the debts owed to China by the poorest African coun-
tries, and clean energy aid projects to help cope with global warming. At the
UN’s Millennium Development Goals summit in 2010, Premier Wen Jiabao
announced the cancellation of more debts. Soon after this China purchased
Spanish government bonds and then Portuguese and Greek bonds to help
alleviate economic difficulties in Europe. Many European leaders looked to
China, not the United States, to come to Europe’s rescue.174
In the meantime Xinhua News Agency launched China Network
Corporation World, China’s first global 24-four hour English language news
service that forthwith moved into its new headquarters in Times Square in
New York City. China sought to deal with the fact that Associated Press,
United Press International, Reuters, and Agence France-Presse produced
80 percent of the daily news stories worldwide, that the top 50 Western
transnational media corporations had 90 percent of the world’s communi-
cations market, and that the United States accounted for 75 percent of the
world’s TV programs.175 As will be seen in following chapters, China at this
time provided foreign aid to construct communications networks in poor
countries in some part to complement China’s efforts to build its global
media soft power.
China also made an effort to improve the global ranking of its universi-
ties. In 2003, Shanghai’s Jiaotong Universities began publishing a global
ranking list. Two of China’s great universities (Beijing University and
Qinghua University) ranked at the lower end of the top 250. In 2010, they
joined the top 200 and 5 other universities entered the top 300 rankings.176
China supplied funding to bring senior scholars home from abroad. Foreign
aid was used to provide a large and increasing number of scholarships to
students from poor countries so that they could study in China or study
Chinese language and/or about China at home.
As noted above, while working to enhance China’s public diplomacy and

enlarge its soft power, China began to give wide publicity to its foreign aid
giving and, one might say, even boasting about it (which was quite different
from its policy before this). Soon China issued a number of white papers and
other reports on its aid giving. In 2011, (as cited in Volume 1, Chapter 1)
the government published a detailed report on its foreign aid. Mentioned in
the report were specifics on China’s medical aid that cited data on building
hospitals and providing doctors. Noted especially was China’s help in pre-
venting malaria—which huge amounts of Western aid had embarrassingly
failed to stem. Also, cited were clean energy aid projects—an area where the
report declared China had an advantage. In short, China was now using
foreign aid directly to enhance its global prestige.
Meanwhile, as will be detailed in Volume 2, Chapter 3, China’s foreign
aid kept North Korea from economic collapse thus allowing Beijing to
moderate Pyongyang’s radical policies and actions. China was credited with
slowing or delaying North Korea’s efforts in building nuclear weapons and
missiles (even though China provided aid in earlier years to facilitate North
Korea building both). In talks that involved other powers, including the
United States, Russia, Japan, and South Korea, there were often heard com-
ments to the effect that China, because of the importance of its foreign aid
to North Korea, was in the driver’s seat in the negotiations.177
China’s aid also countered a negative image it acquired in Southeast Asia
due to its rapid rise in power status, especially in military strength, and its
asserting territorial claims there (most controversial being its contention
the South China Sea belonged to China). By dispersing large amounts of
aid and by offering access to China’s market, while supporting with aid
the region’s most important economic organization, the Association of
Southeast Asian Nations, Beijing in some measure softened fears of China
in the region.178
In yet another realm aid helped China pursue a better image: China
provided publicity about its border agreements coinciding with the aid it
provided. Beijing often made concessions and publicized them. According
to China’s reading of its various territorial disputes, it made concessions of
100 percent in the case of Afghanistan, 76 percent with Laos, 66 percent to
Kazakhstan, 65 for Mongolia, 94 percent in Nepal’s case, 60 percent with
North Korea, and 96 percent with Tajikistan.179 This seemed magnanimous
on China’s part; giving foreign aid at the time made it look even more so.
In Africa and elsewhere, China bolstered its global image by giving aid
without the onerous conditions that were typically attached to Western aid
while it made decisions quickly and absent bureaucratic red tape. China also
displayed its generosity and its concern for local economic development.180
In short, China advanced its global image by becoming an alternative pro-

vider of aid and investments (generally a positive one) to the West.
In some instances China made huge donations of aid to its credit in terms
of building its image abroad. In 1997, China received accolades around the
world for the aid it provided to contain the Asian Financial Crisis contagion.
There was a spate of currency devaluations at the time. China did not do
this and it may have prevented a further wave of devaluations that would
have exacerbated the already bad economic situation. Not only did it not
devalue, China contributed $1 billion to the International Monetary Fund’s
bailout of Thailand and a total of $4 billion to help Indonesia, Malaysia,
South Korea, and Thailand—nations that had been the most seriously
affected by the crisis.
Beijing’s selfless actions created the image of China as a “good participant”
regionally (at a time Asian regionalism was waning). China’s rescue efforts
eclipsed those of Japan, making China the reputed leader of the Pacific Rim
bloc. China’s aid and investments worked better than the financial help given
by Western countries and global institutions, suggesting its help was more
efficient (and in many important ways better).181 China won acclaim through-
out the world, as Chinese leaders intended, and probably won it increased sup-
port for joining the World Trade Organization a few years later.182
In 2008, after the world fell into recession, China claimed, accurately in
the view of most observers, that its economic policies and foreign aid con-
tributed profoundly to ameliorating the impact of the downturn.183 China
made aid and investment pledges totaling tens of billions of dollars, plus cur-
rency swaps. Beijing also, as confidence in the US dollar declined, allowed
the Chinese Yuan to be used as a global currency in more transactions.184
Leaders of many nations and economic experts took notice. They said that
China had assisted significantly in the global recovery and applauded its
actions in doing so.185 They praised China as a “responsible power.”186
Finally, both China’s economic growth and the efficacy of its foreign
aid and foreign investments have drawn attention to China’s unique politi-
cal system that is perceived as stable and able to promote economic growth
while answering speculation in some quarters in the West that the Chinese
Communist Party will fail and will be replaced by a liberal democratic state.
More people now realize the Party maintains high levels of support from
its citizens (confirmed by various polls) and is consolidating power rather
than losing it.187 Thus China has gained global acclaim for its governance,
something liberals in the West find hard to believe or accept it is linked
intimately to its tremendous economic successes and China’s economic help
to other countries. This constitutes still another “claim to fame” for China
and enhances its global image.
China’s Search for Security

As with most nations, China’s foreign policy decision makers have been, and
are now, preoccupied with their country’s national security. In fact, one can
say with good reason this is true of China more than of most countries.188
China has seen a long history of turmoil, war, and civil conflict.189 It was a
victim of invasions from the north for centuries and in its not so distant past
suffered humiliating military defeats at the hands of Western countries and
Japan. In recent times China has been the target of intimidation by one or
both of the world’s superpowers. As a result it has resorted to the use of force
more than other countries.190 However, in so doing Chinese leaders have
been seriously handicapped by not having allies, poorly defined (or unde-
fined) and insecure borders, and recently by sea-lanes China’s navy cannot
protect—a problem exacerbated by China’s desperate need to import raw
materials and export its manufactured products.191
China is thus often seen an aggressive, anti–status quo power, and at
times China has been responsible for such a view. Chairman Mao repeatedly
spoke of restoring the Qing Empire (when in all of its history China was the
largest in territory) and said he would avenge the past ill-treatment of China
by foreign countries. He swore to restore China’s greatness. Mao engaged in
a number of wars, proving that his statements should be taken at face value.
Shortly after Deng Xiaoping came to power and the Soviet bloc imploded,
Deng spoke of a “new cold war” between China and the United States.192
This view has been perpetuated, even enhanced, by the tremendous
progress that China has made in improving its military power in the last
25 years and the fact China is now able to in some ways challenge the US
military. And that contest will grow fast: China is projected to pass America
in military spending in around a decade.193 On the other hand, the reality
is that even if China were to supplant America as the world’s preeminent
power it would still face a number of potential or real opponents that possess
significant military power. Some are also growing powers (such as India).
The bottom line then is that to become the dominant global power China
will have to compete with a host of countries and face the likelihood of anti-
China alliances.194 This is likely too big a challenge.
Deng’s thus admonished China to be humble, bide one’s time, etc. Jiang
Jemin spoke of China’s “peaceful rise” and played down China’s military
expansion. So did his successor Hu Jintao. China’s current leaders seem to
be of the same mind, though there have been quite a few reports suggest-
ing this is changing. Still there is surfeit evidence to support the argument
that China will not become a dominant global military power in the very
near future.195
In fact, China’s doctrine of Comprehensive National Power (combin-

ing military power, technology prowess and diplomatic talent) and its New
Security Concept adopted in 1997 sounds more as if China wants to enhance
its security and, as its says, protect its peaceful rise by cooperating with other
states, promoting South-South cooperation, and engaging international
organizations. Most internal discussions of China’s national strategy since
then do not indicate China has intentions to be an aggressive power.196 (In
this connection one should recall China’s eminent military strategist Sun
Tzu, who argued that one should “win without fighting.”) This being the
case, China needs to, and wants to, complement (or replace) hard power
with soft power to deal with its present security situation.197
How China coped with military threats in the past is indeed instructive.
Throughout its history China, if possible, avoided using its military (or hard
power) to maintain its preeminence in its known world; it accomplished
this mainly using soft power, notably by giving foreign aid via the tribute
system. Clearly China did not maintain its empire with the force of arms
as much as other empires elsewhere.198 Thus one might argue that there is a
proclivity, based on its past and reinforced by its current situation, to try to
deal with security problems by using economic power (tribute then, foreign
aid now).199
Why then is it generally thought that China is an aggressive power that
prefers to use hard power instead of soft power? Why was (and is) China’s
use of soft not noticed more?
As noted Mao sought to give the impression that China would use its
hard power. In fact, Mao sounded as if he wanted to. He stated famously
that political power “grows out of the barrel of a gun.” He sternly warned
of the “imperialists and their running dogs” whom he charged with want-
ing to reverse his rise to power. He promised that China’s national defenses
would be consolidated and that he would build a powerful army, air force,
and navy to protect the nation.200 In fact, he built and maintained the larg-
est standing army of any country in the world and, technically, the largest
navy and air force.201 When Mao assumed power in 1949 he labeled the
most powerful country in the world, the United States, whose military bases
surrounded China to contain China, a “paper tiger.”202
But Mao, in spite of his bluster, realized he could not confront the United
States alone. So he concluded a military pact with the Soviet Union. But this
arguably, was not a good solution to his problems. He thus adopted a mili-
tary strategy called “people’s war,” a concept Mao developed as a stratagem
to fight the Japanese and Chiang Kai-shek’s armies, both of whom possessed
better weapons and more professional soldiers. Using people’s war against
the United States, however, made sense only if the United States were to
invade China, which was not likely. Thus many viewed Mao’s military strat-
egy as little more than a rationalization for China’s inability to cope with
American military power and certainly not evidence that China wanted to
engage the United States in war.203
Hence, as in previous centuries, to avoid war Mao resorted to using diplo-
macy and other means to enhance China’s security. Foreign aid was one of
these, an important one. In fact, Mao tried to parry the threat of American
military power and, when necessary, battle the United States by proxy, that
is, by giving massive military and other aid to North Korea and North
Vietnam. Elsewhere, by supplying aid to anti-imperialist groups fighting
wars of national liberation, Mao confronted the United States, but only
obliquely.204 In short, when it could, China employed economic assistance,
including, of course, arms aid, in lieu of using military force to “fight” the
United States.205
China also espoused the concept of peaceful coexistence (even as it criti-
cized the Soviet Union for employing it). Zhou Enlai introduced the idea at
the summit of the Non-Aligned Movement in 1953. Because of the term’s
ideological connotation (Leninist in origin), many non-aligned nations did
not accept it in name, though they did in practice. China pursued it (except
during the Cultural Revolution). In 1982, China put the principle in its
Constitution.206 This strategy fit well with both China’s desire to avoid war
and to use foreign aid as a central tool of its foreign policy.
China had another problem that its leaders found aid useful in fixing.
In a world of territorial states, China needed to delineate its borders. As
noted earlier, historically China was a culture not a nation; its borders
were thus not demarked. In modern times this became a serious concern.
When the People’s Republic came into being China had land boundaries
with fourteen countries covering 13,700 miles—more borders than any
other country in the world.207 Many of the borders were not delineated
and/or were in dispute. Foreign powers could, and did, entice China’s bor-
der countries into close ties by supporting their boundary claims. Making
matters worse China’s unresolved borders were potential areas of instabil-
ity as minority groups populated most of the border areas. Finally, China
wanted “good neighbor relations” in order to maintain internal harmony
in the context of rapid economic, social, and political change.208 As we
will see in coming chapters, Mao used foreign aid donations to help him
conclude a number of border agreements and thus resolve one important
issue of insecurity for China.209
As noted, beginning in the late 1950s and lasting through the 1960s and
after China became more and more at odds with the Soviet Union, China
thus acquired another formidable (this time proximate to China) enemy. As
was the case of not challenging superior American military power frontally,
China endeavored to avoid a direct confrontation with the Soviet military.
As discussed earlier in this chapter, foreign aid was an instrument of foreign
(strategic) policy that fit this situation.210
Beijing maintained close relations with North Korea and Vietnam, which
aid underpinned, and called upon them to influence the Soviet Union to
reduce Soviet pressure on China. Albania became a distant ally, helping
China outflank the Soviet Union. China provided very extensive aid to all
three of these countries. China likewise provided foreign aid to expand its
influence among African and Asian nations. One of China’s main purposes
was to compete with the Soviet Union for friends and allies and sublimate
their otherwise potentially explosive differences into the global arena. This
reached a high point when China tried to exclude the Soviet Union from
participation in the second Afro-Asian Conference in 1965. The two coun-
tries literally engaged in an indirect or foreign aid “war.”
Similarly China used foreign aid to gain support for its membership in
the United Nations. One of Beijing’s purposes was to join the UN and from
there rally Third World countries to support its positions of disagreement
with Moscow and to play out the dispute in this forum rather than more
directly (and more risky) elsewhere.211 Both inside and outside the frame-
work of the UN, China also gave aid to win support for major tenets of its
foreign policy, many of which were at odds with the Kremlin, such as the
Nuclear Test Ban Treaty, China’s nuclear weapons program, and more.212
India became a security concern to China in the 1960s. After a brief
honeymoon in the early 1950s, India became China’s foe. Early on Chinese
leaders perceived that India augmented the global strategy of the United
States. Later it was the Soviet Union.213 The United States and subsequently
Soviet military aid and arms sales to India moved the balance of power on
the subcontinent in favor of India.214 So China provided economic help and
weapons aid to nations on India’s periphery to counter this, as will be dis-
cussed in Volume 2, Chapter 2.
After China and India fought a border war in 1962 and especially after
India’s military defeat of Pakistan in 1971 resulting in the latter’s dismem-
berment, Beijing with even greater resolve sought to contain India’s influ-
ence. China found military and economic aid the best way (perhaps the
only way) to do this. China gave vast quantities of aid to Pakistan, as well as
significant aid other countries in South Asia; almost all of its aid was given
for the purpose of undercutting India’s regional influence.215
When Deng Xiaoping assumed political leadership in China two years
after Mao’s death, he proceeded to change China’s military. He pushed the
services toward professionalism and advanced the use of technologically
better weapons.216 This constituted a shift away from people’s war. Deng
also abandoned China’s policy of fomenting wars of national liberation in
Third World countries and cut its military aid dramatically. In so doing
Deng turned arms aid into arms sales (to make money) constituting a major
shift in China’s military aid policy.217 Deng’s main focus was on China’s
economic development and he refused to provide the military much money
to modernize.
Yet Deng needed to improve his military if he were to make China
a great power. After a decade of rapid economic growth and as China
became a major trading nation, Deng shifted China’s military strategy
from its long-held continental defense policy to one of “defending the
peripheries” or a predominantly (at least much more so) maritime strat-
egy.218 As a consequence China’s military saw a cutback in army personnel
combined with efforts to increase the capabilities of the air force and the
navy, especially the latter.219 This meant China needed the use (or acquire,
though China denied this was its policy for some time) overseas bases;
foreign aid was the best way to do this. In fact, large amounts of aid (in
most cases called investments though) were given directly or indirectly for
this purpose.220
In 1991, after Deng had for a decade resisted increasing China’s military
spending, he gave the military double-digit funding increases. This has con-
tinued to the present time.221 Not only has the defense budget increased by
more than 10 percent annually, since the army was still cutting back, the
air force and the navy received 20 to 30 percent increases. This translated
into China making huge advances in its military powers, especially in its
power projection capabilities.222 Furthermore, inasmuch as this happened
at a time when the Cold War was over and other major powers were paring
their military spending, many observers came to see China as aggressive and
destabilizing. Soft power, including Chinese foreign aid and investments,
was used to dampen fears over China’s military rise.223
There was another problem: With the demise of the Soviet Union,
China adopted a military strategy that considered the United States its
primary challenge. Yet Chinese leaders sought to avoid conflict with the
United States. China was not strong enough. Additionally China wanted
to continue its rapid economic growth and needed US cooperation and
access to the US market. Hence, China faced a “strategic dilemma”: It
had to rely on the US Navy to protect its oil lifeline and its commercial
shipping to Southeast Asia and on to the Middle East and Africa.224 In
consequence of this situation Chinese leaders endeavored to maintain good
relations with America and to do this tried to portray China as favoring a
harmonious world and the country as rising peacefully.225
China had another tactic: When the United States launched its War on
Terrorism in 2001, China immediately expressed its willingness to cooper-
ate. This gave China some respite from US criticism of China’s growing mil-
itary power and allowed it license to deal with terror ism at home, especially
in the Muslim northwest. Beijing employed a carrot–and-stick approach to
its Muslim areas: crack down on potential terrorists and any domestic unrest
while providing funds for infrastructure and other projects that would win
over support of the local populations. Aid and investments worked well in
combination with coercive policy instruments.226
In the ensuing years, however, apprehension of China’s growing military
power also grew because of China giving new attention and more money to
promoting its revolution in military affairs (RMA). China injected advanced
technology into almost every aspect of military. At nearly the same time,
China adopted a strategy it called “asymmetric warfare.” All of this made it
appear China was expansionist and a threat to other countries in the region
and beyond. China needed to change the debate to economic issues and
often did so by giving foreign aid and making foreign investments.227
In this vein, one need be reminded of the fact China’s economic growth
was based in large part on exports that fostered a fast rising need for energy
and natural resources and markets abroad (which will be discussed in the
next two sections of this chapter). Thus China’s national security planning
at this time focused more and more on protecting sea-lanes.228 This meant
building more robust naval capabilities.
To ensure this did not create a conflict with the United States and other
nations China provided considerable aid money to build security ties with
other countries as well as with international organizations to pursue the war
on terror. China similarly sought to enhance its global security by giving
evidence that it was a “global player” and a force for peace. Beijing thus
increased China’s contributions to UN peacekeeping 20-fold between 2000
and 2008, providing more personnel than Russia, the United Kingdom or
the United States. Most went to Africa. These efforts were connected to
both its need to cooperate with the United States and portray itself as a
positive force for peace and its thirst for energy and resources. 229 China
had another stratagem: to make the expansion of its military power appear
benign China sought to give the impression its military was not just for war
fighting, but also to help in disaster relief and for humanitarian aid efforts.
In fact, President Hu Jintao called for the PLA to “perform new historic mis-
sions” in this realm.230 There were even discussions at this time that China’s
first aircraft carrier would adopt this as one of its missions.231
There was still another facet of China’s security that needed attention:
China was in the process of building a world-class merchant marine to
transport the natural resources and energy it imported and the manufac-
tured goods it exported. In 2002, China set a goal to have the world’s largest
merchant marine. In 2010, it became the largest shipbuilder in the world—
producing over 40 percent of the globe’s total. It was predicted at the time
that China would have the world’s largest merchant marine in 2015. Already
China possessed 8 of the 20 busiest ports in the world, Shanghai being num-
ber one. China’s navy was being readied to protect the merchant marine,232
The Chinese military thus advocated (contrary to Beijing’s efforts to play
down its military expansion) getting access to bases overseas to “safeguard
commercial interests and world peace.”233 Foreign aid and foreign invest-
ments were the key to this strategy working.
As China became a bigger military power so did India, and New Delhi
became a serious challenge. With the fifth largest navy in the world, India
exerted considerable influence in the Indian Ocean and beyond. India vied
with China for Middle East oil and African resources and trade. As noted
above China needed to obtain the use of ports (most importantly near
China’s oil and other lifelines including the Indian Ocean) from which the
Chinese navy could operate.234 India stood in the way.
Another issue was that China’s needed foreign bases owing to the
threats it encountered with the hijacking of ships. Apparently to make
a transition from a policy of not acquiring foreign bases (as China in the
past accused the United States of doing to contain China and because it
was an imperialist power) China’s policy was called “places not bases.” It
remains somewhat unclear whether China’s policy is to build and/or actu-
ally attain foreign military bases.235 As we will see in coming chapters,
China spent huge amounts of aid and investment funds to help build ports
and port facilities in South Asia that it might use in the event of a need or
perceived need.
Finally, in the 1990s and after China again faced a need to negotiate
border treaties. Some borders had not been fixed earlier and/or the collapse
of the Soviet Union created new ones. It resolved disputes with Tajikistan,
Kyrgyzstan, and Kazakhstan (as will be discussed in Volume 2, Chapter 3).
It began negotiating agreements with several Southeast Asian countries
over sea territory in the South China Sea (as will be cited in Volume 2,
Chapter 1). In all cases aid has and/or is, including the promise of future aid
and investments, playing a significant role.
China’s Need for Energy and Raw Materials

As discussed in Volume 1, Chapter 2, after Mao established the People’s
Republic of China in 1949 he spoke of China developing into an economic
giant under his Communist system. He mentioned in particular China

becoming an industrial power. In saying this Mao assumed that China’s
economic relationships with other countries would in the near future
entail China importing raw materials and exporting industrial and con-
sumer goods. Of course, China did not experience economic growth of the
kind Mao envisioned and instead of importing energy and various natural
resources China exported them.236
This situation changed dramatically after Deng’s economic reforms cata-
pulted China into a high economic growth mode. In the 1980s and 90s,
China’s rapid economic development (discussed in Volume 1, Chapter 3)
increased markedly its needs for more energy and raw materials. This hap-
pened to a much greater extent and much sooner than even its very fast growth
would have otherwise engendered because of the extremely rapid expansion
of the manufacturing sector in China. As a result, even though China had
domestic source of energy and most raw materials, Beijing suddenly needed
to import large quantities of both to fuel its manufacturing boom.
Hence, while China’s foreign aid giving in the early years was not influ-
enced by China’s need for energy and raw materials, in the last two decades
or so it has been very much so.237 In fact, the shift was so unexpected and
the magnitude of China’s need for energy and various raw materials so big
it suddenly and radically affected its foreign policy and its giving foreign aid
and making foreign investments.238 Since the 1990s, its almost emergency
need for energy and raw materials to an astounding degree drove China’s
foreign aid and investments, especially to certain countries.239
First, looking at its energy situation, China has been described by an
American economist as an “immature giant.” What he meant was that
China’s increases in energy production have been much slower than increases
in consumption and Beijing has had to act accordingly.240 To be precise,
between 1970 and 2006 China’s energy consumption grew at an average rate
of 7.5 percent annually, much faster during the later years.241 As a result, just
a few years into this century China accounted for 77.1 percent of the world’s
increase in coal consumption, 37.2 percent of its new oil consumption, and
28.2 percent of the global growth in nuclear energy use. By 2007, China
accounted for half of the world’s increase in energy demand.242 At that time
it was projected that in a decade China would be the planet’s largest energy
user, surpassing the United States.243
By 2010, China’s consumption of coal was nearly half of the world’s
total plus 11 percent of the planet’s petroleum and, 3.5 percent of its natu-
ral gas. From consuming half of the amount of energy the United States
consumed in 2000, China was now using more and was projected to con-
sume 70 percent more than America in 2035. It was also estimated China
would go from accounting for 11 percent of the world’s total use of energy
in 2000 to 23 percent in 2035.244
Regarding petroleum specifically, in 1993 China became a net importer
of oil. Not only did it become an importer, it became a big importer. From
1995 to 2003, China accounted for 68 percent of the world’s new demand
for oil. By 2008 China was consuming 7 million barrels a day, half of which
it had to import. Projecting these trends into the future, it was estimated
that by 2030 China would import an amount of oil equal to Saudi Arabia’s
total production.245 This is why the Chinese government viewed access to
foreign petroleum a “core national interest.”246
Two special factors made these figures even more alarming than they
would have been otherwise. One, the gap between production and con-
sumption grew increasingly bigger as time passed. This caused Chinese lead-
ers consternation when looking into the future. This was exacerbated by the
fact China’s domestic reserves of oil and gas were just 2 percent and 1 per-
cent respectively of the world’s total reserves.247 By 2004, China’s “depen-
dency” on imported petroleum had risen to 48 percent, and it was projected
to reach 60 percent in 2020 and 70 percent in 2030.248 According to one
assessment made shortly after the turn of the century, unless new sources are
found, China’s domestic supply of oil would last only 12 years.249
Two, China’s energy mix (coal use being 69 percent compared to the
world’s average of 21 percent, gas and oil at 25 percent while the rest of
the world was 66 percent) was a problem. Extensive coal use accounted for
the severity of the air pollution problem in China and meant that China
had to import more oil, gas, and uranium.250 This spelled relying even more
on imported energy.
The seriousness of air pollution in China warrants special comment:
Nearly half a million people in China die each year from diseases caused by
polluted air. Air and water pollution together, caused mainly by energy pro-
duction and use, especially coal burning, affected China’s neighbors and to
some extent even distant countries.251 China found it difficult to deal with
these countries on this issue.252 Finally, pollution was hard on China’s econ-
omy, costing an estimated 8–12 percent of its gross national product.253 The
government had to give this situation serious attention.254
Subsequently China went a long way in increasing the efficiency of its
energy use and in its diversification of sources.255 It created a strategic energy
reserve. It moved quickly into clean and renewable sources of energy; in fact
China became a world leader in green energy. It closed factories that were
too energy dependent or energy wasteful.256
But all of this did not solved China’s energy crisis. China remained fran-
tic, almost desperate, in its search for new (foreign) sources of energy. Making
matters worse, it was frustrated by the fact Western companies already had
leases on most of the world’s good energy sources. China tried to buy oil
contracts and it did; but it also ran into great difficulties. Incidentally China
did not trust international oil markets, seeing them as controlled by Western
companies. In any event China had to seek oil in places that are not stable
and where there were armed conflicts and/or gross human rights abuses (as
we will see in later chapters). Meanwhile China’s increased purchases dis-
rupted global energy markets arousing concern in the West. All of this was
troublesome for Beijing.257
China’s growing energy needs constituted a vexing security issue for
Chinese leaders. In 1995 Premier Li Peng (in making reference to the South
China Sea) stated that China’s People’s Liberation Army (meaning its military
overall) must bolster its its naval capabilities in order to “safeguard the sov-
ereignty and territorial integrity of the motherland and our maritime rights
and interests.”258 This comment had considerable salience in view of the fact
that China claimed sovereignty over the entire South China Sea and its legis-
lative branch of government had passed a Maritime Law in 1992 to formalize
that.259 President Hu stated in this context that the People’s Liberation Army
Navy had an “important and glorious” responsibility to maintain China’s
maritime rights.260 Hu also spoke of China’s “Malacca problem”—meaning
that China’s oil lifeline from the Middle East through the Strait of Malacca
(four-fifths of China’s imports) was vulnerable.261 Observers noted that
China’s importing increasing amounts of oil and other resources created a
geostrategic dilemma for China in Southeast Asia and led to a “great game”
(contention between China and India) in the Indian Ocean.262
By 2003, China imported 40 percent of its oil, 80 percent of which
was transported via the Indian Ocean and through the Strait of Malacca.
Further increasing China’s security concern, nearly half of its oil came from
four countries (Saudi Arabia, Iran, Oman, and Yemen) all of which were
considered potentially unstable while more than 80 percent of its oil arrived
in China in foreign flagships.263 Oil industry experts suggest that China, by
2025, would import three times as much Middle Eastern oil as the United
States.264 In 2011 and 2012, instability in Libya, Sudan, and South Sudan
disrupted oil exports to China. All of this prompted President Hu Jintao
to express “extreme concern” over the vulnerability of China’s oil supplies
should a foreign country or countries blockade a strategic strait. 265
Drawing further strategic implications from China’s dire energy needs, in
2005, Chinese navy ships confronted the Japanese Navy in the East China
Sea near the Chunxiao gas field. People’s Daily declared that the competition
for oil resources in the East China is just the “prelude of the game between
China and Japan over international energy.”266 Elsewhere it was said that
India’s military planning explicitly included preparations for a naval war

with China over resources.267
China thus found itself in a difficult position in terms of its fast rising
imports of oil, especially from the Middle East and Africa. (Recently it has
obtained 51 and 24 percent of its imports from these two regions.268) Unlike
Japan and some other countries in East Asia, which rely on the US Navy to
protect its lines of supply, China has no official assurances from the United
States in this regard and for this reason feels exposed.269
Making matters even worse a number of China’s leaders believe that the
United States seeks to halt the growth of China’s global reach by depriving
it of energy.270 Some even speak of an “oil war.” Evidence for this percep-
tion includes the fact China has offered to finance oil pipelines in Canada,
Venezuela, Sudan, and Iran that will take oil away from the United States.271
Related to the second “leg” of China’s problem, the Indian Ocean lifeline,
Beijing’s “ring of pearls” strategy is to establish close security relations with
Pakistan, Sri Lanka, Bangladesh, Cambodia, Thailand, and Myanmar (dis-
cussed in Volume 2, Chapters 1 and 2). China relies in large part on finan-
cial aid to give it access to ports (it may use as bases) in the event of not
being able to rely on the US Navy or if it develops problems with either the
US or India.272
China, of course, would prefer to resolve its oil needs peacefully using soft
power, including foreign aid and investments. The Philippines, with which
China has been engaged in a territorial dispute and regarding which Beijing
had used force to take the island called Mischief Reef, invoked its mutual
defense treaty with the United States. Japan has appealed to the United
States for support in its dispute with China over the Diaoyu or Senkaku
Islands.273 Washington cited its mutual defense treaty with Japan and sup-
ported Tokyo, greatly upsetting China.274 Recently Vietnam and the United
States have improved relations markedly. Thus China is involved in possible
conflict situations with its neighbors that might enlist help from the United
States. China hopes to deal with these disputes in some other way than by
military confrontation. The way to do this that comes to mind first is using
economic aid and investment funds to buy resources or placate disputants
with aid rather than fight.
As we will see in subsequent chapters, China is spending considerable
foreign aid funds to facilitate its purchases or acquisitions of oil and other
energy resources. It has spent large sums of money directly purchasing oil
and gas.275 It is funding the construction of roads, railroads, and pipelines
for the transport of oil and the building of ports (cum-bases) for its navy to
protect its transport ships. Huge amounts of aid and investment funds have
been allocated for these and other projects relating to these efforts.276
Energy is not only China’s major and growing import; other natural
resources are also in great and increasing demand. This stems from the fact
that while China has domestic sources of most resources, the per capita
amount of most of the key ones is less than half the world’s average.277 Also,
as noted above, China’s uber-growth in manufacturing has increased expo-
nentially the demand for various metal and nonmetal resource inputs. The
data on the growth of production, use, and demand for resources are telling.
From 2000 to 2008, China tripled its production of steel giving it the
distinction of accounting for three-quarters of the growth in steel output
in the world. In fact, China became the world’s largest producer account-
ing for 37 percent of global output. Large imports of iron ore made this
possible: 37 percent increases annually for several years leading up to
2008. As a result China accounted for half of the world’s seaborne trade
of iron ore.278
During this same period China consumed half of the cement used in
the world, a third of its steel, and a quarter of its aluminum.279 China
became the world’s largest purchaser of copper and the buyer of a third of
the global exports of cotton.280 China’s need for rubber increased as a result
of its booming auto industry. Surpassing the United States in 2002 as the
world’s largest consumer it was projected that China will use 30 percent of
the world’s rubber by 2020.281 Overall it was estimated that the increase in
China’s demand for metals in the next two decades will equal the total con-
sumed by industrialized countries now.282
The troubles China encounters finding and transporting raw materials
are worse in some ways than its logistical problems in importing energy
because its sources are more varied and the search for raw materials more
complicated. Like obtaining energy, but worse, getting raw materials means
China has to go to places that Western countries have avoided. It has to look
for resources among nations with bad human rights records and/or countries
involved in armed conflicts with neighbors. And in the process China has
become quite reliant on maintaining good relations with the United States
and several Western European countries.283
Trying to cope with this situation China has extended vast amounts of
foreign aid to countries that sell raw materials to facilitate their resource
extraction. China has also invested huge amounts of money abroad to both
buy resources and support mining ventures. In many cases, as will be evi-
dent in following chapters, in its search for raw materials, like its efforts
obtain energy, providing aid and investment funds has been risky but gener-
ally successful.
Food is another problem for China that has recently become more acute.
Deng’s reforms launched after 1978 saw the transfer of land from communes
and collectives (public ownership) to households (private). Agricultural

production surged, and by 1984 grain output was one-third higher and the
weakness of the agricultural sector that had held back other parts of the
economy for centuries due to food shortages had ended.284 But this situ-
ation did not last. Industry crowded out agriculture for investment funds
and there was an exodus of farmers to the cities to find better-paying fac-
tory jobs. Meanwhile China’s growing prosperity improved peoples’ diets
and the demand for food increased, especially for meat, which requires
large amount of grain to produce. In 1998, China’s grain production
peaked.285 In 2001 China joined the World Trade Organization and thus
had to open its market to foreign agricultural products. As a result a $4.2
billion surplus in agricultural exports that year turned into a $4.6 billion
deficit by 2004.286
Currently, China accounts for 20 percent of the planet’s population but
possesses only 9 percent of its arable land. Furthermore, the sown area used
for growing food has dropped from 80 percent in 1978 to 60 percent in
2009 because of farmers growing more non-grain crops, labor moving into
the manufacturing sector in the cities (falling from 71 percent in 1978 to
38 percent in 2009), and higher costs adversely affecting farming.287
A special problem for China is that because of its size it cannot count
on taking advantage of the law of comparative advantage and thus import
food and export manufactured goods as many nations such as Japan do. The
reason is that the total world’s trade in grain is only about half of China’s
crop. Also China is quite vulnerable to drought and floods, more than most
countries.288 Finally, water resources in China are being depleted at a very
rapid rate, which adversely affects agriculture.289
China has thus built a grain reserve that accounts for around 40 per-
cent of its annual consumption. The government nevertheless remains very
worried about food security.290 Therefore anticipating that food prices will
increase, China has employed foreign aid to increase food production in
recipient countries and has acquired leases on farmland abroad in exchange
for project aid and investment funds, as we will see in following chapters.
China has also bought land abroad. In fact, China has purchased or other-
wise obtained the right to use more land abroad than any other country in
the world, and this has become a matter of controversy.291 Whether more aid
and investments can resolve this matter is uncertain.
China’s Search for Markets

As noted in Volume 1, Chapter 3, China’s economy began to grow at a rapid
pace in 1979 and continued to expand in ensuing years mainly because Deng
Xiaoping converted the economy from a centrally planned, Communist-style

one to an open and free-market capitalist one.292 This was a step-by-step
fairly orderly process, though it happened quite quickly.293 Rural reforms
were the main thrust of the early changes. Then reforms moved from
agriculture to industry.294 Here the reforms were even more farreaching.
Manufacturing as noted earlier boomed. In the spring of 1992, following
Deng Xiaoping’s famous southern tour, major shifts in economic planning
were aimed at realizing a fully reformed “socialist market economy.”295 The
industrial sector of China’s economy grew even faster.
The “socialist market economy” or “socialism with Chinese characteris-
tics,” the latter a favorite Deng description of the economy, was in fact a free-
market, capitalist one that can, and did, engender overproduction and, with
it, as argued in Volume 1, Chapter 3, unemployment. In fact, by the 1990s
because China’s economy was very capitalist (as measured by the size of the
private sector) China experienced a bigger problem in these realms than
most Western countries. Moreover, these problems could not be handled as
they were during the Mao era (by faking growth, creating make-work jobs,
keeping a large standing army, and having a large number of workers “look-
ing for jobs” rather than being counted as unemployed). Mao’s formulas
for economic development were discredited and so were his ways of dealing
with these problems. So, new solutions to overproduction and unemploy-
ment had to be found.
Could China have adopted European-style socialism? For several reasons
the answer to that is no. First, the European “self government of producers”
system did not leave much of a role for the Communist Party.296 Deng did
not want that. The Party was needed to provide leadership and, of course,
political and social stability. More important, Chinese leaders, including
and especially Deng, were not impressed with the European economies at
the time—seeing them as anemic and slow growth and thus not a model
for China. Certainly in Chinese eyes European capitalism would not make
China rich and powerful soon, if ever. Hence Deng instead chose an unfet-
tered “Wild West” capitalism.297
Soon there grew a realization in China that with the adoption of
the capitalist development model, excess production was serious and
threatened to foster further (and more serious) unemployment. Raising
domestic consumption was not seen as a solution for a variety of reasons
including the fact a high (and forced) rates of savings contradicted con-
sumerism.298 Also a high savings rate was considered necessary to propel
growth given China’s earlier experience with lack of investment and the
fact China’s growth models (Japan, South Korea, Taiwan, Hong Kong,
and Singapore) found high investment a key to growth. In short, China
needed an outlet for the surplus goods it produced. In view of continued

rapid economic growth, the economy overheating, and its factories over-
producing, Chinese leaders had to find good solutions.
There was also the matter of China’s economy being unbalanced. In 1993
at a Standing Committee meeting of the Eighth National People’s Congress,
Vice Premier Zhu Rongji was made governor of the Bank of China and
instituted a variety of reforms “to make the economy stable.”299 Zhu issued
orders to the effect that illegal loans must stop, policies on interest rates
must be adhered to, banks had to cease using businesses under their con-
trol to facilitate the movement of money, etc. Shortly after that the State
Council issued a “Sixteen Point” document to enhance macrocontrol over
the economy.300 But this had little effect. Hence, during the mid-and late
1990s there was still considerable fretting in China’s top leadership circles
over factories’ overcapacity, the continuing problem of unemployment, and
a declining regional demand for China’s products.301
Meanwhile, according to plans already put in place, money-losing, inef-
ficient, and environmentally unfriendly state-owned enterprises were being
phased out. As a result several million urban workers were being laid off
every year—totaling at this time 45 million.302 New jobs were created; but
there were more workers looking for jobs than there were new openings.
Consumerism, which was a low priority compared to growth, did not add
many jobs.303 Manufacturing jobs had grown by leaps and bounds, but
seemed to have hit a ceiling.304
Further exacerbating the situation, in order to reform the military and
create an educated and high-tech savvy cohort of soldiers, Deng had ordered
a massive demobilization. Between 1985 and 1996 an estimated 1.1 mil-
lion troops were discharged. From 1996 to 2000 another half million were
released. Between 2003 and 2005, another 200,000. Most were unskilled,
many illiterate; they found jobs very hard to find.305
In spite of China’s booming economy, the Chinese government contin-
ued to report high and even increasing unemployment. Government offi-
cials also noted that there was a large floating population looking for jobs
and recognized this as taxing an already strained infrastructure, worsening
the crime rate (for China considered high), and causing social unrest.306
China’s leaders were well aware of the fact that China’s history told a lesson
of hordes of roving dissatisfied people (many of them idle) overthrowing
dynasties and noted that the transient unemployed job seekers were a poten-
tially “explosive” force in China.307
In 2005, officially China’s unemployment rate was reported to be
8.5 million but this included only urban unemployed and probably not
nearly all of them. The rate was likely 11–12 percent, meaning there were
20–25 million unemployed in just the city areas in China.308 Obviously

rural unemployment was much higher.
Hence China faced a very serious issue of high unemployment, which
was rising notwithstanding the fast growing economy. According to official
data, joblessness grew 1.8 percent in 1985, 3.6 percent in 2001, and 4.1 per-
cent in 2006. Unofficial reports put it higher than this since the data on
the unemployed did not count millions of rural migrants or disguised rural
unemployment, both of which were exacerbated by China preparing to join
the World Trade Organization.309 The US Central Intelligence Agency esti-
mated the rate of urban unemployment, including migrants, was 9 percent
noting also that there was “substantial” unemployment and underemploy-
ment in rural areas.310 One writer put the number of unemployed in China
at 170 million or 23 percent of the workforce.311 Another opined that the
number of newly unemployed industrial workers equaled the total in the rest
of the world.312
At this time it was said as many as 300 million people seeking work
had migrated from China’s countryside to its cities. Plus another 100 to
200 million were expected to do so in the next decade.313 Chinese lead-
ers had to be concerned about these people becoming disgruntled and the
potential for them to threaten the government. After all China has a history
of bottom-up rebellion unsurpassed anywhere else in the world.314
In fact, the growing incidences of antigovernment protest, some of them
violent, underscored this concern. According to official data, the number
of people involved in public protests increased from 740,000 in 1994 to
3.7l million in 2004. The number of strikes rose to 77,704 from 22,600
(in 2003).315 Official data published at this time showed that the average
number of people involved in each protest increased from 10 in the mid-
1990s to 52 by 2004. In early 2005, there were 341 large-scale incidents,
17 of which involved more than 10,000 people during which 1,740 people
were injured and 102 were killed while causing $4 to $5 billion in economic
losses. During the first ten months of 2005, 1,825 police were injured and
23 killed while handling mass protest situations.316 Though there are no
records to suggest to what extent this situation was the result of unemploy-
ment, it was unquestionably a big contributing factor.317
In 2010, 180,000 protests, riots, and other mass incidents numbered
fourfold that of a decade earlier. The causes were reported to be unemploy-
ment and inflation (causing wages to fall or stagnate). These were increas-
ingly serious problems even though the economy was doing very well.318
So, notwithstanding China’s remarkable economic growth, China’s plan-
ners spoke of being “trapped in an endless unemployment crisis.” Almost
weekly China witnessed flare-ups of labor and social unrest. Economists
noted that China was like an elephant riding a bicycle: If it slowed down
it would fall off causing a catastrophe. At near or above double-digit GDP
growth, China still needed to create 24 million jobs a year.319
In 2010, Premier Wen Jiabao stated that every year 150 million migrant
workers leave their rural homes to look for jobs in the city, 24 million urban
people are unemployed, and 6.3 million college graduates are looking for
jobs, “all of this adding up to employment pressure.”320 George W. Bush
wrote in his memoir after he left the presidency that he once asked President
Hu Jintao during a telephone conversation what kept him up at night. Hu
replied: “Twenty-five million new people to find jobs for every year.”321
Meanwhile, in 1982 Chinese leaders made a deliberate decision to
restructure China’s foreign aid program so as to create markets for Chinese
goods and services.322 This decision did not have much immediate impact
as China was cutting its foreign aid giving at this time. But it did matter
once China began increasing its aid. In fact, finding jobs for more Chinese
looking for employment was one reason for China dramatically expanding
its foreign aid and foreign investments. The expansion of China’s aid giving,
especially to African countries (as will be seen in Volume 3, Chapter 2), was
clearly linked to finding markets for Chinese products and thus alleviating
unemployment.
In 1996 Beijing announced a reform of its foreign aid and new policies
giving a high priority to economic returns for China. China at that point
gave more of its foreign aid as loans rather than grants and also put con-
ditions on Exim Bank concessional loans that required recipients to agree
to policies that included the following: favorable economic returns to all
parties, Chinese enterprises should be selected as the main contractor or
exporter, and the purchase of equipment, technology, and services should be
from China in preference to other countries. In principle, at least 50 percent
of procurement should be local.323 This policy continued and, in fact, was
extended in the ensuing years.
Thus China sought to find and open unexplored markets for its excess
production.324 As noted earlier in the early 1990s the Chinese government
began to encourage Chinese companies to “go out.” At the same time, and
related to the policy of pressuring companies to go global, Beijing took mea-
sures to use China’s excess capital to increase foreign aid and investments
to help absorb China’s excess production.325 This worked fairly well. But
other countries criticized China’s export-led growth, in fact, increasingly so
as its current account (foreign exchange position) increased rapidly.326 Many
accused China of dumping its products.
Another issue was China’s increasing dependence on the US market. In
2000, the US trade deficit with China surpassed that of Japan creating a
serious public relations problem for Washington. Making matters worse,

unlike Japan, China was not considered a friendly democracy and did not
have an important security treaty with America.327 In 2005 the United States
incurred a deficit in its trade with China of over $200 billion; this was the
largest deficit with one country ever for the United States. Intimately related
to this problem was the fact that 90 percent of China’s exports to America
displaced the exports of other developing countries.328 These countries were,
as a consequence, increasingly upset with China for “stealing their market.”
Excess capacity in China’s factories at this time was said to be
“pandemic.”329 For example, China’s overproduction of steel was 120 million
tons a year—greater than the entire output of Japan, which was the second
(after China) largest steel producer in the world.330 In 2005, a high official
in China spoke of serious overproduction in 11 sectors of the Chinese econ-
omy, including cement, steel, textiles, and autos. He said that he anticipated
that China would produce 18 million units of cars by 2010—8 million more
than the expected sales.331
Foreign aid and external investing (much of it amounting to aid) were
the means used to increase exports of overproduced goods. But this created
problems including causing trade deficits in recipient countries. Sometimes,
as will be seen in following chapters, China gave foreign aid to offset deficits
trading partners had with China. Obviously China needed to make massive
“investments” in foreign countries tied to buying Chinese products. But
China also provided aid to compensate some countries for losing export
opportunities to China.332 There seemed to be a contradiction here.
In 2008, the United States and then Europe experienced an economic
downturn followed by prolonged slow growth and an unprecedented (after
World War II) slow recovery from the recession. Japan was already in reces-
sion. Thus the 2008 global slowdown was accompanied by a contraction in
their buying Chinese exports made more serious by growing protectionism
in the United States, Europe, and Japan. It affected China’s exports more
than those of other countries because of the special worry about the “China
threat” and the fact that the “Made in China” label was more obvious on
China’s products than a similar label of origin on the products from other
countries, such as Indian software, Brazilian aircraft, etc.333
China continued (in fact, increased) its purchasing of US treasury bonds
that bore rates of interest below the rate of inflation and also lost value
because of the revaluation of the US dollar (especially vis-à-vis the Chinese
Yuan). This resulted in a significant financial loss to China, which one
might say was tantamount to China giving the United States foreign assis-
tance.334 China even redirected its buying US products to states or localities
in the United States that were suffering the most severe job losses or harshest
economic downturns, an action that foreign aid decision makers often made
(and still make) in giving foreign aid.335
In the meantime China had to stimulate its domestic market and seek
foreign markets elsewhere to keep its economy from faltering. There were
limits, however, on how much China could expand consumer spending
without creating economic dislocation. Thus Beijing had to find more for-
eign markets to absorb its excess production and thereby slow the loss of
jobs at home. But that was not an easy task. It was estimated that when the
global recession hit, 20 million workers in Chinese cities returned to the
countryside due to job losses. The unemployment rate went up and China
experienced greater economic and social instability.
In 2009, the idea was proposed that China launch a $500 billion for-
eign assistance program that was said to resemble the post–World War II
US Marshall Plan to help developing countries and speed up the world’s
economic recovery. It was said specifically that the idea was floated in light
of China’s “overcapacity” in its manufacturing sector and that financial aid
would “increase their (developing nations’) purchases of Chinese goods,
thus boosting China’s export-oriented economy.”336
Though China’s economy was generally unaffected by the world reces-
sion (due to massive domestic stimulus measures that probably cannot be
repeated or at least cannot be done again easily due to the debt it caused)
the situation in terms of losses or shrinkage of foreign markets for Chinese
products and the unemployment it caused became even more grave. In
mid-2012, Premier Wen Jiabao warned that unemployment would become
“more severe.”337 Subsequently job losses for migrant workers continued,
with the government getting even more concerned about the social turmoil
this would cause. Unemployment was especially serious for those with less
education and few skills and for both younger and older workers. Cutting
wages helped China adjust; but it also caused further worker unrest. The
government approved more infrastructure projects (roads, railroads, etc.)
and ordered more apartments and houses built in the cities. But this was
still not enough.338 One remedy was giving still more foreign assistance in
the form of aid and investments.
Notes
1 Introduction: The Nature and Scope of China’s

Foreign Aid and Investment Diplomacy
1. Giving financial help to another country or people has a long history. However,
its prominence in world politics is recent. A well-known international relations
scholar calls foreign aid one of the “real innovations which the modern age has
introduced into the practice of foreign policy.” He further states that among
current issues, foreign aid has “proven . . . baffling to both understanding and
action.” If this writer is to be believed, foreign aid giving is a recent phenom-
enon, is poorly defined, and the debate about it often confusing. See Hans
Morgenthau, “A Political Theory of Foreign Aid,” American Political Science
Review, June 1962, p. 301.
2. Peter Stephenson, Handbook of World Development: The Guide to Brandt Report
(New York: Holmes and Meier Publishers, 1981), p. 6. More specifically aid
refers to help given to developing countries, defined as those with a per capita
income below a certain level, or funds given to multinational institutions such
as the UN Development Program or the World Bank. Export credits are usu-
ally defined as foreign aid by the OECD.
3. See Stephen Browne, Aid and Influence: Do Donors Help or Hinder? (London:
Earthscan, 2007), pp. 12–13. The author also discusses such terms as “recipi-
ent,” “development,” “nonmilitary,” “concessional,” and “overheads.” For a
discussion of the purposes of foreign aid and also debt forgiveness or relief,
see Carol Lancaster, Foreign Aid: Diplomacy, Development, Domestic Politics
(Chicago, IL: University of Chicago Press, 2007), pp. 12–18 and p. 57. After
the Jubilee 2000 campaign and the World Bank encouraging aid giving coun-
tries to cancel debts owed by developing countries, debt relief came to be con-
sidered as “aid” and was so categorized in many cases.
4. See John Alexander White, The Politics of Foreign Aid (New York: St. Martins,
1974).
5. Lawrence Siring, Jack Plano, and Roy Olton, International Relations: A Political
Dictionary (Santa Barbara, CA: ABC-CLIO Publishing, 1995), p. 139.
170 ● Notes
6. The United States, the world’s foremost foreign aid giver, has often can-
celled aid allocations if the recipient countries became too friendly with the
Communist Bloc. Aid was cut completely to Cuba when its government “went
communist.” The Hickenlooper Amendment to the US Foreign Assistance
Act declared that the United States would not provide aid to countries that
had nationalized US property. Other countries have used a variety of reasons
for discontinuing aid or not delivering on a certain pledge.
7. This writer has found that almost all of the scholars writing on the subject
count aid this way. More will be said about this later in this chapter and in the
following chapters.
8. For a discussion of the different types of aid, see Jacob J. Kaplan, The Challenge
of Foreign Aid (New York: Praeger, 1967), chapter 13.
9. See Eugene W. Castle, The Great Giveaway: The Reality of Foreign Aid (Chicago,
IL: Henry Regnery, 1957). The author notes that in the United States a signifi-
cant amount of money and effort is made to “propagandize” foreign aid. See
Volume 3, Chapter 1. On the other hand, opinion surveys show there is little
public understanding of foreign aid. This works to the advantage of interest
groups that favor aid giving. See David A. Baldwin, Foreign Aid and American
Foreign Policy: A Documentary Analysis (New York: Praeger, 1966), pp. 4–5.
10. For a recent discussion on the advantages of both grants and loans, see Sabhayu
Bandyopadhyay, Sajal Lahiri, and Javed Younes, “Framing Growth: Aid vs.
Foreign Loans,” Federal Reserve Bank of St. Louis, October 2013 (online
at research.stlouisfed.org). In recent years there has been some shift among
experts back to favoring grants over loans. See Benedict Clements, Sanjeev
Gupta, Alexander Pivovarsky, and Erwin R. Tiogson, “Grants versus Loans,”
Finance and Development (International Monetary Fund), September 2004
(online at imf.org).
11. The United States wrote off a number of loans beginning in the 1970s when
it became apparent that more aid was required for many poor countries and
as international conferences and reviews by Congress embarrassed recipients.
Many other Western nations did the same. See Kaplan, The Challenge of
Foreign Aid, pp. 316–18.
12. John D. Montgomery, Foreign Aid in International Politics (Englewood Cliffs,
NJ: Prentice Hall, 1967), p. 34.
13. Browne, Aid and Influence, p. 5.
14. This is a view commonly espoused by Communist nations for ideological rea-
sons. This point will be discussed further ahead. However, Communist Bloc
countries, especially after they were in the aid business for a short time, gave
much of their aid as loans. There, of course, have been Western advocates of
gift aid as opposed to loans.
15. For discussion on this point, see George Liska, The New Statecraft: Foreign Aid
in American Foreign Policy (Chicago: University of Chicago Press, 1960), p. 6.
The original argument comes from Lenin’s Imperialism: The Highest Stage of
Capitalism. Also see Judith Hart, Aid and Liberation: A Socialist Study of Aid
Policies (London: Victor Gollangz, 1973), chapters 8 and 9.
Notes ● 171
16. There is a visible tendency for nations that lack natural resources to try to
gain guaranteed sources. Japan is a case in point. See Robert M. Orr Jr. and
Bruce M. Koppel, “A Donor of Consequence: Japan as a Foreign Aid Power,”
in Bruce M. Koppel and Robert M. Orr Jr. (eds.), Japan’s Foreign Aid: Power
and Policy in a New Era (Boulder, CO: Westview Press, 1993), p. 2.
17. See Teresa Hayter, Aid as Imperialism (New York: Pelican, 1971).
18. Rostow argues that economic development occurs in stages and that aid can be
essential in helping a developing country move from one stage to another. See
W. W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto
(London: Cambridge University Press, 1960).
19. Lloyd D. Black, The Strategy of Foreign Aid (Princeton, NJ: D. Van Nostrand,
1968), pp. 14–15.
20. Western countries, especially the United States, have given considerable food
aid to poor countries while at the same time encouraging them to improve
their agricultural sectors. This seems a contradiction since a lot of poor nations
needed food and the United States had a surplus.
21. Thus there is a dichotomy between “project aid” and other aid that has been
used by writers on the subject.
22. The United States moved to giving more tied aid due to a balance of pay-
ments problem in the 1960s. See Robert E. Asher, Development Assistance in
the Seventies: Alternatives for the United States (Washington, DC: Brookings,
1970), p. 200.
23. See Kaplan, The Challenge of Foreign Aid, pp. 341–71 for a discussion of what
multilateral aid is and the problems associated with it. By the late 1960s,
20 percent of aid from Western countries was given through multilateral insti-
tutions. Also see Black, The Strategy of Foreign Aid, p. 3.
25. See Denis Goulet and Michael Hudson, The Myth of Aid (Maryknoll, NY:
Orbis Books, 1971), p. 106, 117 and 258–59. The authors note that World
Bank and International Monetary Fund are status quo oriented and thus dis-
courage institutional change. They also note that much international insti-
tution aid is tied aid, generally to improve governance, the rule of law, and
human rights.
26. This has been the case of most Communist nations’ aid not only because
they did not want to forsake the political influence that aid provided, but
also because they gave foreign aid largely for ideological reasons. For details,
see Kurt Muller, The Foreign Aid Programs of the Soviet Bloc and Communist
China: An Analysis (New York: Walker and Company, 1964).
27. Some writers, in fact, prefer the term “security assistance” to include both
economic and military assistance. In the case of the United States, when aid
proposals are made in Congress, security is generally used as justification.
See Max F. Millikan, “The Political Case for Economic Development Aid,”
in Robert A. Goldwin (ed.), Why Foreign Aid? (Chicago, IL: Rand McNally,
1962), pp. 90–91. It is worth mentioning here, given that this book is about
China’s aid, that US aid to Taiwan from 1950 to the mid-1960s was given
172 ● Notes
largely in the form of military aid—around 60 percent—and Taiwan was one

of the big success stories of American aid producing economic growth and
democracy. See H.Y. Wen, Behind Taiwan’s Economic Miracle: A Political and
Economic Analysis of the US Aid Experience in Taiwan (Taipei: Tsu-Li Wan-
Pao, 1990).
28. Giving a nation military assistance also frees much of its budget for other
purposes—often for economic development. Likewise “economic aid” is often
funneled to the military to pay the military budget or buy more weapons.
29. See Kaplan, The Challenge of Foreign Aid, p. 283 for more details on this
issue.
30. Black, The Strategy of Foreign Aid , p. 86. The author notes that “economic and
military aid are merely two different ways of achieving the same objective.”
31. Kaplan, The Challenge of Foreign Aid, pp. 282–83.
32. This point will be discussed at length in subsequent chapters.
33. Landrum R. Bolling with Craig Smith, Private Foreign Aid: U.S. Philanthropy
for Relief and Development (Boulder, CO: Westview Press, 1982).
34. For a definition of technical aid, see Maurice Domergue, Technical Assistance:
Theory, Practice and Policies (New York: Praeger, 1968), p. 5.
35. Black, The Strategy of Foreign Aid , pp. 125–26.
36. See Lauchlin Currie, The Role of Advisors in Developing Countries (Westport,
CT: Greenwood, 1981), pp. 4–5.
37. See Index of Global Philanthropy and Remittances 2009 (Washington, DC:
Hudson Institute Center for Global Prosperity, 2009).
38. Ibid., p. 16 and 18. It is estimated that remittances totaled $316 billion in
2009. See “Remittances,” Economist, December 18, 2010, p. 185. The World
Bank made the estimate.
39. SeeInternational Development Strategy for the Second United Nations
Development Decade, UN General Assembly Resolution 2626 (XXV), October
24, 1970, p. 43. This refers to aid broadly; 0.7 percent is the guideline for
developmental aid. In a recent OECD report (2007), the United States ranks
below 17 European nations plus Canada, Australia, New Zealand, and Japan
in this respect. See Development Cooperation Report, 2009 (Paris: OECD,
2007). The United Council of Churches recommended the 1 percent figure,
which evolved into 0.7 percent target used by the United Nations in the 1960s.
See Lancaster, Foreign Aid, p. 37l.
40. See Organization for Economic Development and Cooperation Development
Statistics Online (viewed April 13, 2009). One reason US aid is lower in terms
of its percent of the gross national product is that the United States has much
higher defense spending (in percent terms), and much of its aid is given as
military assistance, which comes from the Department of Defense budget.
A second reason is that the United States gives much aid through private char-
itable and other organizations. According to the American Association for
Fundraising Counsel, the United Kingdom, one of the top nations in the world
in charitable giving, extended 0.8 percent of its GDP in this form of aid in
2003. The United States, by comparison, gave 2.2 percent. See Bruce Bartlett,
Notes ● 173
“A ‘Stingy’ U.S.? Hardly,” Christian Science Monitor, January 5, 2005 (online

at www.csmonitor.com). Recently US private aid has exceeded official aid by a
considerable amount. See Carol Adelman, “The Privatization of Foreign Aid:
Reassessing National Largesse,” Foreign Affairs, November-December 2003,
pp. 9–14. In 2007, according to the OECD, the United States gave more in
charitable aid or philanthropy than it gave in official development assistance:
$36.9 billion compared to $21.8 billion.
42. Ibid., pp. 28–29.
43. Development economists feel market access is very beneficial to developing
countries that have some industries that can export.
44. Detailed Benchmark Definition of Foreign Direct Investment (third edition)
(Paris: Organization for Economic Cooperation and Development, 1966).
45. Leer Hudson Teslik, “Sovereign Wealth Funds,” Backgrounder (Council on
Foreign Relations), January 18, 2008, p. 1 (online at cfr.org/publications/
15251).
46. See Robert M. Kimmitt, “Public Footprints in Private Markets: Sovereign
Wealth Funds and the World Economy,” Foreign Affairs, January/February
2008.
47. Tatuyana P. Soubbotina and Katherine A. Sheram, Beyond Economic Growth:
An Introduction to Sustainable Development (Washington, DC: The World
Bank, 2004), chapter 13.
48. Mikayla Wicks, “Foreign Direct Investment versus Official Development
Assistance: The Battle Is On,” Building Blogs, May 17, 2012 (online at build-
ingblogs.org).
49. “Foreign Direct Investment,” Economist, June 29, 2013, p. 85.
50. It needs to be noted that Chinese writers assessing its aid giving cite other
periods. Yuan Wu, for example, speaks of the first phase from 1956 to 1978.
See Yuan Wu, “China and Africa (Beijing: International Press, 2006). Another
author says the first period is from 1950 to 1974. See Li Xiaoyun, “China’s
Foreign Aid and Aid to Africa: Overview” (slide presentation), cited in David
H. Shinn and Joshua Eisenman, China and Africa: A Century of Engagement
(Philadelphia: University of Pennsylvania Press, 2012), p. 144. Other writers
use still other periodizations. Some speak of three periods. One writer cites
1992, when China instituted deeper reforms and the economy did much bet-
ter, as a turning point. This categorization will be discussed in greater detail
in the following pages. This writer believes that 1992 did not constitute a real
transition in China’s aid giving; rather 2005 showed a marked increase in
China’s aid giving because Chinese leaders recognized at this time that they
had an excess of foreign exchange, though one can say that this realization
happened gradually.
51. Details on this are provided in Volume 2, Chapter 1.
52. Shino Watanabe, “China’s Foreign Aid,” in Hyo-sook Kim and David
M. Potter (eds.), Foreign Aid Competition in Northeast Asia (Sterling, VA:
Kumarian Press, 2012), p. 61.
174 ● Notes
53. Three-quarters of Soviet aid went to other Communist countries, most of it to

countries that China also aided. See Lancaster, Foreign Aid, p. 32.
54. China, of course, remained a poor country by many standard definitions, or
at least much of China was poor. What is meant by calling China a “less than
poor” or “rich” country is discussed in Volume 1, Chapter 3.
55. Probably most of China’s military aid was delivered. See John F. Copper,
“China’s Military Assistance,” in John F. Copper and Daniel S. Papp (eds.),
Communist Nations’ Military Assistance (Boulder, CO: Westview Press, 1983),
pp, 96–134. China’s arms aid to non-Communist countries was usually quite
visible. It was less so to Communist countries.
56. See Peter Van Ness, Revolution and Chinese Foreign Policy: Peking’s Support for
Wars of National Liberation (Berkeley: University of California Press, 1970),
p. 164. The author notes that many of the biggest recipients of US aid were
China’s “targets of revolution.” China also made aid commitments to nations
where there was no liberation struggle apparent but the nations were unstable
and/or where the leadership or the politics in those countries often changed
quickly and dramatically.
57. This point will be discussed in later chapters. Suffice it to say here that China
did classify information about its aid giving and most officials considered it
secret information.
58. See Teh-chang Lin, “Problems in the Study of Beijing’s Foreign Aid,” Issues
and Studies, July 1995, pp. 66–78.
59. See, for example, Bruce Vaugh, Thomas Lum, and Wayne Morrison,
“Southeast Asia,” in China’s Foreign Policy and “Soft Power” in South America,
Asia, and Africa (Washington, DC: U.S. Government Printing Office, 2008),
p. 97. China not delivering promised aid is mentioned on a number of occa-
sions in subsequent chapters.
60. One author calculates that of the aid China gave from 1956 to 1973, 47 percent
was not used as of December 1973. See Wolfgang Bartke, China’s Economic
Aid (New York: Holmes and Meier, 1975), pp. 10–11. For an alternative view
on this matter, see Janos Horvath, Chinese Technology Transfer to the Third
World: A Grants Economy Analysis (New York: Praeger, 1976), pp. 22–23.
Horvath states that delays between China’s aid commitments and deliveries
are considerable, but this does not matter, or should not be seen as a major
issue, as repayment of Chinese loans is also delayed. Also see Sidney Klein,
Politics versus Economics: The Foreign Trade and Aid Policies of China (Hong
Kong: International Studies Group, 1968), p. 16. The author notes that it
took China four years to build a cement factory in Cambodia and that aid to
a number of other countries was not disbursed on schedule. It is also worth
noting that China suffered from serious economic dislocation and a drop in
the gross national product after the Great Leap Forward launched in 1958 and
economic and political disruption as a result of the Cultural Revolution that
started in 1966. Both had impacts for several years.
61. The Aid Programme of China (Paris: Organization for Economic Co-operation
and Development, 1987), p. 5. According to this report, up to 1985 China
Notes ● 175
had pledged a total of $9.3 billion in bilateral aid to developing countries (not
including Communist Bloc nations) and $7.2 of this had been disbursed. Also
see Kurt Muller, The Foreign Aid Programs of the Soviet Bloc and Communist
China: An Analysis (New York: Walker and Company, 1964), p. 234 and
Thomas Lum, Hanna Fischer, Julissa Gomez-Granger, and Anne Leland,
“China’s Foreign Aid Activities in Africa, Latin America, and Southeast Asia,”
Congressional Research Service, February 25, 2009, Summary. The authors
note that not only have some loans and pledges not been fulfilled but a number
of projects may have been counted more than once.
62. For instances of this, see Copper, China’s Foreign Aid, pp. 34–35, 46–48,
56–58.
63. Ibid., pp. 136–37. For a different view, see Bartke, China’s Economic Aid ,
p. 11. Bartke calculates that less than 10 percent of China’s aid was in grants
during the period 1956 to 1963. This writer believes that his lower figure is
explained by the fact Bartke did not count China’s aid to North Korea or
North Vietnam, which it might be presumed he defines as military aid. This
writer does not agree with that distinction and thus assumes a larger percent-
age of grants. Horvath, for example, states that the grant factor in China’s
aid is “second to none.” See Horvath, Chinese Technology Transfer to the Third
World, p. 1. He asserts that the grant factor in China’s aid was between 0.70
and 0.80 (meaning that between 70 percent and 80 percent of the face value
of the aid was grants, or free aid). He states that only Canada matched China
in this respect. See p. 84.
64. Ku I-chi, “The Foreign Aid of U.S. Imperialism,” Peking Review, July 14,
1959, p. 6; Chin Yi-woo, “China’s Economic and Technical Cooperation with
Friendly Countries,” Peking Review, October 25, 1974. Another writer states
that China viewed Western aid as characterized by domination, suppression,
plunder, and imperialism. See Law Fai Yu, Chinese Foreign Aid: A Study of Its
Nature and Goals with Particular Reverence to the Foreign Policy and World
View of the People’s Republic of China, 1952–1982 (Saarbrucken, Germany:
Verlag Breitenbach, 1984), p. 41.
65. Zhao Guanhua, who later became China’s foreign minister, at a UN meet-
ing in November 1971, said humbly that: “With a population of 700 million,
China ought to make a greater contribution to human progress. And we hope
that this situation of our ability falling short of this wish of ours will be grad-
ually changed.” See Irresistible Historical Trend (Peking: Foreign Languages
Press, 1971), pp. 4–15, cited in Alan Lawrance, China’s Foreign Relations since
1949 (London: Routledge and Kegan Paul, 1975), p. 218. An official Chinese
publication later described China’s aid this way: “Abiding by Chairman Mao’s
teachings, Chinese aid personnel have travelled thousands of miles to help
the people of other countries in their construction. . . . Defying hardships and
fatigue, they persist in a style of hard work and simple living, and share wealth
and woe with the working people of other countries.” See “Wholeheartedly
Serving the People of the World: Chinese Aid Personnel Abroad,” Peking
Review, March 15, 1998, p. 32.
176 ● Notes
66. Copper, China’s Foreign Aid, p. 137.

67. One could argue that this policy reflected the fact China did not have enough
funds to compete with Western or even Soviet aid, and thus it was a rational-
ization. Yet it does have a background. During World War II, Mao fought
the Japanese without outside help and spoke of self-reliance being a policy.
Mao later noted that encouraging aid recipients to be self-reliant meant that
they relied on their own resources (including human resources) and staved off
the threat of imperialism. See Law, Chinese Foreign Aid, pp. 45–46. It is also
worth noting here that the fourth of the eight principles of China’s foreign aid
by Zhou Enlai in 1964 cited self-reliance.
68. See Tseng Yun, “How China Carries out the Policy of Self-Reliance,” in
Weinberg Chai (ed.), The Foreign Relations of the People’s Republic of China
(New York: Putnam, 1971), pp. 226–31. One author, however, suggests that
China promoted self-reliance so that these countries could become closer to
China. See Garon Hydlen and Rwekaza Mukandala (ed.), Agencies in Foreign
Aid: Comparing China, Sweden and the United States (New York: St. Martin’s
Press, 1999), p. 157.
69. This is certainly the case if one takes into account the grant factor in China’s
loans and the fact it cancelled or forgave many of them. Only 8.9 percent were
interest-bearing loans and the interest China charged on its loans ranged from
2 to 2.5 percent. See Muller, The Foreign Aid Programs of the Soviet Bloc and
Communist China, p.234.
70. Ibid. Also see Klein, Politics versus Economics, p. 15.
71. Klein, Politics versus Economics, p. 16.
72. See Horvath, Chinese Technology Transfer to the Third World , chapter 4.
Horvath provides a highly analytic presentation of the grant factor in China’s
aid loans, noting that it differs considerably from that of other countries).
China gave the most generous aid, he notes, to poor countries. China’s most
generous aid in terms of the grant factor went to Bangladesh, Mali, Laos,
Congo, Cambodia, Kenya, Uganda, Niger, Upper Volta, and Mauritania
respectively. See pp. 53–54. Also see Bartke, China’s Economic Aid , p. 9.
Both of the writers are speaking of China’s aid during phase one, up to
around 1975.
73. The US Central Intelligence Agency reported in the mid-1970s that China’s
aid program was the most concessionary of all the Communist nations’ aid
programs. See Communist Aid to the Less Developed Countries of the Free World,
1976 (report ER 77–10296), August 1977, p. 5.
74. See Carol H. Fogarty, “China’s Economic Relations with the Third World,”
in China: A Reassessment of the Economy (Washington, DC: Government
Printing Office, 1975), p. 732. The Joint Economic Committee of the US
Congress undertook this study. The author in this study compares China’s
economic aid to poor countries with the aid given by other Communist coun-
tries. This author believes that by including China’s military aid to North
Korea, North Vietnam, and Albania and given the risk factor in China’s aid
Notes ● 177
(meaning the considerable instability in recipient countries and their difficul-

ties in repayment) the picture is different. This point will be discussed further
in following pages.
75. See Vivian Foster, William Butterfield, Chuan Chen, and Nataliya Pushak,
Building Bridges: China’s Growing Role as Infrastructure Financier for Africa
(Washington, DC: World Bank, 2008), pp. 47–48.
76. One author notes that China was “not only the poorest country in the world to
provide aid, but its aid was the highest ever given as a percentage of the donor
country’s per capital income . . . and . . . often went to countries with a standard
of living much higher than itself.” See Jung Chang and Jon Halliday, Mao: the
Unknown Story (New York: Alfred A. Knopf, 2005), p. 461. Also see Copper,
China Foreign Aid, pp. 2–4 for further discussion of this matter.
77. Shuaihua Cheng, Ting Fang, and Hui-ting Lien, “China’s International Aid
Policy and Its Implications for Global Governance,” RCCPVB Working Paper
(Research Center for Chinese Politics and Business, Indiana University),
June 2012.
78. See Table 1.1 in Copper, China’s Foreign Aid, p. 2.
79. Chang and Halliday, Mao: The Unknown Story, p. 586. US charitable giving
and giving access to its market are not counted here. Neither was its aid given
through international aid agencies.
80. A few writers, however, observed that China, like other aid-giving countries,
gives aid mainly to attain political objectives. See A. Doak Barnett, Communist
China and Asia: A Challenge to the United States (New York: Vintage Books,
1960), p. 244.
81. One of the reasons China moved to giving aid more in the form of loans was
that it wanted to aid more countries at the time of the second Afro-Asian
Conference in 1965 and was in a contest with the Soviet Union for winning
votes. One writer notes that China made the decision to shift more of its for-
eign aid to loans in 1957, when its aid program was more firmly established.
See Klein, Politics versus Economics, p. 14.
82. Horvath, Chinese Technology Transfer to the Third World , p. 1. The author
states the grant factor on China’s loans was 76 percent from 1957 to 1974.
83. Jianwei Wang, “China’s New Frontier Diplomacy,” in Sujian Guo and Jean-
Marc F. Blanchard (eds.), “Harmonious World” and China’s New Foreign Policy
(Lanham, MD: Lexington Books, 2008), p. 32. The author uses the term
“debt” rather than aid though.
84. Bartke, China’s Economic Aid, p. 12. The author notes that in the case
of Western aid half of the cost is in wages and salaries. Also see The Aid
Programme of China, p. 7. It is interesting to note in this connection that an
official Chinese publication stated that China’s loans were all without inter-
est. See Zhongguo dwuwai jingji jishu yuanzhu (China’s foreign economic and
technical aid) (Beijing: Ministry of Foreign Trade and Technical Cooperation,
1985), p.20. This was obviously not true as will be seen in following chapters
where Chinese announcements of aid mention the rate of interest.
178 ● Notes
85. Chinese loans could not reasonably be repaid in foreign currencies or gold and
usually weren’t. See Klein, Politics versus Economics, p. 14.
87. The Tan-Zam Railroad was built by China in East Africa. It was a very big
project and one that Western and international agencies turned down as not
feasible. This project will be discussed in following chapters.
88. Lawrance, China’s Foreign Relations since 1949, p. 218.
89. Copper, China’s Foreign Aid, pp. 14–18; Klein, Politics versus Economics,
p. 14.
90. Ibid., p. 17 and 140.
92. This was enshrined in China’s “Eight Principles of China’s Aid to Foreign
Countries.” The criticism of China about its aid personnel and workers was
that they remained away, and segregated, from the local population. This was,
and is, often heard in African countries.
93. Gail A. Edie and Denise M. Grissell, “China’s Foreign Aid, 1975–78,” China
Quarterly, March 1979, p. 216. For a detailed description of China’s aid proj-
ects, see Bartke, China’s Economic Aid , pp. 75–215.
94. Carol Fogarty, “Chinese Relations with the Third World,” in Chinese Economy
Post-Mao (Washington, DC: Joint Economic Committee of Congress, 1978),
pp. 851–59.
95. Law, Chinese Foreign Aid, p. 212.
96. Teh-chang Lin, “Beijing’s Foreign Aid Policy in the 1990s,” p. 42.
97. This would have to be the case; alternatively China promised a large number
of projects and actually delivered only a few of them. Lin cites an average of
36 projects completed annually between 1979 and 1983 and about the same
number finished in the following years up to 1993. See “Beijing’s Foreign Aid
Policy in the 1990s,” p. 39.
98. “Chinese Assistance to Third World,” Beijing Review, March 2, 1987,
pp. 29–30. This source mentioned 222 projects this year, 13 of which were
new, 100 technological and managerial cooperation projects and 50 others.
The definition of project here was very unclear. According to a Chinese offi-
cial, China has completed 1,554 projects. See “China to Further Economic
and Trade Cooperation with the World,” Shijie Zhishi, September 16, 1999
(translated by FBIS September 16, 1999 #SK3011095899).
99. Zhongguo Jingji Nianjian (Almanac of China’s Economy) (Beijing: 1981), pp. iv
and 134–37. No definition of “project” was provided.
100. Xinwen Bao (Journalism Paper), February 15, 1990, cited in “Foreign Countries
Aid by China,” Beijing Review, May 14–20, 1990, p. 33. This data, it needs to
be noted, is not consistent with other information provided by official Chinese
sources.
101. See Lawrance, China’s Foreign Relations since 1949, p. 153 for phase two aid. Also
see Gregory T. Chin and B. Michael Frolic, Emerging Donors in International
Development Assistance: The China Case, International Development Research
Centre (Canada), December 2007, p. 2.
Notes ● 179
102. Klein, Politics versus Economics, p. 15. There were, of course, many notable
exceptions as will be seen in later chapters. Also these show projects got more
notice in the Western media.
103. According to an official Chinese source, between 1963 and 1983 China sent
6,500 doctors to 43 Asian and African countries. As of 1983 there were 35 med-
ical teams comprising 1,100 personnel working in 80 centers in 35 countries.
See Li Ke, “China’s Aid to Foreign Countries,” Beijing Review, September 5,
1983, p. 16. Later, in 1990, it was reported that China had sent some 10,000
medical personnel to 60 countries and had contracted to build 30 projects.
See Li Ming, “China’s International Health Technology Cooperation,” Beijing
Review, January 15–21, 1990, p. 43.
104. Klein, Politics versus Economics, p. 15.
105. Ibid. The author notes that, in contrast, the Soviet Union often sent more
technicians and charged for that.
107. Xinwen Bao (Journalism Paper), February 15, 1990, cited in “Foreign Countries
Aid by China,” Beijing Review, May 14–20, 1990, p. 33.
108. Zhang Haibing, “China’s Aid to Southeast Asia,” in Saw Swee-Hock (ed.),
ASEAN-China Economic Relations (Singapore: Institute of Southeast Asian
Studies, 2007), p. 257.
109. Thomas Lum, Christopher M. Blanchard, Nicolas Cook, Kerry Tombaugh,
Susan B. Epstein, Shirley A. Kan, Michael F. Martin, Wayne M. Morrison,
Dick Nanto, Jim Nichol, Jeremy M. Sharp, Mark P. Sullivan, Bruce Vaughn,
and Thomas Coipuram Jr., “Comparing Global Influence: China’s and U.S.
Diplomacy, Foreign Aid, Trade, and Investment in the Developing World,”
Congressional Research Service, August 15, 2008, pp. 33–34. Many of these
issues are also discussed in Copper, China’s Foreign Aid.
110. See Yong Deng, “Conception of National Interests: Realpolitik, Liberal
Dilemma, and the Possibility of Change,” in Yong Deng and Fei-ling Wang
(eds.), In the Eyes of the Dragon: China Views the World (Lanham, MD:
Rowman and Littlefield, 1999), pp. 47–72; Thomas J. Christensen, “Chinese
Realpolitik,” Foreign Affairs, September/October 1996, pp. 37–52.
111. Edie and Grisnell, “China’s Foreign Aid, 1975–78,” p. 216.
112. China donated funds to the United Nations Industrial Development
Organization (UNIDO) beginning in 1971, amounting to slightly more than
US$ 200,000 annually. China was a member of UNIDO before it was admit-
ted to the UN and its goals seemed to fit China’s notion that underdevel-
oped nations should industrialize in order to escape dependency on Western
industrial countries. China also gave a modest amount of money to the UN
Development Program beginning in 1973—around US$ 2 million annually.
For details, see Samuel S. Kim, China, the United Nations, and World Order
(Princeton, NJ: Princeton University Press, 1979), pp. 308–11 and 324–26.
Kim notes that China told the UN not to expect much help in it giving mul-
tilateral aid. It is worth noting in this connection that China has been critical
of United Nations aid, saying that the salaries of UN experts in the field are
180 ● Notes
exorbitant and that the UN Development Program helps Western field experts
more than poor countries. China even refused to get involved in some projects
because it had pledged in its Eight Principles that its workers adopt the liv-
ing standards of the people in the localities where they work. In the 1980s,
China’s policy in this regard shifted a bit. According to the OECD, China had
provided $300 million to multilateral organizations up to 1985. See The Aid
Programme of China, p. 6.
113. It needs to be noted that charity organizations did not find an important place
in China as in Western countries. During the Mao period the government
took responsibility for helping the poor and doing social tasks as well as what
is called “charity work” in the West. Thus charities were not considered neces-
sary and were to some degree seen as present in the West due to the predatory
nature of capitalism. During the Deng era most Chinese saw charity work, as
in most other countries, as undesirable because it undermined the family and
resulted in added costs to government, which then made China less compet-
itive in world trade. It is also worth noting that in countries with a Buddhist
religion or background, asking for charity was to be left to monks and help to
the less fortunate was seen as wrong because they were seen as having to pay
for wrongdoing in a previous life and suffering, considered as necessary, would
lead to a better life in their next incarnation.
114. For information and data on China’s early emergency aid, see Copper, China’s
Foreign Aid, pp. 16, 50,95,98,102,109, 145.
115. However, in 1964, in the context of experiencing economic difficulties,
Premier Zhou Enlai did say that China’s foreign aid should be at least 3 per-
cent of the state budget. He later said that he would “like to see” 3 percent of
foreign exchange earmarked for foreign aid. See Shu Gang Zhang, “Beijing’s
Aid to Hanoi and the United States-China Confrontations, 1964–1968,” in
Priscilla Roberts (ed.), Behind the Bamboo Curtain: China, Vietnam and the
World Beyond (Washington, DC: Woodrow Wilson Center Press, 2006),
p. 264.
116. Chin and Frolic, Emerging Donors in International Development Assistance: The
China Case, p. 4.
117. See ibid, p. 13 and p. 94, for the context in which the principles were
announced.
118. However, there was mention of the eight points in the Chinese media. For
example, see Ai Ching-chu, “China’s Economic and Technical Aid to other
Countries,” Peking Review, August 21, 1964 published a few months after
they were announced, and Chin Yi-wu, “China’s Economic and Technical
Cooperation with Friendly Countries,” Peking Review, October 25, 1974, ten
years later.
119. See, for example, “Zhou Enlai Announces Eight Principles of Aid,” China
Daily, June 17, 2014 (online at chinadaily.com.cn).
120. One source notes that it was stated at this time that in 1960 a “spree of gifts
by Mao coincided with the worst years of the greatest famine in history.
Notes ● 181
Over 22 million people died of starvation in 1960 alone.” See Chang and
Halliday, Mao: The Unknown Story, p. 461.
121. See Zhimin Lin, “China’s Third World Policy,” in Yufan Hao and Guiyang
Huan (eds.),The Chinese View of the World (New York: Pantheon Books, 1989),
p. 243.
122. “Zhao Ziyang’s Four Principles of Economic and Technological Cooperation,”
Beijing Review, January 24, 1983, p 19.
123. Chinese leaders seemed to have made the decision at this time to receive
aid and loans in large quantities. The vice chairman of the State Planning
Commission said in 1980 that China planned to borrow as much as $20 bil-
lion by 1985. See Times, February 8, 1980, cited in Copper, China’s Foreign
Aid in 1979–80, p. 1. Also see John F. Copper, China’s Foreign Aid in 1979–80
(Baltimore: University of Maryland School of Law 1981), pp. 1–3.
124. In the next decade China received $7.5 billion—around $400 million in gratis
aid, the rest of it in loans. See “China’s Foreign Trade in the Past 40 Years,”
Beijing Review, October 2–8, 1989, p. 11, and World Development Report (New
York: Oxford University Press, 1990), p. 216. This study was published for the
World Bank. Later China, of course, received much more. For details on the
decisions to seek foreign financial aid and investment money, see Vogel, Deng
Xiaoping, pp. 224–27.
125. World Development Report 1991: The Challenge of Development (New York:
Oxford University Press, 1991), p. 242.
126. Li, “China’s Aid to Foreign Countries,” p. 14.
127. Sam S. Kim, “Mainland China and a New World Order,” Issues and Studies,
November 1991, p. 19.
128. Ibid. Further details on China’s termination of aid to these countries are pro-
vided in subsequent chapters.
129. See John F. Copper, “China’s Foreign Aid in 1977,” Current Scene, August-
September 1978, pp. The Tan-Zam Railroad was finished at this time. Another
reason for China’s official aid indicating a low amount may be that it did not
want to make known its aid to Cambodia in view of world attention focusing
on that country’s violation of human rights record at the time.
130. Copper, China’s Foreign Aid in 1979–80, p. 7.
131. See ibid., pp. 1–4.
132. Anne Gils and Gerald Segal, China and the Arms Trade (New York: St. Martin’s
Press, 1985), p. 27.
133. See centerfold in Jane’s Defense Weekly, November 14, 1984.
134. Copper, China’s Foreign Aid in 1979–80, p. 5.
135. Ibid., pp. 4–6. China provided donations to a dozen UN affiliated organiza-
tions in 1980, totaling more than $5 million. See Table 8, pp. 42–43 in this
publication. According to a Chinese source, up to 1998 China had sent 16,000
medical workers to more than 60 countries, mostly in Africa and South Asia,
39 having died in the field. See “China to Continue Medical Aid Abroad,”
Beijing Review, April 20–26, 1998, p. 6.
182 ● Notes
136. In 1982, Deng Xiaoping announced China’s policy of South-South coopera-

tion. The tenets of this policy were almost identical to those of China’s for-
eign aid. Thus it appeared that Deng intended that aid would again become
a major element of China’s foreign policy when China became economically
more prosperous.
137. See “Egalitarianism Is Not Sun-Light,” Beijing Review, May 14–20, 1990, p. 33
and Arthur Lewis Rosenbaum, “Introduction,” in Arthur Lewis Rosenbaum
(ed.), State and Society in China: The Consequences of Reform (Boulder, CO:
Westview Press, 1992), p. 12.
138. The “red versus expert” question had long been a pervasive one in China.
During the Mao era being red was more important; now it was being expert.
139. During the Mao era model Communists were praised. The Dazai commune,
where commitment to Mao was prominent, was made to emulate. After Mao
died it was disclosed that Dazai had been successful largely because of the
continual infusions of state money and various kinds of other support.
140. For an assessment of the application of these new ideas (ideology) in African
countries, see Deborah Brautigam, Chinese Aid and African Development:
Exporting Green Revolution (New York: St. Martin’s Press, 1998), pp. 175–95.
141. Zoo Chunyi, “Wu Yi on Reforming Foreign Assistance Programs,”
Xinhua Domestic Service, October 17, 1995 (FBIS Document ID FTS
1995510170006000).
142. “Relay of State Council Directive for Implementation and Further Reform
of Foreign Aid Work,” Gouge Shangbao, June 17, 1995 (Foreign Broadcasting
Information Service, or FBIS, Document ID FTS 19950617000048),
and Si Liang, “Special Article: China’s Two Forms of Aiding Foreign
Countries, Zhongguo Tongxuen She, May 8,1996 (FBIS Document ID FTS
19960508000027).
143. A number of observers have noted this about China’s aid to specific areas
and countries. For example, one writer says the line between China’s aid
and its foreign investments in Latin America is a “fine one.” See David
Shambaugh, “Beijing’s Thrust into Latin America,” International Herald
Tribune, November 20, 2008 (online at iht.com). Rules were made govern-
ing sovereign wealth funds (called the Santiago Principles), but compliance
was voluntary. China has been fairly transparent about not distinguishing
between foreign aid and foreign investments; apparently Beijing was not con-
cerned that Western countries might complain that China was not abiding
by the standard definitions of each. It has also worked with other sovereign
wealth funds to weaken criticism that might arise when it makes controver-
sial purchases. See “Cash in Hand,” Economist, June 19, 2010, p. 76. For the
view that China deliberately blurred the line between aid and investments, see
David Shambaugh, China Goes Global: The Partial Power (Oxford: Oxford
University Press, 2013), p. 202.
144. Also the Exim Bank did not want to be seen as risking or trying to gain control
over foreign affiliates.
145. Shambaugh, China Goes Global , p. 177.
Notes ● 183
146. Yevgeniya Korniyanko and Toshiaki Sakatsuma, “China’s Investments in

Transitional Countries,” European Bank for Reconstruction and Development
(Working Paper), January 2009 (online at ebrd.com).
147. Ibid.
148. Peter Nolan, Is China Buying the World? (Cambridge: Polity Press, 2012).
149. Vivien Foster, William Butterfield, Chuan Chen, and Nataliya Pushak,
Building Bridges: China’s Growing Role as Infrastructure Financier for Sub-
Saharan Africa (Washington, DC: The World Bank, 2009), p. xvii and p. 7.
China’s investments are more concessional than private investments by a con-
siderable amount, but do not meet the 35 percent (initially and not factoring
in debt forgiveness) that Western official investments carry.
150. Obviously many of China’s investments, especially for projects in countries
that are unstable or experience conflicts or civil wars, cannot and will not be
repaid. Some very large investments in some Middle East countries have been
written off. This point is discussed further in subsequent chapters.
151. One might say, however, that this was offset by remittances Chinese work-
ers abroad were making back to their families, though most of it was the
product of their working on Chinese aid and investment products abroad.
See “Remittances,” Economist, November 13, 2010, p. 114. The amount was
slightly below $50 billion in 2009 and over $50 billion in 2010.
152. See, for example, see Li Shenming, “Foreign Aid and International Relations:
Foreign Aid Is an Extension of Domestic Politics and an Instrument for
Implementing Foreign Policy,” People’s Daily, June 17, 2002 (Translated
by FBIS Document ID: CPP2002061700060). Li was vice president of the
Chinese Academy of Social Science.
153. See “”Zero Tariffs to Aid African Trade,”China Daily, January 20, 2005 (online
at chinadaily.com.cn). For further analysis of China’s defining its foreign aid,
see Sara Lengauer, “China’s Foreign Aid Policy: Motive and Method,” Bulletin
of the Centre for East-West Cultural and Economic Studies , September 1, 2011,
p. 38 (online at epublications.bond.edu.au/cm).
154. Carol Lancaster, “Foreign Aid in the Twenty-First Century: What Purposes?”
in Louis A. Picard, Robert Groelsema, and Terry F. Buss (eds.), Foreign Aid
and Foreign Policy: Lessons for the Next Half Century (Armonk, NY: M.E.
Sharpe, 2008), p. 39.
155. “China Will Help train 3,000 Professionals from More Than 130 Developing
Countries This Year,” Xinhua, June 14, 2004 (from FBIS Doc. ID
CPP20040614000201).
156. Robert G. Sutter, Chinese Foreign Relations: Power and Policy Since the Cold
War (Lanham, MD: Rowman and Littlefield, 2008), p. 108.
157. During the recent recession, China has also provided funds that might be
called emergency help to the International Monetary Fund and to Greece.
158. Ibid. Also see “China’s Growing Role in UN Peacekeeping,” Asia Report, April
17, 2009. In early 2009, China had 2,000 peacekeepers serving in ten UN
operations worldwide. It is worth recalling that in 1971, when it joined the
UN, China rejected the concept of peacekeeping.
184 ● Notes
159. See Pang Zhongying, “China’s Changing Attitude to UN Peacekeeping,”

International Peacekeeping, No. 1, 2005, pp. 87–104.
160. Samuel S. Kim, “Chinese Foreign Policy Faces Globalization Challenges,” in
Alastair Iain Johnson and Robert S. Ross (eds.), New Directions in the Study
of China’s Foreign Policy (Stanford, CA: Stanford University Press, 2006),
pp. 297–98.
161. “China’s National Defense in 2006,” Xinhua, December 29, 2006.
162. “2008 Status of Contributions to the Regular Budget, International Tribunals,
Peacekeeping Operations, and Capital Master Plan,” cited in “Comparing
Global Influence,” p. 42. China’s overall rank in contributing personnel to
peacekeeping was number 12 and its contribution to the UN’s peacekeeping
budget was 3 percent (compared to the US at 26 percent).
163. Cui Xiaohuo, “Peacekeeping Role Marching Forward,” China Daily, July 4,
2009 (online at chinadaily.com). According to this article, China contributed
3.15 percent of the UN’s peacekeeping budget, ranking seventh most among
contributors. This number accords with Western estimates. See 2009 Report
to Congress (by U.S.-China Economic and Security Review Commission),
November 2009 (Washington, DC: U.S. Government Printing Office, 2009),
p. 117. According to this report, the number is slightly less if counting only
troops, but slightly higher if also counting police.
164. It is worth noting that China’s support of peacekeeping may stem from its
concerns with acquiring natural resources. The US government source cited
above suggests this is the case.
165. China has given large amounts of foreign aid to these organizations as will be
seen in following chapters.
166. This point is assessed further in the conclusion of this book.
167. Chinese leaders did not say this openly. But they did note that China had a
large portion of its foreign exchange in US dollars and that the dollar was
being devalued and as a consequence China lost money. In fact, Chinese lead-
ers criticized the United States for this probably to answer criticism about the
losses, which they could not do much about. See Volume 1, Chapter 3 for more
details on this topic.
168. Shambaugh, China Goes Global , pp. 179–80.
169. See Farah Abuzeid, “Foreign Aid and the ‘Big Push’ Theory: Lessons from
Sub-Sahara Africa,” Stanford Journal of International Relations, Fall 2009
(online at stanford.edu).
170. “China’s Foreign Aid,” Part I.
171. “Providing foreign aid as a way to survive,” Global Times, July 21, 2012 (online
at globaltimes.cn).
172. “Comparing Global Influence,” p. 34.
173. “White Paper: China’s Foreign Aid,” China Daily, April 22, 2011 (online at
chinadaily.com.cn).
174. Chinese officials used the term “foreign aid” though they seemed to mean
foreign assistance or financial help or a broader term. They appeared to want
Notes ● 185
to use the same language as other countries and aid-giving organizations even
though the definition was different.
175. Carol Lancaster, “The Chinese Aid System,” The Reality of Aid, July 1, 2007
(online at www.realityofaid.org )
176. See “Full Text: China’s Foreign Aid,” Xinhua, July 10, 2014 (online at xihua-
net.com).
177. See Zhang Dan, “China Issues White Paper on Foreign Aid,” Xinhua, July 10,
2014 (online at xinhua.com.cn).
178. This issue is discussed in a number of places in Copper, China’s Foreign Aid.
For a recent statement of this problem, see “Comparing Global Influence”
p. 33. One report mentions that China administers aid in an ad hoc manner
and that because it is also a recipient and citizens object to its lavish spend-
ing on aid, it is reluctant to be seen as a major aid donor. See Thomas Lum,
Hannah Fisher, Julissa Gomez-Granger, and Anne Leland, “China’s Foreign
Aid Activities in Africa, Latin America, and Southeast Asia,” Congressional
Research Service, February 25, 2009, p. 1. Also see Kerry Dumbauagh, “China’s
‘Soft Power’: Overview and U.S. Policy Challenges,” in China’s Foreign Policy
and “Soft Power” in South America, Asia, and Africa (Washington, DC: U.S.
Government Printing Office, 2008), p. 2. The author notes that diplomatic
factors that affect aid giving make it difficult to assess or predict.
179. For example, data on China’s economy are collected by the national govern-
ment from figures provided by the provinces. At times the provinces inflate
the figures to prove that they had done a good job in promoting growth. At
other times they report lower figures to reduce their tax obligations or to get
financial help from Beijing. See Ted Fishman, China, Inc.: How the Rise of
the Next Superpower Challenges America and the World (New York: Scribner,
2005), pp. 9–10. Foreign analysts also vastly disagree in their estimates of
China’s economy. See, for example, Stephen Green, “Lies, Damned Lies, and
Chinese Statistics,” Far Eastern Economic Review, January/February 2009,
p. 14. The Chinese government has admitted that its statistical data are often
not accurate and has promised to fix this problem. See “China Says to Improve
Economic Statistics after Foreign Media Comment,” Xinhua, April 17, 2009
(online at chinaorg.cn/china/news/2—9–04–18/content 17629318.htm). As
will be noted below the total amount of aid announced by the Chinese during
a specific year or a period of time often disagrees with a figure derived from
simply adding what China announces that year or during a period of several
years. The Chinese government is also motivated to undervalue its aid in order
to keep aid and investment funds from Western countries (Japan being a good
example) and international financial organizations and to reduce domestic
opposition to its aid giving.
180. During the early years, China’s currency was valued at $1=2.46 Yuan. See
Wolfgang G. Friedman, George Kalmanoff, and Robert F. Meagher,
International Financial Aid (New York: Columbia University Press, 1966),
p. 85. Recently it has been valued at 7 or so per $1.
186 ● Notes
181. Carol Lancaster, “The Chinese Aid System,” Center for Global Development
Essay, June 2007, p. 2 (online at cgdev.org).
182. See Bartke, China’s Economic Aid , pp 10–11. The author cites $229 million as
the value of China’s aid in 1973.
183. Horvath, Chinese Technology Transfer to the Third World , pp. 20–21. The
author puts China’s aid at $440 million.
184. Black, The Strategy of Foreign Aid , p 101. The author cites two US Department
of State publications as his “principal source.”
185. Laos may be defined as a Communist country and, therefore, not seen as
a developing country notwithstanding its low per capita income. But the
Communist label should not apply until 1975.
186. Warren Weinstein (ed.), Chinese and Soviet Aid to Africa (New York: Praeger,
1975), p. 249. Bartke cites $49 million China gave in 1969; Horvath gives the
figure $52 million.
187. Law, Chinese Foreign Aid, p. 286 and p. 88.
188. W.F. Choa, “China’s Economic Aid to Developing Countries,” China
Mainland Review (Hong Kong), June 1965.
189. Ibid.
190. Teh-chang Lin, “Beijing’s Foreign Aid Policy in the 1990sTable 1 (on p. 38).
The author’s data are from his PhD dissertation and various issues of Almanac
of China’s Foreign Economic Relations and Trade published in China (no pub-
lisher cited).
191. “Communist Governments and Developing Nations: Trade and Aid,”
US Department of State, Bureau of Intelligence and Research, Research
Memorandum, June 17, 1966, p. 2, Table 1.
192. The Aid Programme of China, p. 6 and Table 1.
193. Handbook of Economic Statistics (Washington, DC: Central Intelligence
Agency, 1990).
195. Barnett, Communist China and Asia , p. 244. The author gets his informa-
tion from various reports on budgets cited in issues of Current Background.
See footnote no. 53 on page 522. It should be noted that the Chinese way of
counting years is different and includes both the beginning and ending year;
therefore 1953 to 1957 is five years.
196. Ibid.
197. Ibid., p. 245.
198. Ibid.
199. Sutter, Chinese Foreign Relations, p. 368.
200. Copper, “China’s Foreign Aid, 1975–78,” p. 216. Also see John F. Copper,
“China’s Foreign Aid Program: An Analysis and Update,” in China Looks
to the Year 2000 by the Joint Economic Committee of the U.S. Congress
(Washington, DC: U.S. Government Printing Office, 1986). China’s rela-
tions with North Vietnam had been strained after Hanoi defeated the United
States in the war and especially after it invaded Cambodia, a nation friendly
Notes ● 187
and close to China, in 1978 and ruled it as a client state. China’s relations with
Albania deteriorated because of China’s close relations with Washington.
201. Ibid., p. 36. Official aid here means aid pledged, not including military aid.
202. Mentioned earlier is the problem of whether “foreign aid” includes arms and
other military hardware. Any kind of assistance to the military of the recipient
countries or economic help to countries involved in conflict presents a seri-
ous problem in measuring China’s aid. The OECD definition of aid does not
include arms aid.
203. One report mentions this problem, but the authors do not attempt to assess it.
See Lum et al., Comparing Global Influence, p. 33. Also, see Copper, China’s
Foreign Aid. He mentions it in various places.
204. One reason for this is that China extended both in large amounts to facilitate
the acquisition of energy and other natural resources and create markets for
Chinese goods. See Lum et al., China’s Foreign Aid Activities in Africa, Latin
America, and Southeast Asia , Summary.
205. Lin, “Beijing’s Foreign Aid Policy in the 1990s,” Table 1.
206. Carol Lancaster, “Foreign Aid in the Twenty-First Century,” p. 43.
207. “Understanding Chinese Foreign Aid: A Look at China’s Development
Assistance to Africa, Southeast Asia, and Latin America,” New York University
Wagner School (this was a report prepared for the Congressional Research
Service), April 25, 2008. There is no explanation why China’s aid to North
Korea, some South Asian and Middle East countries and some Central Asian
and European nations was not included. This figure the author derived from
the report’s statement that China’s aid in 2007 was $31 billion or 20-fold of
what it was in 2003.
208. Joshua Kurlantzick, Charm Offensive: How China’s Soft Power Is Transforming
the World (New Haven, CT: Yale University Press, 2007), p. 98.
209. Carol Lancaster, “The Chinese Aid System,” p. 3 (online at cgdev.org).
210. Phillip C Saunders, “China’s Global Activism: Strategy, Drivers, and Tools,”
Institute for National Strategic Studies, National Defense University, 2006, p. 2.
211. Cris Alden, “China’s New Engagement with Africa,” in Riordan Routt and
Guadduple (eds.), China’s Expansion into the Western Hemisphere: Implications
for American and the World (Washington, DC: Brookings 2008), p. 217. For more
recent statements saying essentially the same thing or something quite similar,
see Teresita Cruz-del Rosario, “Enter the Dragon, Softly: Chinese Aid in South,
Southeast and Central Asia,” Lee Kuan Yew School of Public Policy (Working
Paper Series), June 2011, p. 7. And Shambaugh, China Goes Global, p. 110.
212. “Understanding Chinese Foreign Aid: A Look at China’s Development
Assistance to Africa, Southeast Asia, and Latin America, New York University’s
Wagner School, April 25, 2008.
213. Hideo Hash, “China’s Regional Trade and Investment Profile,” in David
Shambaugh (ed.), Power Shift: China and Asia’s New Dynamics (Berkeley:
University of California Press, 2005), p. 87. The author cites several sources,
both UN and Chinese government publications.
188 ● Notes
214. Ibid.
215. Lancaster, “The Chinese Aid System,” p. 10.
216. Lum, et al., “Comparing Global Influence,” p. 4.
217. Chen-dong Tso, “Coming to Terms with China’s Foreign Aid,” Peace Forum,
July 13, 2009 (online at peaceforum.org.tw). The writer cites the Congressional
Research Service and the Australian Lowy Institute as sources.
218. Richard Grimmest, “Conventional Arms Transfers to Developing Countries,
1999–2006,” Congressional Research Service, September 26, 2007.
219. See Lum, et al., “Comparing Global Influence, “p. 33.
220. Michael A. Glossy, “China’s Foreign Aid Policy: Lifting States out of Poverty
or Leaving Them to Dictators?” Freeman Report (Center for Strategic and
International Studies) December 2006 (online at www.csis.org ).
221. “Understanding Chinese Foreign Aid.” There is no explanation why China’s
aid to North Korea, some South Asian and Middle East countries, and some
Central Asian and European nations was not included. This figure was derived
by the author from the statement in the report that China’s aid in 2007, which
was $31 billion, was three times what it was in 2005.
222. Sutter, Chinese Foreign Relations (third edition), pp. 316–17.
223. “Statement by Chinese Foreign Minister Li Zhaoxing at the High-Level
Meeting for Mid-Term Review of Program of Action for LDC’s for Decade
2001–2010,” Ministry ofForeign Affairs, September 19, 2006 (online at chi-
naconsulates.org).
224. “Statement by President Hu Jintao of China at the High-Level Meeting on
Financing for Development at the United Nations Summit,” Permanent
Mission of the People’s Republic of China to the UN, September 14, 2005
(online at www.fmpr.gov.cn).
225. “China Boosts Foreign Aid Training Programs,” China CSR, September 12,
2007 (online at www.chinacsr.org ).
226. World Military Expenditures and Arms Transfers, 1967–1976 (Washington,
DC: Arms Control and Disarmament Agency, 1978), p. 26.
227. World Military Expenditures and Arms Transfers, 1969–1978 (Washington,
DC: Arms Control and Disarmament Agency, 1980), p. 159.
228. Richard F. Grimmett, “Conventional Arms Transfers to Developing Nations,
2000–2007,” Congressional Research Service, October 23, 2008, p. 11. In
this report China was ranked fifth according to most of the categories used
such as agreements, deliveries, etc. China ranked considerably below the
United States and Russia and also behind the United Kingdom and France.
China ranked high in transferring tanks, self-propelled guns, armored vehi-
cles, combat aircraft, and missiles. It is worth noting that China was also
a leading purchaser of weapons (mainly from the Soviet Union), ranking
number one in the world during the period 2000–03, and fourth during
2004–07.
229. See Jacqueline Newmyer, “Oil, Arms and Influence: The Indirect Strategy
behind Chinese Military Modernization,” Orbis, Spring 2009, p. 214. The writer,
Notes ● 189
for example, cites China’s help in building fiber optic cables for Iran, which were
used by the military under Saddam Hussein; various forms of military aid were
also given to Nepal and so was a guided-missile project with Turkey.
230. This point is discussed in following chapters. Several countries have received
China’s assistance in this realm.
231. Anne Gilks and Gerald Segal, China and the Arms Trade (New York: St.
Martin’s Press, 1985), p. 29.
232. “China Granted Aid to 120 Countries in 60 years,” People’s Daily Online, August
12, 2010 (online at English.people.com.cn/90776/90773/7102942html).
233. “Li Keqiang Visits Exhibition Marking 60 Years of China’s Foreign Aid,”
Xinhua, August 22, 2010.
234. “China’s Foreign Aid,” Information Office of the State Council, April
2011 (online at http://news.xinhuanet.com/english2010/china/2011-04/21/
c_13839683.htm). Also see Gillian Wong, “China Cites Positive Impact in
First Report on Aid,” Associated Press, April 21, 2001 (online at news.yahoo.
com/s/20110421/ap_on_bi_ge/as_china_foreign_aid).
235. Ibid.
236. Sara Lengauer, “China’s Foreign Aid Policy: Motive and Method,” Bulletin of
the Center for East-West Cultural and Economic Studies, September 1, 2011,
p.35.
237. These two statements are discussed further in following chapters and their
sources are documented there.
238. John Wong and Sarah Chan, “China’s Outward Direct Investment: Expanding
Worldwide,” China: An International Journal, September 2003, p. 280.
240. Sutter, Chinese Foreign Relations, p. 109. Sutter cites Trends and Recent
Developments in Foreign Direct Investment (Paris: Organization for Economic
Cooperation and Development, 2005). He notes that the figure should be
much higher, and believes that aid or investments that do not require the loss
of Chinese funds or that investments are defined as deals involving Chinese
commodities or the involvement of Chinese businesses.
241. Jiang Wei, “Outward Investment Steady,” China Daily, January 24, 2006,
p. 9, cited in Sutter, Chinese Foreign Relations, p. 109.
242. Derek Scissors, “Chinese Outward Investment: Better Information Required,”
The Heritage Foundation, February 25, 2010.
243. As will be seen in following chapters China has announced investments much
larger than the Chinese figures announced here; thus the US analyst pro-
vided data that are more accurate, though he mentions that more and better
data are needed.
245. Ibid., p. 178. US outward investments in 2010 totaled nearly five times
China’s.
246. Li Jiabao and Zhang Yuwei, “Promising Outlook on US, China Investment,”
China Daily, June 27, 2013 (online at chinadaily.com.cn).
190 ● Notes
247. See Lengauer, China’s Foreign Aid Policy,” p. 38; Lum et al., “China’s Foreign
Aid Activities in Africa, Latin America, and Southeast Asia,” p. 3.
248. This point is mentioned in coming chapters.
249. See, for example, Fox Butterfield, China: Alive in the Bitter Sea (New York:
Bantam Books, 1982), pp. 319–22 and 383–405.
250. Carol Lancaster, “The Chinese Aid System,” p. 2.
251. Ibid. Also see Thomas Lum, Wayne W. Morrison and Bruce Vaughn, “China’s
‘Soft Power’ in Southeast Asia, Congressional Research Service, January 4, 2008.
According to China’s 2011 report, “China’s Foreign Aid” Part IV, 11.0 percent
of China’s aid recipients were “medium and high income countries.”
252. See Lancaster, “The Chinese Aid System.” Several other writers have also
noted the impasse in trying to assess China’s aid due to the fact it is considered
a state secret and have found many officials unwilling to talk about it for that
reason. See, for example, Chin and Frolic, Emerging Donors in International
Development Assistance, p. 11.
253. Alex Wilks, ”China and the Paris Declaration: An Intriguing Question,” The
Better Aid Blog, September 21, 2007 (online at betteraid.org).
254. Ibid. Some other writers have also observed this, especially about the magnitude
of China’s aid giving or the total numbers. See Deborah Brautigam, “China’s
Foreign Aid in Africa: What Do We Know?” in Robert I. Rotberg (ed.), China
into Africa: Trade, Aid, and Influence (Washington, DC: Brookings, 2008),
p. 214 footnote no. 5.
255. This is true, in particular, of China’s aid to Africa as will be seen in Volume 3,
Chapter 2.
256. Wilks, ”China and the Paris Declaration.”.
257. Lancaster, “The Chinese Aid System,” pp. 3–4.
258. Ibid.
2 China’s Worldview and Its Foreign

1. See C. K. Yang, “The Feudal Relationship between Confucian Thought and
Chinese Religions,” in John Fairbank (ed.), Chinese Thought and Institutions
(Chicago, IL: University of Chicago Press, 1957), p. 269. As the author points
out, some writers have seen Confucius as agnostic, but this is hardly the case.
Another writer notes that ancient kings in China, as elsewhere, often “appealed
to the supernatural” in the course of their rule. See Michael Loewe, Imperial
China (London: George Allen and Unwin, 1966), p. 71.
2. Confucius thought of Heaven not as an “arbitrary governing tyrant, but the
embodiment of a system of legality (wherein) . . . the Ruler shall act by set-
ting an example, like Heaven.” See Wolfram Eberhard, A History of China
(Berkeley: University of California Press, 1969), p. 42.
3. Derk Boode, Essays on Chinese Civilization (Princeton, NJ: Princeton University
Press, 1981), p. 107.
Notes ● 191
4. Loewe, Imperial China , p. 74.

5. Jonathan Spence, The Search for Modern China (New York: W. W. Norton,
1990), p. 85. Spence calls this “moral indoctrination.”
6. See Charles O. Hacker, China’s Imperial Past An Introduction to Chinese History
and Culture (Stanford, CA: Stanford University Press, 1975), p. 55. Hacker
calls the Mandate of Heaven the “cornerstone” of Chinese political theory.
7. See Wolfram Eberhard, “Political Function of Astronomy and Astronomers in
Han China,” in John K. Fairbank (ed.), Chinese Thought and Institutions, p. 37
for details on this point. It is worth noting that in China there was no concept
of the divine right of kings as there was in Europe.
8. See John King Fairbank, The United States and China (Cambridge, MA:
Harvard University Press, 1979), p. 57.
9. In fact, one can argue that China has the longest tradition of successful autoc-
racy of any nation in the world. See John King Fairbank and Merle Goldman,
China: A New History (Cambridge, MA: Harvard University Press, 1998),
p. 1.
10. Lucien Pye, Asian Power and Politics: Cultural Dimensions of Authority
(Cambridge, MA: Harvard University Press, 1985), p. 88. Pye notes that
people who did not respond to their model rules were seen as being less than
human.
11. Yang, “Feudal Relationship,” p. 269.
12. Bin Wang, China’s Transformation: Historical Change and the Limits of European
Experience (Ithaca, NY: Cornell University Press, 2000), p. 97.
13. See Fairbank and Goldman, China: A New History, p. 62.
14. See Chih-yu Shih and Zhiyu Shi, China’s Just World: The Morality of Chinese
Foreign Policy (Boulder, CO: Lynne Rienner, 2003), p. 30. The authors state:
“In fact, once China was united by Qin Shihuang, legalism proved to be
an inadequate instrument of rule because it was virtually impossible for the
emperor to amass enough force to control his huge territory. Confucianism
was the natural rescue.”
15. Fairbank and Goldman, China: A New History, pp. 62–63.
16. Fairbank, The United States and China , p 54.
17. Milton W. Meyer, China: A Concise History (Lanham, MD: Rowman and
Littlefield, 1994), p. 3. The author notes “rulers guided the population through
their conduct, not by codes of law.”
18. In the ancient Middle East this idea is found in Mesopotamian and Egyptian
cultures, but both making this claim weakened it. China had no competitors.
See Benjamin I. Schwartz, Communism in China: Ideology in Flux (New York:
Atheneum, 1975), p. 230.
19. Samuel S. Kim, China, the United Nations, and the World Order (Princeton,
NJ: Princeton University Press, 1979), p. 20.
20. Most Western foreign aid has been influenced by charity and problems relat-
ing to colonialism and war. China’s tribute was based on quite different think-
ing, as we will see.
192 ● Notes
21. Historian John Fairbank notes that Confucius, upon whose teachings China’s
state ideology was based, ran a school to teach political leaders right moral
conduct. He also notes that “government by goodness” prevailed in China in
a way unlike anything in the West. He further states: “Right conduct gave the
ruler power.” See Fairbank, United States and China , pp. 57–59.
22. See Martin Jacques, When China Rules the World: The End of the Western World
and the Birth of a New World Order (New York: Penguin, 2012), pp. 200–1.
The author states: “Confucian ways of thinking, never extinguished, are being
revived and scrutinized for any light that they might throw on the present,
and for their ability to offer a moral compass.” Historian Wang Gungwu has
suggested that writings on foreign relations of two thousand . . . years ago seem
so compellingly alive today.” See also Wang Gungwu, “Early Ming Relations
with Southeast Asia: A Background Essay,” in John King Fairbank (ed.), The
Chinese World Order: Traditional China’s Foreign Relations (Cambridge, MA:
Harvard University Press, 1968), p. 61.
23. Jacques Gernet, A History of Chinese Civilization (London: Cambridge
University Press, 1972), p. 635. Of course, both Western and Chinese schol-
ars have argued that Chiang did not rule this way. Yet one can also argue
that there is always a gap between theory and practice in governance and that
Chiang ruled during a period of war.
24. Fairbank, The United States and China , p. 55.
25. Wang Gungwu, “The Chinese,” in Dick Wilson (ed.), Mao Tse-tung in the
Scales of History (London: Cambridge University Press, 1977), p. 291. It is
also interesting to note that Mao’s given name suggests he is to aspire to be
an official in the Confucian tradition though Mao did not change it as some
other Chinese leader did (Lin Biao for example). In addition, Mao’s Red Book
was published in huge quantities for the masses to memorize and cite, just as
Confucian texts were, and as Confucians was not often called by his name,
but rather was referred to as “the sage” Mao was not called by his name either,
but was appellated “the chairman.” Another writer notes that Mao’s “Little
Red Book drew on the Confucian tradition.” Jacques, When China Rules the
World , p. 198.
26. For details on this point, see Henry Kissinger, On China (New York: Penguin,
2011), chapters 4 through 10.
27. Ross Terrill, The New Chinese Empire and What It Means for the United States
(New York: Basic Books, 2003), p. 134.
28. These were land reform, honest and efficient government, moderate taxation,
minimum interference in the private lives of the people, and freedom from
being despoiled by marauding armies. See John F. Malby, The Mandate of
Heaven: Record of a Civil War, China 1945–49 (London: University of Toronto
Press, 1968), p. 303.
29. Maurice Meisner, The Deng Xiaoping Era: An Inquiry into the Fate of Chinese
Socialism, 1975–1994. (New York: Hill and Wang, 1996), chapter 4. Also
see Edward Friedman, National Identity and Democratic Prospects in Socialist
China (Armonk, NY: M. E. Sharpe, 1995), pp. 285 – 86. Friedman notes
Notes ● 193
that the post-Mao policy was “meant to combine authoritarian Confucian

values and pragmatic economics.” He further states that Deng’s model was
Singapore’s Lee Kuan Yew, the “most renowned exponent of this conservative
Confucian evaluation.” Deng clearly made economic growth and the prosper-
ity of China a legitimator of his and the Communist Party’s rule.
30. Bruce Gilley, Tiger on the Brink: Jiang Zemin and China’s New Elite (Berkeley:
University of California Press, 1998), p. 72.
31. Agence France Press, July 22, 1996 cited in ibid., p. 170.
32. Tony Zurlo, China (Nations in Transition) (Sligo, Ireland: Greenhouse Press,
2002), p. 70.
33. See Edward Friedman, “Jiang Zemin’s Successors and China’s Growing Rich-
Poor Gap,” in Tun-jen Cheng, Jacques deLisle, and Deborah Brown (eds.),
China under Hu Jintao: Opportunities, Dangers and Dilemmas (Singapore:
World Scientific, 2006), p. 103.
34. Regarding the much-expanded input of intellectuals in the decision-mak-
ing process, see Bergsten et al., China’s Rise : Challenges and Opportunities
(Washington, DC: Peterson Institute, 2009), pp. 35–36. The financing of
Confucian institutes will be mentioned in later pages.
35. Economist, May 19, 2007, p. 48.
36. Orville Schell and John Delury, Wealth and Power: China’s Long March to the
Twenty-First Century (New York: Random House, 2013), p. 387.
37. William A. Callahan, China Dreams: 20 Visions of the Future (Oxford: Oxford
University Press, 2013), p. 21 and p. l46.
38. See C. P. Fitzgerald, China Views Its Place in the World (London: Oxford
University Press, 1969), pp. 7–10.
39. China’s level of economic development and its affluence will be discussed fur-
ther in the next chapter. It should be noted here, however, that the Westerners
that visited China in the 1500s were deeply impressed with China’s riches,
though this was forgotten in later centuries and the image in the West was
that China was poor. For a description of China when Matteo Ricci and oth-
ers visited, see Robert Elegant, The Center of the World: Communism and the
Mind of China (New York: Funk & Wagnalls, 1968), chapter 3. Another writer
notes that from the first century AD to the early nineteenth century, China’s
economy made up between 22 and 33 percent of the global gross domestic
product. See David Lampton, “Three Faces of China’s Power,” Foreign Affairs,
March/April 2007, pp. 115–27.
40. See Harry G. Gelber, The Dragon and the Foreign Devils: China and the World,
1100 B.C. to the Present (New York: Walker and Company, 2007), p. 34.
Gelber notes that often the tribute bearers would come to China with very
small gifts and leave with gold and other treasures. Also, see Warren I. Cohen,
East Asia at the Center: Four Thousand Years of Engagement with the World
(New York: Columbia University Press, 2000), p. 25.
41. Spence, The Search for Modern China, p. 118. One writer calls this “tribute
trade”—noting that it “bought” the allegiance of vassal states and helped con-
trol the flow of people and commodities across China’s far-flung frontiers. He
194 ● Notes
also notes that this trade, being of such import, was not taxed. See Giovanni
Arrighi, “China’s Market Economy in the Long Run,” in Ho-fung Hung (ed.),
China and the Transformation of Global Capitalism (Baltimore, MD: Johns
Hopkins University Press, 2009), p. 27.
42. See Kim, China, the United Nations, and World Order, pp. 25–26. The author
notes they also picked up China’s religious beliefs and language.
43. Fairbank (ed.), The Chinese World Order, pp. 10–11.
44. Milton W. Meyer, China: A Concise History (Lanham, MD: Rowman and
Littlefield, 1994), p. 243. The author also notes that for China it was a policy
of “pacification through the exchange of gifts.”
45. Gelber, The Dragon and the Foreign Devils, pp. 34–35.
46. Ross Terrill, The New Chinese Empire (New York: Basic Books, 2003), p. 63.
47. Ibid., p. 64.
48. One author describes the tribute system as a “nonaggressive form of imperi-
alism” and a “policy of pacification through the exchange of gifts.” Meyer,
China: A Concise History, p. 243.
49. See Steven W. Mosher, Hegemon: China’s Plan to Dominate Asia and the World
(San Francisco, CA: Encounter Books, 2000), p. 3.
50. Jacques, When China Rules the World , p. 274. China’s view of its conduct of
foreign relations was patriarchal. Chinese officials received representatives of
“barbarian” rulers who came to the Middle Kingdom to learn and to trade.
The head of the “Celestial Empire” (as China referred to itself), the emperor,
enlisted them into “the realm of the civilized” as China’s tributaries. The
emperor’s minions taught them how to kowtow and instructed them in other
rules and protocol in conducting relations with China. China was clearly the
superior; the countries that paid tribute were the inferiors. See Ssu-yu Teng
and John Fairbank, China’s Response to the West: A Documentary Survey 1839 –
1923 (New York: Atheneum, 1973), pp. 18–19.
51. In the case of Tibet and some other areas, tribute-bearing missions would
bring half of a bronze fish that fit the other half kept in China.
52. Mark Mancall, China at the Center: 300 Years of Foreign Policy (New York:
The Free Press, 1984), p. 2. Of course, the term gong is used to translate the
word tribute but the author would say that this does not adequately convey the
broad and deep meaning of the concept.
53. Joseph R. Levenson, “The Inception and Displacement of Confucianism:
From History as the Base of Culture to Historicism and Shifting Sands,”
Diogenes, Summer 1963, pp. 65–80, cited in Mancall, China at the Center,
p. 21.
54. Karl Polany, Conrad Arensberet, and Harry Pearson (eds.), Trade and Market
in the Early Empires: Economics in History and Theory (Glencoe, IL: Free
Press, 1957), cited in Mancall. China at the Center, p. 16. This, of course,
created difficulties for China in its relations with Asian neighbors. See also
Harold C. Hinton, “China as an Asian Power,” in Thomas W. Robinson and
David Shambaugh (eds.), Chinese Foreign Policy: Theory and Practice (Oxford:
Claredon Press, 1994), pp. 352–53.
Notes ● 195
55. Mancall, China at the Center, p. 15.

56. John Fairbank, “On the Ch’ing Tributary System,” Harvard Journal of Asiatic
Studies, June 1941.
57. Fox Butterfield, China: Alone in the Bitter Sea (New York: Times Books, 1982),
p. 56.
58. Andrew J. Nathan and Robert S. Ross, The Great Wall and the Empty Fortress:
China’s Search for Security (New York: W. W. Norton, 1997), p. 22.
59. The details of this can be found in Volume 2, Chapter 2, in the section on
Nepal.
60. Terrill, The New Chinese Empire, p. 63.
61. It is worth nothing that similar ideals have been perpetuated by global powers
in modern times including the US promotion of itself as the font of democ-
racy and liberty while contending that its diplomacy is always based on these
ideals.
62. John W. Garver, Foreign Relations of the People’s Republic of China (Englewood
Cliffs, NJ: Prentice Hall, 1993), p. 13.
63. Dana R. Dillan, The China Challenge (Lanham, MD: Rowman & Littlefield,
2007), p. 5.
64. Clearly the tribute system was not abandoned at times in the past when
China was weak. One scholar notes that during the Sung Dynasty, a “lesser
empire,” the rhetoric of tribute was “immensely comforting and reassur-
ing.” See Wang Gungwu, “The Rhetoric of a Lesser Empire: Early Sung
Relations with Its Neighbors,” in Morris Rossabi (ed.), China among Equals:
The Middle Kingdom and Its Neighbors, 10th –14th Centuries (Berkeley:
University of California Press, 1983). Another writer states that tribute was
the “only framework of foreign relations known to traditional China.” See
Joseph Camilleri, Chinese Foreign Policy: The Maoist Era and Its Aftermath
(Seattle: University of Washington Press, 1980), p. 5. Two other authors note:
“Because traditional foreign policy was Sinocentric, assimilative, normative,
ideological, personalistic and hierarchical, nineteenth-century China had
trouble adapting to the European-organized multistate system which was
egalitarian, nonideological and contractual.” See Andrew J. Nathan and
Andrew Scobell, China’s Search for Security, (New York: Columbia University
Press, 2012), p. 26.
65. Terrill, The New Chinese Empire, p. 267.
66. Mosher, Hegemon, p. 46.
67. See Dillan, The China Challenge, p. 7.
68. Eberhard, History of China, p. 352.
69. For further details, see John F. Copper, Playing with Fire: The Looming War
with China over Taiwan (Westport, CT: Praeger, 2006), pp. 110–14.
70. Ibid., p. 113.
71. Western critics pointed out that because of the $800 billion in US govern-
ment debt that China held, President Obama lavishly praised his hosts when
he visited China and did not criticize China for human rights abuses, as had
other US presidents. Some described the president as a supplicant; others
196 ● Notes
said his visit was humiliating. See, for example, “Leaders: The Pacific (and
Pussyfooting) President: Barack Obama in Asia,” Economist, November 21,
2009, p. 16.
72. “Bridge over Troubled Water,” Economist, November 15, 2014, p. 15.
73. Nathan and Scobell, China’s Search for Security, p. 27.
74. See Jacques, When China Rules the World , pp. 191–92.
75. Ibid. It is interesting to note in this connection that one author has divided the
world into two parts: one that emphasizes rule-based governance that assumes
democracy (the United States, Europe, Africa, and Latin America) and the
other, Asia, which focuses on economic growth and prosperity. See Michael
Wesley, “The New Bipolarity,” American Interest, January/February 2013,
pp. 34–40.
76. See Callahan, China Dreams, p. 55.
77. See Steve Chan, Looking for Balance: China, the United States and Power
Balancing in East Asia (Stanford, CA: Stanford University Press, 2012).
78. Jacques, When China Rules the World , p. 375.
79. Ibid., p. 420. Another writer calls China’s tribute system a kind of soft power,
suggesting it was not too different from China’s use of soft power today, which
it is obviously working successfully. See Sheng Ding, The Dragon’s Hidden
Wings: How China Rises with Its Soft Power (Lanham, MD: Lexington Books,
2008), p. 153.
80. This is one of the main themes of Stefan Halper, The Beijing Consensus: How
China’s Authoritarian Model will Dominate the Twenty-First Century (New
York: Basic Books, 2010).
81. Mao died in 1976, but his view of the world, like Mao’s other ideas, lasted
until late 1979 when Deng Xiaoping assumed the role of China’s top leader.
82. China’s foreign policy decision making, of course, has many origins. Some
argue that China’s domestic politics affect foreign policy more than interna-
tional conditions or events. See, for example, David Bachman, “Domestic
Sources of Chinese Foreign Policy,” in Samuel S. Kim (ed.), China and
the World (Boulder, CO: Westview Press, 1989) and Kenneth Lieberthal,
“Domestic Politics and Foreign Policy,” in Harry Harding (ed.), China’s
Foreign Relations in the 1980s (New Haven, CT: Yale University Press, 1984).
Others argue the reverse. In terms of how Chinese decision makers look at
China’s external environment, Mao’s view of the world constitutes the prism
through which they look and formulate their views. Since theory plays such
an important role in the Communist way of thinking and because contending
theories to “explain reality” in the world did not exist, Mao’s views are vitally
important. See, for example, Wang Jixi, “International Relations Theory and
the Study of Chinese Foreign Policy: A Chinese Perspective,” in Robinson and
Shambaugh (eds.), Chinese Foreign Policy, pp. 381–487. One writer notes that
China’s foreign policy is more “conceived as part of a world order, which it (and
in principle all other nations) must fit. See Lowell Dittmer, “On China’s Rise,”
in Brantley Womack (ed.), China’s Rise in Historical Perspective (Lanham, MD:
Rowman and Littlefield, 2010), p. 40.
Notes ● 197
83. Benjamin I. Schwartz, Communism in China: Ideology in Flux (Cambridge,

MA: Harvard University Press, 1968), chapter 10.
84. Ibid.
85. See Kissinger, On China, chapters 4 through 11.
86. Arthur A. Cohen, The Communism of Mao Tse-tung (Chicago, IL: University
of Chicago Press, 1964), chapter 1.
87. For Chinese leaders, Marxism-Leninism provided the perceptional prism
through which they viewed the world and, which they believed, explained
reality. However, a second or additional cluster of ideas also influenced them.
As ideology declined in importance it still played a major role in policy for-
mation. See Steven I. Levine, “Perception and Ideology in Chinese Foreign
Policy,” in Robinson and Shambaugh (eds.), Chinese Foreign Policy, p. 30. The
author cites Benjamin Schwartz regarding the latter idea.
88. For original writings that put forth these views, see Dan N. Jacobs and Hans
H. Baerwald (eds.), Chinese Communism: Selected Documents (New York:
Harper Torchbooks, 1963). Reading the most read of Mao’s and other Chinese
Communist leaders works one gets the impression of a hostile and inflexible
China. However, considering Mao’s writings on the united front, one might
see China’s worldview and thus its foreign policy as more flexible.
89. It is worth noting here that Mao’s formulated these views in the 1930s
in writings such as “Dialectical Materialism,” “On Practice,” and “On
Contradictions.” His ideas were well developed and, one might say, not easy to
change in the sense Mao might abandon communism and seek good relations
with the United States. See Melvin Gurtov and Byong-Moo Hwang, China
under Threat: The Politics of Strategy and Diplomacy (Baltimore, MD: Johns
Hopkins University Press, 1980), p. 5.
90. Barbara Tuchman wrote an interesting article on what if Mao had visited the
United States at this time, suggesting things might have been very different.
Most scholars, however, do not feel that a Sino-US rapprochement was pos-
sible at this time. For a discussion of the issue, see Garver, Foreign Relations of
the Peoples’ Republic of China , chapter 2.
91. Mao needed an enemy to justify his style of governing. The United States
fit this role as it had supported Chiang Kai-shek and opposed Mao’s rule.
Moreover, the United States was antiCommunist, in fact, increasingly so, and
hostile to Mao’s regime. See Wang Shuzhong, “The Post-war International
System,” in Harish Kapur (ed.), As China Sees the World: Perceptions of Chinese
Scholars (New York: St. Martin’s Press, 1987), pp. 14–15. However, Mao’s per-
ception of a bifurcated world was not so simplistic. In fact, many of the specif-
ics of Mao’s worldview helped define the nature and the objectives of China’s
foreign policy and its foreign aid, which are not too different from China’s his-
torical view. Mao took up Lenin’s view that imperialism had shifted the focus
of the worldwide struggle to the underdeveloped countries that were exploited
by Western colonial countries. They were, in Lenin’s view, and Mao’s, the core
of the revolution. Early on Mao spoke of forming an international united front
against imperialism. He advocated and wrote of “peoples war,” self-reliance,
198 ● Notes
the “paper tiger” theory (that the West was in some ways weak and vulnerable),
and anti-imperialism (that the Western capitalist countries were exploiters
and, in fact, had to maintain this kind of relationship with the Third World
to survive). For a discussion of these points, which appeared in China’s official
documents later, see Winberg Chai, The Foreign Policy of the People’s Republic
of China (New York: G. P. Putnam’s Sons, 1972), p. 30.
92. No doubt, Mao was influenced also by nationalistic sentiment and sought to
restore China’s place in the world. But he also viewed the world in Communist
terms, as a struggle between socialism and capitalism. In fact, he melded the
two views. See A. Doak Barnett, Communist China and Asia: A Challenge to
American Policy (New York: Vintage Books, 1960), pp. 65–79.
93. There is, of course, considerable debate about whether Mao viewed the United
States as China’s enemy or saw the world in such starkly black-and-white
terms. But Mao clearly viewed his situation and the world outside through an
ideological prism and in 1949 at least did not see that he had a choice in choos-
ing sides. For details, see John Gittings, The World and China: 1922 –1972 :
The Men and Ideas That Shaped China’s Foreign Policy (New York: Harper and
Row, 1974), chapters 7, 8, and 9. Chinese academics have explained that while
Roosevelt hoped for cooperation with the Soviet Union based on the Yalta
Agreement and through the United Nations following World War II, with
Harry Truman’s accession to power, differences over Europe became acute
and Truman adopted a policy of “rolling back” Soviet influence. This and
American support of Chiang Kai-shek during the Chinese Civil War meant
that when Mao came to power in 1949 there was no room for flexibility. Mao
and Chinese leaders were also well aware that the pre–WWII global balance of
power system, which had been run by Europe, was destroyed. For details, see
Wang Suizhong, “The Post-War International System,” in Harish Kapur (ed.),
As China Sees the World , pp. 13–14.
94. See Dennis and Ching Ping Bloodsworth, The Chinese Machiavelli: 3000
Years of Chinese Statecraft (New York: Farrar, Straus and Giroux, 1976), p. 8.
95. Yong Deng, China’s Struggle for Status: The Realignment of International
Relations (Cambridge: Cambridge University Press, 2008), p. 5.
96. There is another way of explaining why this happened, namely that Chinese
Communist ideology weakened over time or as the regime had to govern and
be more pragmatic. See Schwartz, Communism and China, p. 46.
97. This shift in view no doubt stemmed from doubts about China’s relation-
ship with the Soviet Union. Mao and Chinese leaders were disappointed with
Moscow’s help, and the alliance was regarded by China as worthless in the
1960s. Some, of course, would say that given China’s history as the Middle
Kingdom and its superiority complex, it could not play second fiddle to the
Soviet Union. China’s leader also found that alienating Third World countries
with its narrow view of the world was not productive. There were a host of
other reasons for Mao adopting a “variation” on bipolarity.
98. See Gittings, The World and China, 1922 –1972, chapter 10. It is worth men-
tioning that Mao had spoken much earlier of what sounded like a “third bloc”
Notes ● 199
or “intermediate zone” to describe areas of the world, including China, that

would create serious problems for US foreign policy. In 1947, this doctrine
was elaborated upon and published by Lu Ting-yi, probably on Mao’s behalf.
See p. 143.
99. For details on China’s change of mind regarding the Soviet Union early on, see
Donald S. Zagoria, The Sino-Soviet Conflict, 1956-61 (New York: Athenuem,
1964).
100. See Gittings, The World and China 1922 –1972, chapter 10.
101. China’s emphasis on principles may be seen as linked to China’s historical
emphasis on virtue and is not Marxist. See Dittmer, “On China’s Rise,” in
Womack (ed.), China’s Rise in Historical Perspective, p. 40.
102. For details on this theme, see Pobzeb Vang, Five Principles of Chinese Foreign
Policy (Bloomington, IN: Author House, 2008), chapter 1. The other prin-
ciples were mutual non-aggression, non-interference in each other’s internal
affairs, and equality and mutual benefit. These tenets were later embedded
into the document The Eight Principles on China’s Foreign Aid—guidelines
China followed and is still following in giving assistance.
103. These principles contradict Western principles of aid giving, which demand
economic reforms and improved human rights conditions. This conflict will
be discussed at length in following chapters.
104. The French demographer Alfred Sauvy coined the term in 1952. It did not
come into common usage until the Bandung Conference. See Deborah
Brautigam, The Dragon’s Gift: The Real Story of China in Africa (London:
105. See Garver, Foreign Relations of the People’s Republic of China, p. 118. Garver
suggests the rigid two-camp view ended in 1953. Mao did not actually use
the term intermediate zone until 1957, though he said he had formulated it in
1946. See Kim, China, the United Nations, and World Order, p. 74.
106. Garver, Foreign Relations of the People’s Republic of China, p. 119.
107. Some writers suggest that what happened in the mid-1950s and Mao’s refer-
ence to an intermediate zone were not good evidence of a shift in China’s
worldview since Beijing lacked the means and the drive to create a “revo-
lutionary united front.” See J. D. Armstrong, Revolutionary Diplomacy:
Chinese Foreign Policy and the United Front Doctrine (Berkeley: University
of California Press, 1977), pp. 70–73. It may be that Mao himself was not
sure or was formulating theory from the advantage of retrospect several
years later. One author suggests, “the Chinese like to let their theories grow
slowly and naturally, like plants responding to the environment.” See Franz
Schurmann, The Logic of World Politics (New York: Pantheon Books, 1974),
p. 355.
108. Henry Kissinger, World Order (New York: Penguin, 2014), p. 225.
109. For the use of the term “ethical diplomacy,” see John Crammer-Byng, “The
Chinese View Their Place in the World: An Historical Perspective,” China
Quarterly, January-March 1973, pp. 67–79. Also see Gurtov and Hwang,
China under Threat, p. 15.
200 ● Notes
110. Lenin’s thesis is to be found in his book Imperialism: The Highest Stage of
Capitalism. See Camilleri, Chinese Foreign Policy, p. 13 for a discussion of
Mao’s rural base ideas applied to foreign policy.
111. See Donald W. Treadgold, “Alternative Western Views of the Sino-Soviet
Conflict,” in Herbert J. Ellison (ed.), The Sino-Soviet Conflict: A Global
Perspective (Seattle: University of Washington Press, 1982), p. 328.
112. For example, see Arthur Huck, The Security of China: Chinese Approaches to
Problems of War and Strategy (New York: Columbia University Press, 1970),
p. 12. Interestingly, China at this time viewed the United States as having
adopted what looked like a tribute system in East Asia. The US market was
being linked to the region, it granted legitimacy to nations there (or not) and
gave “gifts” in the form of economic aid in the conduct of its diplomacy. See
Giovanni Arrighi, “China’s Market Economy in the Long Run,” in Ho-fung
Hung (ed.), China and the Transformation of Global Capitalism (Baltimore,
MD: Johns Hopkins University Press, 2009), p. 32.
113. See Barnett, Communist China and Asia, chapter 5.
114. Mao made these claims in various speeches at the time, including one before
the Supreme Soviet in the Soviet Union. See Jacobs and Baerwald (eds.),
Chinese Communism, pp. 154–55.
115. Kim, China, the United Nations, and World Order, p. 77.
116. Garver, Foreign Relations of the People’s Republic of China, pp. 136–37.
117. To put this in perspective, see Barnett, Communist China and Asia,
pp. 375–76.
118. See Wang Shusheng, “The Post-War International System,” in Harish Kapur
(ed.), As China Sees the World , p. 15. As a consequence of these events (collec-
tively), for Mao, the socialist (Communist) camp or bloc ceased to exist.
119. Alan Lawrance, China’s Foreign Relations since 1949 (London: Routledge,
1975), p. 151. The author cites articles in People’s Daily, January 21, 1964,
and Peking Review, January 24, 1964. Mao perceived that the countries in the
“second intermediate zone” were former world powers that were not bullied by
the superpowers and did not like their status as second-ranking powers.
120. Kim, China, the United Nations, and World Order, p. 78.
121. See Chih-yu Shih, China’s Just World: The Morality of Chinese Foreign Policy
(Boulder, CO: Lynne Rienner, 1993), p. 85.
122. Ibid. The author also notes that President Lyndon Johnson spoke of “the deep-
ening shadow of Communist China” as justification for escalating the war in
Vietnam at that time.
123. Gittings, The World and China 1922 –1972, p. 261.
124. “Long Live the Victory of People’s War,” Peking Review, September 3, 1965.
125. See Samuel S. Kim, “Mao Zedong and China’s Changing World View,” in
James C. Hsiung and Samuel S. Kim (eds.), China in the Global Community
(New York: Praeger 1980), p. 32. The author notes that Mao at this time said
that he “had not reached an opinion” on what constituted the principal con-
tradiction in the world, which is what his worldview had been based on up to
that juncture.
Notes ● 201
126. Lin’s worldview was at odds with those of other members of the top leader-
ship, but it was probably more a power struggle that resulted in his demise. See
Suzanne Ogden, China’s Unresolved Issues: Politics, Development and Culture
(Englewood Cliffs, NJ: Prentice-Hall, 1989), pp. 57–60.
127. See Garver, Foreign Relations of the People’s Republic of China, p. 89.
128. See Kim, “Mao Zedong and China’s Changing World View,” p. 33.
129. Gittings, The World and China 1922 –1872, p. 264.
130. “Chairman of Delegation of the People’s Republic of China Teng Hsiao-ping’s
Speech at the Special Session of the United Nations General Assembly,” Peking
Review, April 12, 1974, pp. i–v.
131. See King Chen (ed.), China and the Three Worlds: A Foreign Policy Reader
(White Plains, NY: M. E. Sharpe, 1979) for details. According to the editor’s
interpretation of Mao’s speeches, Third World leaders and scholars intended
his main thesis about the three worlds for mass consumption. Also see “Third
World Awakening and Growing Strong,” Peking Review, March 22, 1974.
132. See Robert G. Sutter, U.S.-Chinese Relations: Perilous Past, Pragmatic Present
(Lanham, MD: Rowman Littlefield, 2010), chapter 4.
133. For details, see Frederick Teiwes and Warren Sun, The End of the Maoist Era:
Chinese Politics during the Twilight of the Cultural Revolution, 1972-1976
(Armonk, NY: M. E. Sharpe, 2008), pp. 492–96.
134. “Chairman Mao’s Theory of the Differentiation of the Three Worlds Is a
Major Contribution to Marxism-Leninism,” Peking Review, November 4,
1977, pp. 10–41.
135. Deng did not take Hua’s positions as head of the party or the government
from Hua. But Deng’s agenda was approved by the Chinese Communist Party
Central Committee, indicating Deng was in control. Hua lost his positions
later to Deng’s protégés. For details on how Deng wrested political power
from Hua, see David Shambaugh, “Deng Xiaoping: The Politician,” in David
Shambaugh (ed.), Deng Xiaoping: Portrait of a Chinese Statesman (London:
Oxford University Press, 1995), pp. 74–81.
136. Mao was severely criticized after his death for various mistakes and for killing
and persecuting Chinese citizens. His Great Cultural Revolution was called
a complete mistake. See “Resolution on Certain Questions in the History
of Our Party since the Founding of the People’s Republic of China,” Beijing
Review, July 6, 1981. For an analysis of this phenomenon, see Michael Yahuda,
Toward the End of Isolationism: China’s Foreign Policy after Mao (New York: St.
Martins, 1983), p. x.
137. In 1984, Deng gave a speech and charged that China’s poverty and ignorance
were the result the isolationism followed by China for 300 years from the mid-
dle of the Ming Dynasty to the Opium War. Deng Xiaoping, Fundamental
Issues, p. 79, cited in Yahuda, “Deng Xiaoping: the Statesman,” in Shambaugh
(ed.), Deng Xiaoping: Portrait of a Chinese Statesman (Oxford, UK: Clarendon
Press, 1995), pp. 149–50.
138. It is worth noting here that the basis for and ideas in Mao’s “three worlds”
theory had been put forward by Deng in 1974 and may have been his. See
202 ● Notes
“Chairman of Chinese Delegation Teng Xiao-ping’s Speech at Special Session

of the U.N. General Assembly,” Peking Review, April 19, 1974, pp. 6–11. In
this speech, Deng also stated that the socialist camp “is no longer in exis-
tence.” In other words, the Communist view of the world that had had been
accepted since Lenin was now out of date. See Yahuda, China’s Role in World
Affairs, pp. 240–41.
139. See Allen S. Whiting, “Foreign Policy of China,” in Roy C. Macridis (ed.),
Foreign Policy in World Politics (Englewood Cliffs, NJ: Prentice-Hall, 1985),
p. 262.
140. See Ren Jiantao, “Ideology: Its Role in Reform and Opening,” in Joseph
Fewsmith (ed.), China Today, China Tomorrow: Domestic Politics, Economy,
and Society (Lanham, MD: Rowman & Littlefield, 2010), p. 182.
141. Ibid., p. 183. Thus some have used the term “market Leninism” (which seems
a contradiction) to explain Deng’s economics.
142. One might argue that internationalism has been a main theme in Communist
parlance. But globalism in China (or in Chinese) means something else. It has
an economic framework. It reminds many of the Internet.
143. China’s frequent reaction when its human rights record was criticized was to
state that this was a domestic issue that China as a sovereign nation-state had
jurisdiction over and it was not the right of other nations or organizations to
make an issue of it.
144. See Chan, Looking for Balance. Chan argues that China, like other countries,
does not see the world in power-balancing terms and is motivated by economic
growth opportunities.
145. These concepts were practiced in China prior to the Ch’in Dynasty two cen-
turies before Christ. Chinese know them from history, but have long discarded
them in favor of China’s tribute diplomacy.
146. See Suisheng Zhao, “Chinese Nationalism and Pragmatic Foreign Policy
Behavior,” in Suisheng Zhao (ed.), Chinese Foreign Policy: Pragmatism and
Strategic Behavior (Armonk, NY: M. E. Sharpe, 2005), p. 71.
147. See Shambaugh, China Goes Global, pp. 56–58 for a discussion of various
kinds of nationalism that fit China.
148. Mao’s three worlds view was not discarded, some authors say because it was
not Marxist, since it did not focus on class or socialist criteria, but instead was
founded on state behavior in international relations. See Yahuda, Toward the
End of Isolationism, p. 176. In any event, by the mid-1980s it was hardly even
mentioned in discussions about foreign policy in China. See Harry Harding,
China’s Second Revolution: Reform after Mao (Washington, DC: Brookings
Institution, 1987), p. 243.
149. It would seem oversimplistic to say that China had a worldview under Mao
and lacked one under Deng and after. It may be best to say that probably
China’s worldview was talked about too much during the Mao era and was
not applied as much as it appeared, and under Deng it was the opposite. It
may be that China lacked what may be called a “grand strategy”—defined as a
logic or overarching vision about how to combine a large range of capabilities
Notes ● 203
and link them with military, economic, and military strategies, to seek inter-
national goals. See Avery Goldstein, Rising to the Challenge: China’s Grand
Strategy and International Security (Stanford, CA: Stanford University Press,
2005), p. 19. The author contends that China did not attain a grand strategy
until the mid-1990s.
150. For details, see Lucian W. Pye, “An Introductory Profile: Deng Xiaoping and
China’s Political Culture,” in Shambaugh (ed.), Deng Xiaoping, pp. 32–35.
151. One might argue that China’s foreign policy became more pragmatic after the
Sino-Soviet border clash in 1969, which prompted China to seek a new rela-
tionship with the United States and greater importance and a new look being
given to national security. Later, in 1985 when Deng was clearly in power and
his pragmatic ideas dominant in China, People’s Daily published an article say-
ing that it would be unrealistic to think the writings of Marx and Lenin, writ-
ten in the nineteenth century, could help solve today’s problems. The paper
then retracted this. Deng also often cited Marx, Lenin, and Mao and promised
to build socialism. His successors, Jiang Zemin and Hu Jintao, did likewise.
152. This was seen as critical because the revolutionary state depends on ideol-
ogy. Thus Deng’s China may be called a postrevolutionary era. See Brantly
Womack, “The Party and the People: Revolutionary and Postrevolutionary
Politics in China and Vietnam,” World Politics, July 1987, pp. 479–507.
153. See Denny Roy, China’s Foreign Relations (Lanham, MD: Rowman and
Littlefield, 1998), pp. 39–41.
154. Wang, “International Relations Theory and the Study of Chinese Foreign
Policy,” in Robinson and Shambaugh (eds.), Chinese Foreign Policy, p. 486.
155. Deng’s perception of the world, it is said, was dominated by the need to resist
Soviet expansionism (and the need to improve relations with the United States)
to do so. Good relations with the United States were also a sin qua non for
Deng’s economic reforms to work. To explain this in theoretical terms Deng
simply underscored the part of Mao’s three-worlds view and its accompanying
united front theory that emphasized the “good view” of the United States.
156. Deng, it is said, lacked the Sino-centric view of the world Mao espoused. Thus
he was more willing to accept the Western view of international relations.
See Richard Evans, Deng Xiaoping and the Making of Modern China (New
York: Viking, 1993), p. 23. The author attributes this to Deng’s foreign experi-
ence, which Mao lacked. Also see Levine, “Perception and Ideology in Chinese
Foreign Policy,” p. 41. Levine notes that China abandoned the role the Soviet
Union had played in the 1920s and 30s in favor of being a country more in
favor of status quo and in dealing with established political parties and govern-
ments in other countries.
157. See Quansheng Zhao, Interpreting Chinese Foreign Policy (Hong Kong: Oxford
University Press, 1996), chapter 3.
158. The idea that economic development would make China a big player in world
politics was put forward by Mao. Mao never realized it; yet it could be said
to be Mao’s thinking. On this point, see Gurtov and Hwang, China under
Threat, p. 19.
204 ● Notes
159. This happened in 1985. See Ren Xiao, “The International Relations
Theoretical Discourses in China,” Asia Paper #09 (Sigur Center for Asian
Studies), pp. 2–3. Hence, one of the most important of Deng’s actions was
refuting Mao’s view that war was inevitable.
160. See Kissinger, On China, p. 357. This, Kissinger notes, was part of China’s
traditional view of the world.
161. Ibid.
162. See Barry Naughton, “Deng Xiaoping: The Economist,” in Shambaugh (ed.),
Deng Xiaoping, pp. 103–04.
163. Deng Xiaoping: Speeches and Writings (Oxford: Permagon Press, 1987), p. 97
cited in Wang, “International Relations Theory and the Study of Chinese
Foreign Policy,” in Robinson and Shambaugh (eds.), Chinese Foreign Policy,
p. 487.
164. It has been argued that the United States needed China at this time for eco-
nomic reasons. The return on investments had fallen, Europe and Japan no
longer served to stimulate the U.S. economy; the Vietnam War did (but at
a tremendous cost politically and in terms of the balance of trade). Thus,
Washington was ready (and willing) to accommodate China’s entrance into the
global economy. For details, see Greg O’Leary, “China’s Foreign Relations: The
Reintegration of China into the World Economy,” in Bill Brugger (ed.), China
since the Gang of Four (New York: St. Martin’s Press, 1980), pp. 232–41.
165. Kissinger called Deng’s strategy “offensive deterrence.” See On China,
pp. 363–64. He argues that President Carter supported Deng in his invasion
of Vietnam in early 1979 based on the fact he provided China with intelligence
(from US spy satellites) on Soviet troop movements. Deng did not expect for-
mal support or any kind of alliance from the United States but generally got
what he wanted from Washington.
166. See Margaret M. Pearson, “China’s Integration into the International Trade
and Investment Regime,” in Elizabeth Economy and Michel Oksenberg (eds.),
China Joins the World: Progress and Prospects (New York: Council on Foreign
Relations, 1999), p. 161. Also see Harding, China’s Second Revolution, p. 244.
The United States granting most-favored-nation status to China in 1980 was
probably the most important agreement Deng attained. It reduced the tariffs
on a number of Chinese products from 50 to 8 percent, including many that
China exported to the United States and hoped to export more.
167. This was formalized at the Twelfth Party Congress in 1982. It was reaffirmed
at the Thirteenth Congress in 1987. See James C. Hsiung, “Peking’s Foreign
Policy after the Thirteenth Party Congress: New Strategic Environment
and Domestic Linkages,” in David S. Chou (ed.), Peking’s Foreign Policy in
the 1980s (Taipei: Institute of International Relations, National Chengchi
University, 1989), p. 57.
168. Kissinger, On China, p. 487. Also see Sutter, Chinese Foreign Policy, p. 23.
It is worth noting here that President Nixon had mentioned a five-power
multipolar world when he visited China in 1972. See Time, January 3, 1972,
cited in Choudhury, China in World Affairs, p. 77. At this time China was
Notes ● 205
concentrating on relations with the Soviet Union and the United States and
China seemed to be playing a “fulcrum” or balancer role. This came up again
in 1982, when Deng calculated that China had leaned too far into the US
camp at which time he announced an “independent foreign policy.” By 1982
Deng faced a serious backlash at home due to the tectonic policy changes he
had made. Deng was criticized for becoming too close to the United States,
which, his opponents said, endangered China’s flexibility in foreign affairs,
its hope of getting Taiwan back, and much more. So Deng announced what
he termed a “new foreign policy direction,” or at least a major shift in thrust
toward dealing with foreign countries, especially the United States and the
Soviet Union. It was called China’s “independent foreign policy.” It was also
called a “neutral foreign policy.” The gist of the new policy was that China
would no longer align with the United States against the Soviet Union. In
strategic or theoretical terms it put China in the “fulcrum” position in the
US-Soviet Union-China triangle. On September 1, 1982, at the Chinese
Communist Party’s National Party Congress, General Secretary Hu Yaobang
included a chapter in his report on China’s independent foreign policy.
Mentioned were the Five Principles of Peaceful Coexistence and an effort by
China to improve relations with all countries, including socialist ones. See Hu
Yaobang, “Create a New Situation in All Fields of Socialist Modernization,”
Beijing Review, September 13, 1982, pp. 29–33. For details on the significance
of this policy shift in ensuing years, see various chapters in James C. Hsiung
(ed.), Beyond China’s Independent Foreign Policy: Challenges for the U.S. and Its
Allies (New York: Praeger, 1985). This policy indeed helped promote better
relations with the Soviet Union. Tension with Moscow had not been produc-
tive for China. Finally, it shifted China’s emphasis in carrying on external
relations separate from strategic issues and toward economic issues. It made
China’s view of the world more global. Deng saw the need for a more indepen-
dent view of the world and from 1982 on viewed the world as changing due
to the end of the Cold War. As it turned out this “shift” was mostly nominal
and did not hurt China’s relations with the United States, as Washington did
not consider Deng’s policy announcement as anti-American or a major move
away from its current policy. Alternatively, the United States felt China’s shift
did not constitute a threat in view of the Soviet Union’s now more friendly and
less threatening mien toward the United States. See Hongqian Zhu, “China
and the Triangular Relationship,” in Yufan Hao and Guocang Huan (eds.),
The Chinese View of the World (New York: Pantheon Books, 1989), p. 42. The
author states that a change in the Soviet Union’s behavior toward China was
largely responsible. Another writer states that the reasons were on the one
hand President Reagan’s military buildup “held in check” Soviet expansion-
ism and Reagan’s Taiwan policy on the other that troubled China. See Robert
G. Sutter, Shaping China’s Future in World Affairs: The Role of the United States
(Boulder, CO: Westview Press, 1996), p. 31.
169. Kissinger, On China, p. 391.
170. Ibid., p. 392.
206 ● Notes
171. Wang, “International Relations Theory and the Study of Chinese Foreign
Policy,” p. 486.
172. Tang Shiping, “From Offensive to Defensive Realism: A Social Evolutionary
Interpretation of China’s Security Strategy,” in Robert S. Ross and Zhu Feng
(eds.), China’s Ascent: Power, Security, and the Future of International Politics
(Ithaca, NY: Cornell University Press, 2008), p. 154.
173. Thomas J. Christensen, “Chinese Realpolitik,” Foreign Affairs, September/
October 1996 reprinted in Guoli Liu (ed.), Chinese Foreign Policy in Transition
(New York: Aldine De Gruyter, 2004), p. 59.
174. Deng, China’s Struggle for Status, pp. 44–45.
175. Schwartz, Communism in China, pp. 233–34.
176. See Sutter, Chinese Foreign Relations, p. 23 and p. 66.
177. Ibid., p. 5.
178. One can certainly not argue that Deng did not have the prestige or the author-
ity to coin a new worldview. See Michael Yahuda, “Deng Xiaoping: The
Statesman,” in Shambaugh (ed.), Deng Xiaoping, p. 143. One could also make
this judgment from the many foreign policy initiatives Deng made soon after
coming to power. See Greg O’Leary, “China’s Foreign Relations,” pp. 231–32.
180. Ezra F. Vogel, Deng Xiaoping and the Transformation of China (Cambridge,
MA: Belknap Press, 2011), p. 714.
181. For details on Jiang’s life and the Jiang Zemin era, see Gilley, Tiger on the
Brink and Willy Wo-Lap Lam, The Era of Jiang Zemin (Singapore: Prentice
Hall, 1999).
182. See Lam, The Era of Jiang Zemin, chapter 1.
183. According to one writer, Jiang consolidated his position and became China’s
unquestioned top ruler during the period 1993–96. See Gilley, Tiger at the
Brink, p. 334.
184. Western commentators have noticed that he seemed oblivious to the so-called
vision thing. See Lam, The Era of Jiang Zemin, p. 265. Jiang did, however,
on one occasion mention seeing the world as tripolar in structure—with the
United States, the European Union, and Asia (led by China) as constituting
the three poles. See p. 320. Kissinger writes that Jiang “made no claim to
philosophical preeminence” and was the “least Middle Kingdom-type” that
he had encountered among Chinese leaders. See Kissinger, On China, p. 449.
185. Jiang yielded to and often accepted the views of Foreign Minister Qian Qichen
and Premier Zhu Rongji. See Kissinger, On China, p. 450. Before Deng died in
1997 Jiang was on his own. Deng’s failing health had resulted in little being said
about China’s worldview at a time when its foreign policy and foreign aid were
seeing vast changes. Thus Deng’s final years were characterized by compromise
and efforts to build consensus. See Goldstein, Rising to the Challenge, p. 23.
186. Lam, The Era of Jiang Zemin, chapter 6.
187. Gilley, Tiger on the Brink, p. 268 and p. 270.
188. Ibid., p. 267–74.
Notes ● 207
189. Ibid., p. 284.

190. See Joseph Y. S. Cheng and Zhang Wankun, “Patterns and Dynamics of
China’s International Strategic Behavior,” in Zhao (ed.), Chinese Foreign
Policy, pp. 180–82.
191. Robert Lawrence Kuhn, The Man Who Changed China: The Life and Legacy of
Jiang Zemin (New York: Crown Publishers, 2004, p. 360.
192. Sutter, Chinese Foreign Policy, p. 66. Kissinger wrote that Chinese leaders
acknowledged the unipolar nature of the system, but expected it to evolve
toward a multipolar one, which would not be to such an advantage to the
United States, in the future. See Kissinger, On China, pp. 463–64.
193. John R. Faust and Judith F. Kornberg, China in World Politics (Boulder: CO:
Lynne Rienner, 1995), p. 208.
194. Lam, The Era of Jiang Zemin, pp. 169–70.
195. Ibid., p. 171.
196. Some observers saw the emphasis on virtue and benevolence as suggest-
ing a return of China’s traditional way of looking at the world. See Lowell
Dittmer, “On China’s Rise,” in Womack (ed.), China’s Rise in Historical
Perspective, p. 40.
197. See Gerald Chan, Chinese Perspectives on International Relations: A Framework
for Analysis (New York: St. Martin’s Press 1999), p. 146.
198. Clinton’s national security advisor, Anthony Lake, called China a “reactionary
backlash state.” China responded in kind. This standoff may have precipitated
two crises over Taiwan and a very negative reaction from China in 1999 when
the United States bombed the Chinese Embassy in Belgrade. Jiang said at
the time: “The great People’s Republic of China will never be bullied, the
great Chinese nation will never be humiliated, and the great Chinese people
will never be conquered.” See Warren Christopher, Chances of a Lifetime (New
York: Scribner, 2001), p. 237.
199. China’s economic growth in 1992 and after surpassed its record during the
1980s. The connection between this and China expanding its foreign aid is
discussed in following chapters.
200. Chan, Chinese Perspectives on International Relations, p. 56. The author notes
that, unlike Japan, Chinese international relations scholars have not copied
Western theory to any extent but have tried to build international relations
theory with “Chinese characteristics.”
201. Ibid., p. 44.
202. Cited in ibid, pp. 37–38.
204. Zhu Rongji’s Answers to Journalists’ Questions, chapter 5, cited in Kissinger,
On China, p. 480.
205. Shambaugh, Chinese Goes Global, p. 175.
206. Jacques, When China Rules the World , pp. 319–20.
207. For details on the Hu era, see Willy Wo-Lap Lam, Chinese Politics in the Hu
Jintao Era: New Leaders, New Challenges (Armonk, NY: M. E. Sharpe, 2006).
208 ● Notes
208. See Zhongqi Pan, “China’s Changing Image of and Engagement in World
Order,” in Guo and Blanchard (eds.), “Harmonious World” and China’s New
Foreign Policy, p. 56.
209. Cheng and Zhang, “Patterns and Dynamics of China’s International Strategic
Behavior,” p. 186 and Lam, Chinese Politics in the Hu Jintao Era , p. 166.
210. See “Hu Makes 4-Point Proposal for Building Harmonious World,” Xinhua,
September 16, 2005, and “Hu: China Will Adhere to Peaceful Development,”
Xinhua, September 16, 2005.
211. Jean-Marc F. Blanchard and Sujian Guo, “Introduction: ‘Harmonious World’
in China’s New Foreign Policy,” in Guo and Blanchard (eds.), “Harmonious
World,” pp. 2–6.
212. Dittmer, “On China’s Rise,” in Womack (ed.) China’s Rise in Historical
Perspective, p. 40.
213. China does not want to challenge the United States, but would like a world
system that is not dominated by Western countries that seek to promote
democracy, but one that rather is democratic—meaning all countries, espe-
cially developing countries, have a larger voice. It would mean that human
rights would be defined differently. It would mean more equal access to raw
materials.
214. Zheng Bijian, “China’s ‘Peaceful Rise’ to Great Power Status,” Foreign Affairs,
September/October 2005, p. 22.
215. Kissinger, On China, pp. 498–500. Interestingly the next year the government
in China initiated a public debate with a 12-part television series on this issue.
Called the “Rise of the Great Powers,” the program dealt with various aspects
of China’s “moment in history.”
216. Lam, Chinese Politics in the Hu Jintao Era , p. 160.
217. Douglas E. Schoen and Melik Kaylan, The Russia-China Axis: The New Cold
War and America’s Crisis of Leadership (New York: Encounter Books, 2014),
p. 175.
218. Lam, Chinese Politics in the Hu Jintao Era , p. 161.
219. See “Hu Jintao’s report at 17th Party Congress,” Xinhua, October 24, 2007.
220. Jean-Marc F. Blanchard and Sujian Guo, “Introduction in Guo and Blanchard
(eds.), “Harmonious World,” p. 5.
221. Shang Ding, “To Build a ‘Harmonious World’: China’s Soft Power Wielding
in the Global South,” in Guo and Blanchard (eds.), “Harmonious World,”
p. 108.
223. China immediately provided South Korea with $26 billion in a currency swap
deal and Southeast Asian countries with investments and credit money. See
Sutter, Chinese Foreign Relations, p. 86. China had already increased its for-
eign aid (including investments in Africa, Latin America, and elsewhere) and
continued to do so as will be seen in following chapters.
225. Ibid.
Notes ● 209
226. See Stefan Halper, The Beijing Consensus, p. 5.

227. Willy Lam, China’s Quasi-Superpower Diplomacy: Prospects and Pitfalls
(Washington, DC: Jamestown Foundation, 2009), p. 8. Also see Willy Lam,
“Beijing Launches Diplomatic Blitz to Steal Obama’s Thunder,” China Brief,
February 20, 2009.
228. Stephen Olson and Clyde Prestowitz, The Evolving Role of China in
International Institutions (Report prepared for the U.S.-China Economic and
Security Commission of the U.S. Congress), January 2011, p. 14.
229. Ibid., pp. 88–89.
230. See Halper, The Beijing Consensus, p. 32. Also see further details in
Chapter 3.
231. For the use of the term superfusion, see Zachary Karabell, Superfusion: How
China and America Became One Economy and Why the World’s Prosperity
Depends on It (New York: Simon and Schuster, 2009). For the term “eco-
nomic deterrence,” see Graham Allison, “Keeping China and the United
States Together,” in Richard Rosecrance and Gu Guoliang (eds.), Power and
Restraint: A Shared Vision for the U.S.-China Relationship (New York: Public
Affairs, 2009), p. xiii.
233. Dai Bingguo, Persisting in Taking the Path of Peaceful Development (Beijing:
Ministry of Foreign Affairs, 2010).
234. Cited in Kissinger, On China, pp. 499–500.
235. Sutter, China’s Rise in Asia , p.7.
236. “China Confirms Leadership Change,” BBC News, November 15, 2012
(online at bbc.com).
237. Zhu Feng, “The World According to Xi,” Project Syndicate, December 24,
2012 (online at plroject-syndicate.org).
238. Timothy Heath, “The 18th Party Congress World Report: Policy Blueprint
for the Xi Administration,” China Brief, November 30, 2012 (online at
Jamestown.org).
239. Elizabeth C. Economy,” China’s Imperial President: Xi Jinping Tightens His
Grip,” Foreign Affairs, November/December 2014, pp. 88–89.
240. Xi Jinping, The Governance of China (Beijing: Foreign Languages Press, 2014).
See in particular pp. 298–99 and p. 490.
241. In contrast Western aid programs find their origins in missionary work and
later governmental efforts to deal with the less wholesome aspects of colonial-
ism and thus appear more like charity and/or efforts to facilitate the welfare of
the society of the recipient.
242. Tribute countries were geographically proximate to China. Still this does not
explain the fact that they received China’s aid early and in some cases, espe-
cially North Korea and Vietnam, it was so large. This point will be pursued in
following chapters.
243. One scholar notes that Southeast Asians, in particular, distinguish between
power and influence and seek to balance the United States, which has more
210 ● Notes
of the former, with China, that represents the latter. See David Shambaugh,
“China Engages Asia: Reshaping the Regional Order,” International Security,
Winter 2004/05, p. 66. Some argue that the hedging theory very well describes
Asian nations’ policies that are divided between playing to China’s views of the
world while maintaining good relations with the United States. For a discus-
sion on this point, see Bronson Percival, The Dragon Looks South: China and
Southeast Asia in the New Century (Westport, CT: Praeger, 2007), p. 21.
244. See Jacques, When China Rules the World , p. 419.
245. Schwartz, Communism and China, p. 237.
246. In China’s world historically the government sought harmony in the “Big
Family.” Mao sought uniformity in political outlook, which was not too dif-
ferent. See Terrill, The New Chinese Empire, p. 125.
247. Put another way, China was focused on supporting communism (both at home
and abroad and the two connected) and its security. See Deborah Brautigam,
Chinese Aid and African Development: Exporting Green Revolution (New York:
St. Martins, 1998), p. 38.
248. It is worth pointing out that China was both getting (from the Soviet
Union) and giving foreign assistance at the same time. This did not seem
to be a contradiction to Mao; it could be explained by the fact he saw intra-
Communist Bloc relations as prevailing over relations with other blocs or
nations. On the other hand, China’s aid to both North Korea and North
Vietnam also mirrored China’s traditional worldview; thus it seems hardly
a coincidence that both countries were in the past tribute-bearing nations.
This point is discussed at greater length in the context of assessing this aid
in subsequent chapters.
249. This, one might say, resembled extending China’s tribute system to more dis-
tant peoples in the past. Historically, the tribute system expanded in scope
with increases in China’s prosperity, military power, and other measures of
influence. See Mosher, Hegemon, pp. 29–30.
250. Details will be provided in the next chapter. China may have granted aid to
some countries other than North Korea before 1954, namely North Vietnam,
which did not become official until later.
251. For details, see John Gittings, The World and China, 1922-1972, chapter 10.
252. In 1957, as noted earlier, China shifted back to a hardline policy. There was
no change in worldview, however. And this was temporary. China’s foreign aid
giving remained attuned to Mao’s worldview, not its momentary reversion to a
tough foreign policy.
253. China’s anti-Soviet perspective had already been made part of its worldview
in it announcing intermediate zones and elaborating on this thesis. In 1962,
Mao described Soviet leaders as “beyond redemption.” In 1964, he spoke of
the Soviet Union as being China’s main enemy and China’s relationship with
the Soviet Union as being the main contradiction facing China. See Gittings,
The World and China 1922-1972, pp. 254 and 256.
254. Again one can argue that this happened various times in Chinese history with
the tribute system.
Notes ● 211
255. I am using China’s official aid in this case and North Korea is excluded since
it is not categorized as a Third World country. In so counting, China exceeded
its aid giving in any previous year in 1964. It extended aid to 14 countries; the
highest number of countries that received aid in one year; prior to that it was 8.
See Copper, “China’s Foreign Aid Program: An Analysis and Update,” p. 502.
256. This issue is discussed at length in Volume 1, Chapter 4.
257. Copper, “China’s Foreign Aid Program: An Analysis and Update,” p. 502.
Official aid here, of course, does not include China’s arms aid and its aid to
North Korea and North Vietnam, which was generally unannounced.
258. Ibid.
259. Brautigam, Chinese Aid and African Development, p. 38.
260. Copper, “China’s Foreign Aid Program: An Analysis and Update,” p. 502.
261. This reached a high point when two countries vied strenuously for support
of their policies at the second Afro-Asian Conference in Algeria in 1965 and
competed fiercely with foreign aid to do this. This will be discussed at length
in following chapters.
262. There, of course, is a caveat: there is contradictory evidence to cite, namely
that China’s aid giving did not precisely reflect its leaders view of the world.
There are a host of reasons for this and some of them need to be discussed.
China’s worldview has at times been slow in evolving and has often followed
events rather than leading them, even though it should have been the other
way around. There is an explanation: According to Lenin, the truth of doctrine
is demonstrated by its successful application. Mao agreed. For several years,
because of China being in a transition phase from alignment with the Soviet
Union to a “gear shifting” phase and finally breaking with the Soviet Union its
view of the world and its foreign policy were in a state of flux.
Mao for some time hoped that he could persuade the Soviet Union to
abandon peaceful coexistence and take a harder stance toward the United
States and Western imperialism and agree to China’s worldview. It is also
interesting to note that China’s, namely Mao’s, worldview was also influenced
by some variables that seem difficult to impossible to explain. Mao was influ-
enced by numbers, numerology some would say, and this has been offered as a
partial explanation of how he viewed the world. Notable was Mao’s counting
heads in setting forth a list of China’s friends and enemies, which arguably
influenced Mao’s ideas about intermediate zones. See Gittings, The World and
China 1922-1972, p. 234.
263. Deng and China’s new leaders were appalled by the fact China’s foreign aid
(including military aid) had taken 5 percent of government expenditures dur-
ing the period 1967 to 1976; this could not continue. See Brautigam, The
Dragon’s Gift, p. 52.
264. This point is discussed in detail in Volume 1, Chapter 4.
265. This issue is discussed at greater length in Volume 1, Chapter 3.
266. For the most part these principles had been enunciated in Zhou Enlai’s eight
aid principles stated in 1964; thus there was little new in them. What was
noteworthy was what statements or promises did not accompany them.
212 ● Notes
267. In Zimbabwe, one of the countries Zhao visited, 5,000 people greeted him at
the airport. Five were trampled to death, sixty-four were injured, and scores
fainted in the melee. For details, see FBIS January 3, 1983 and Beijing Review,
January 24, 1983, p. 19.
268. Beijing Review, September 5, 1983, p. 18.
269. Shi Lin, Zhongguo de Duiwai Jingji Hezuo [China’s Current Economic
Cooperation with Foreign Countries] (Beijing: China Social Science Press,
1989), p. 68.
270. Brautigam, The Dragon’s Gift, p. 52.
272. Shambaugh, China Goes Global , p 176.
273. Ibid., p. 177.
274. Ibid., pp. 178–79. These predictions were made by Western firms, but were
confirmed by the Ministry of Foreign Commerce that anticipated a 17 percent
annual increase.
3 China’s Economy and Its Foreign Aid

and Investment Diplomacy
1. Relating this to China’s view of itself and its role in the world, see Mark
Mancall, China at the Center: 300 Years of Foreign Policy (New York: Free
Press, 1984), pp. 8–9.
2. Ibid., p. 9.
3. Ibid., p. 8. China’s Grand Canal was a remarkable feat of engineering begun in
the seventh century. It was 1,700 kilometers in length and linked Hangzhou
with Beijing. It alleviated drought in the north, controlled the Yellow River,
and facilitated trade.
4. Chinese regard the nineteenth century as recent history. In 1820, China pro-
duced around a third of the world’s gross national product—more than the
United States, Western Europe, and Eastern Europe combined. See Angus
Maddison, The World Economy: A Millennial Perspective (Paris: OECD, 2006),
pp. 261–63.
5. The importance of trade in expanding China’s power and influence can be
seen in the fact that Chinese products were found in Central Asia, Southeast
Asia, the Middle East, and even Europe. China imported jade, meat, music,
Buddhism, and much more thus adding to its standard of living and its cul-
ture. See Mancall, China at the Center, pp. 9–10.
6. David Shambaugh, China Goes Global: The Partial Power (New York: Oxford
7. For details on this period see Alexander Eckstein, China’s Economic Revolution
(Cambridge: Cambridge University Press, 1977), chapter 1.
Notes ● 213
8. In 1952, China had 0.7 acres of cropped land per capita compared to 2.3
in the Soviet Union. See A. James Gregor, Marxism, China, & Development:
Reflections on Theory and Reality (New Brunswick, NJ: Transaction Publishers,
1995), p. 81.
9. See Alexander Eckstein, China’s Economic Development: The Interplay of
Scarcity and Ideology (Ann Arbor: University of Michigan Press, 1976),
pp. 10–11. This was well below the United States, the United Kingdom, the
Soviet Union, and even Japan, when those countries sought successfully to
promote economic growth.
10. Yuan-li Wu, An Economic Survey of Communist China (New York: Bookman
Associates, 1956), pp. 12–13.
11. See Yuan-li Wu, The Economy of Communist China: An Introduction (New
York: Praeger, 1965), pp. 5–17 for details on Mao’s plans and how they dif-
fered from that of capitalist, pluralist nations.
12. John G. Gurley, China’s Economy and Maoist Strategy (New York: Monthly
Review Press, 1976), p. 5. Gurley notes that Mao believed that economic devel-
opment could happen only within the context of the development of human
beings, assumed egalitarianism, and rejected trickle-down economics.
13. Eckstein, China’s Economic Development, p. 12.
14. See Audrey G. Donnithorne, China’s Cellular Economy: Some Economic Trends
after the Cultural Revolution (London: Eastern Press, 1973).
15. See Nai-ruenn Chen and Walter Galenson, The Chinese Economy under
Communism (Chicago: Aldine Publishing Co., 1969), chapter 8.
16. See John F. Copper, China’s Global Role: An Analysis of Peking’s National
Power Capabilities in the Context of an Evolving International System (Stanford:
Hoover Institution Press, 1980), p. 63 for a further discussion of this point.
17. China’s population growth at this time was around 2 percent annually, which
meant 12 million more people were added to the population each year. This
was higher than the Soviet Union or India. See Ta-chung Liu and Kung-chia
Yeh, The Economy of the Chinese Mainland: National Income and Economic
Development (Princeton, NJ: Princeton University Press, 1965), p. 102.
18. See Jan S. Prybyla, The Chinese Economy (Columbia: University of South
Carolina Press, 1978), chapter 2.
19. Gregor, Marxism, China, & Development, pp. 81–82.
20. Maria Hsia Chang, The Labors of Sisyphus: The Economic Development of
Communist China (New Brunswick, NJ: Transaction Publishes, 1998),
pp. 51–55.
21. Chu-yuan Cheng, Communist China’s Economy, 1949–1962: Structural
Changes and Crisis (South Orange, NJ: Seton Hall University Press 1963),
pp. 157–58.
22. This point is discussed further in Volume 1, Chapter 4.
23. Prybyla, The Chinese Economy, p. 183.
24. This point is discussed in detail later in the chapter.
214 ● Notes
25. Eckstein, China’s Economic Revolution, pp. 120–21 and 125–26.

26. Eckstein, China’s Economic Development, p. 15.
27. Eckstein, China’s Economic Revolution, pp. 54–58.
28. Gregor, Marxism, China & Development, pp. 79–82.
29. Chang, The Labors of Sisyphus, p. 54. According to another source, Mao was
shown to have “feet of clay” and had to admit that he knew nothing about eco-
nomics. See John King Fairbank and Merle Goldman, China: A New History
(Cambridge: Harvard University Press, 1998), p. 373.
30. During 1967 and 1968, industrial output declined 30 billion Yuan in value.
Crude iron production fell from 15 million tons in 1966 (when the Cultural
Revolution started) to 9.08 million tons in 1968. In 1967 and 1968 the agri-
cultural and industrial sectors lost 10 and 4 percent of their output. See Yiu-
chung Wong, From Deng Xiaoping to Jiang Zemin: Two Decades of Political
Reform in the People’s Republic of China (Lanham, MD: University Press of
America, 2005), p. 60. The author cites data from China Statistical Yearbook.
31. Barry Naughton, The Chinese Economy: Transitions and Growth (Cambridge:
MIT Press, 2007), pp. 75–76.
32. See A. Doak Barnett, China’s Economy in Global Perspective (Washington, DC:
Brookings Institution, 1981). According to the author, China’s GNP fell from
US$145 billion in 1959 to US$112 billion in 1961. See p. 17.
33. See Maurice Meisner, The Deng Xiaoping Era: An Inquiry into the Fate of
Chinese Socialism, 1975–1994 (New York: Hill and Wang, 1996), p. 188.
34. The Planetary Product in 1974 (Washington: U.S. Department of State,
November 1973). According to this report, China’s economy grew at 3.8 per-
cent from 1955 to 1960 (compared to the world’s average of 4.5), 3.9 percent
from 1960 to 1965 (world’s average was 5.0), 5.2 percent from 1965 to 1970
(world’s average was 5.4 percent) and 4.7 percent from 1970 to 1974 (world’s
average was 4.7 percent).
35. Donald Zagoria, “China’s Quiet Revolution,” Foreign Affairs, April 1984,
p. 881.
36. Ted Fishman, China Inc.: How the Rise of the Next Superpower Challenges
America and the World. (New York: Scribner, 2005), p. 126.
37. Tianyong Zhou, The China Dream and the China Path (Singapore: World
Scientific, 2013), p. 2.
38. Ibid.
39. Handbook of Economic Statistics (Washington: Central Intelligence Agency,
1978).
40. Handbook of Economic Indicators (Washington: Central Intelligence Agency,
1977) and A. H. Usack and R. E. Batsavage, “The International Trade of the
People’s Republic of China,” in The People’s Republic of China: An Economic
Assessment and Far Eastern Economic Review, March 4, 1977.
41. Angus Maddison, The World Economy: A Millennial Perspective (Paris:
Organization for Economic Cooperation and Development, 2001), p. 263.
42. The Planetary Product in 1974 (Washington: U.S. Department of State,
1975).
Notes ● 215
43. For details, see Maurice Meisner, The Deng Xiaoping Era , chapter 4.
44. Mao, in order to regain his authority after the Great Leap debacle, destroyed
the Party and government during the Cultural Revolution. Millions were per-
secuted. The Cultural Revolution launched in 1965–66 lasted until Mao died
in 1976. Mao’s designs for economic and social change were destroyed in the
process, but neither new plans nor constituencies for supporting it were created.
See Dwight H. Perkins, “China’s Prereform Economy in World Perspective,”
in Brantley Womack (ed.) China’s Rise in Historical Perspective (Lanham, MD:
Rowman Littlefield, 2010), pp. 123–24.
45. This is why Deng was able to “lead behind the scenes” in terms of making
economic reforms. See David S. G. Goodman, Deng Xiaoping and the Chinese
Revolution (London: Routledge, 1994), p. 91. Also see Richard Evans, Deng
Xiaoping and the Making of Modern China (New York: Viking, 1993), p. 311.
It is worth noting that some had observed that when Deng came back after
in 1975 being purged, the economy grew by 11.1 percent—the best perfor-
mance of any year during the Cultural Revolution. In 1976, when Deng was
purged again it fell to 1.7 percent. Also see Wong, From Deng Xiaoping to
Jiang Zemin, p. 60.
46. Naughton, The Chinese Economy, p. 86. The author notes that Chinese lead-
ers did not concern themselves with political or ideological issues very much,
unlike the Soviet Union and the Eastern European countries. They saw their
main objective as responding to unmet needs. Economic development, he says,
was the central focus of the party and the government—replacing class strug-
gle. See Barry Naughton, “The Dynamics of China’s Reform-Era Economy,”
in Brantley Womack (ed.), China’s Rise in Historical Perspective, p. 131.
47. Deng died in 1997, having been in charge of China’s economy for 19 years. But
his successors continued his policies; therefore, most of what Deng did is still
working to make China’s economy grow.
48. Data to prove this point will be provided in following pages.
49. For details, see Barry Naughton, The Chinese Economy, chapter 10.
50. Meisner, The Deng Xiaoping Era , pp. 222–26.
51. William H. Overholt, The Rise of China: How Economic Reform is Creating a
New Superpower (New York: W. W. Norton, 1993), p. 33.
52. Fred C. Bergsten Bates Gill, Nicholas R. Lardy, and Derek Mitchell. China:
The Balance Sheet (New York: Public Affairs, 2006), p. 24. Many of the state-
owned enterprises earned less than the cost of their capital not to mention that
they produced goods that could not be sold outside of China due to their poor
quality and they did considerable damage to the environment.
53. By 2007, the SOEs that remained were making profits to the tune of $200 bil-
lion per year or more than 6 percent of the GDP. See Edward Tse, The China
Strategy: Harnessing the Power of the World’s Fastest Growing Economy (New
York: Basic Books, 2010), p. 37.
54. For details on China’s industrialization under Deng, see Naughton, The
Chinese Economy, chapter 13.
55. Overholt, The Rise of China, p. 45.
216 ● Notes
56. Tse, The China Strategy, p. 61.

57. Bergsten et al., China: The Balance Sheet, pp. 19–20.
58. China (Paris: Organization for Economic Cooperation and Development,
2005), p. 21. Another factor that made China’s labor more productive was the
high rate of literacy in China and the low rate of gender differences (73 percent
of females were literate compared to 38 percent in India). This was especially
helpful in attracting foreign companies producing computers and electronic
products. See Bergsten et al., China: The Balance Sheet, p. 22.
59. Willem Van Kemenade, China, Hong Kong, Taiwan, Inc. (New York:
Doubleday, 1997), p. 258. Also see Prem Shankar Jha, Crouching Dragon,
Hidden Tiger: Can China and India Dominate the West? (New York: Soft Skull
Press, 2010). Jha believes that the decentralization of economic planning and
a change in those responsible for investment facilitated China’s economic
miracle.
60. Ibid., p. 260.
61. Marc Blecher, “Sounds of Silence and Distant Thunder: The Crisis of
Economic and Political Administration,” in David S. G. Goodman and Gerald
Segal (eds.), China in the Nineties: Crisis Management and Beyond (Oxford:
Clarendon Press, 1991), pp. 36–44.
62. Meisner, The Deng Xiaoping Era , pp. 260–70.
63. Overholt, The Rise of China, pp. 46–47.
64. Naughton, The Chinese Economy, chapter 13.
65. Overholt, The Rise of China , p. 48.
66. Ibid., p. 74.
67. Angus Maddison, Chinese Economic Performance: The Long View (Paris:
Organization for Economic Cooperation and Development, 2007), p. 89.
68. Deng’s economic “genius” was, it is said, that he appropriately did not develop
an overall economic plan, kept his hands off most of the time, and inter-
vened only when necessary. He also sought good advice and listened. See
Barry Naughton, “Deng Xiaoping: The Economist,” in David Shambaugh
(ed.), Deng Xiaoping: Portrait of a Chinese Statesman (Oxford: Clarendon Press,
1995), p. 84.
69. After a decade or so after 1984, China’s People’s Liberation Army became the
largest commercial entity in China setting up 20,000 companies with a profit
of $5 billion. By one estimate half of China’s military personnel were engaged
in commercial activities. See John Naisbitt, Megatrends Asia: Eight Asian
Megatrends That Are Reshaping Our World (New York: Simon and Schuster,
1996), p. 27.
70. See Fei-ling Wang, “Beijing’s Incentive Structure: The Pursuit of Preservation,
Prosperity and Power,” in Yong Deng and Fei-ling Wang (eds.), China Rise:
Power and Motivation in Chinese Foreign Policy (Lanham, MD: Rowman
Littlefield, 2005), p. 32.
71. Kemenade, China, Hong Kong, Taiwan, Inc. The author notes that Hong Kong
helped transform China from “Mao-worshipping blue ants” and Taiwan had
Notes ● 217
a synergetic impact on China. See p. x. He also argues that Mao had political
reasons for emulating Hong Kong and Taiwan: to eventually incorporate them
into China.
72. Martin Jacques, When China Rules the World: The End of the Western World
and the Birth of a New World Order (New York: Penguin, 2012), p. 156.
73. In 1993, for example, Taiwan’s foreign exchange reserves reached $85.6
billion—the highest of any country in the world. See The Republic of China
Yearbook, 1994 (Taipei: Government Information Office, 1994), p. 3.
74. The figures on foreign investments in China from Japan and the Four
Dragons vary considerably. According to one writer, between 1980 and 1996
Japan invested $14.6 billion in China; the Four Dragons invested $34.6 bil-
lion. See Xiaomin Rong, “Explaining the Patterns of Japanese Foreign Direct
Investment in China,” Journal of Contemporary China , March 1999, p. 132.
In addition to its investments in China, Japan has provided an estimated $34
billion in development aid to China. See Fareed Zakaria, “Does the Future
Belong to China? Newsweek, November 3, 2008.
75. Sterling Seagrave, Lord of the Rim: The Invisible Empire of the Overseas Chinese
(New York: G. P. Putnam’s Sons, 1995), pp. 2–3. The author includes Taiwan
in this figure. He compares the $2 trillion figure with Japan’s (with about
twice as many people), $3 trillion.
76. “Overseas Chinese Firms Awarded for Contributions to China’s Economy,”
People’s Daily, September 29, 2003, cited in David M. Lampton, The Three
Faces of Chinese Power: Might, Money and Minds (Berkeley: University of
California Press, 2008), p. 85.
77. It is worth noting here that during the Ming Dynasty (1368–1644) China
terminated its exploration and much of its trade and other contacts with the
outside world. During the subsequent Qing Dynasty (1644–1911) China gen-
erally banned or at least discouraged trade and other commerce with the out-
side world and as a result fell behind Europe, the United States, and Japan.
Most Chinese are aware of this history. One author describes Deng’s view as
compared to Mao’s this way: Mao’s thinking was autarkic, isolationist, peas-
ant thinking. Deng’s was open door and turned China into a trading and
naval power. See Kemenade, China, Hong Kong, Taiwan, Inc., p. 260.
78. Samuel S. Kim, “China’s Path to Great Power Status in the Globalization
Era,” in Guoli Liu (ed.), Chinese Foreign Policy in Transition (New York: Aldine
de Gruyter, 2004), p. 359. This chapter was originally published in Asian
Perspective in 2003.
80. Some of course, exaggerated this. Lester Brown wrote an article in 2005 titled
“China Replacing the United States as World’s Leading Consumer.” The Earth
Policy Institute in Washington, DC published this on February 16. (See www.
earth-policy.org/Update45.htm) The World Bank at this time predicted China
would contribute 15.8 percent of the world’s growth between 2004 and 2020.
See L. Alan Winters and Shih Yusef (eds.), Dancing with Giants (Washington,
218 ● Notes
DC: World Bank and Institute of Policy Studies, 2007), p. 6. China’s rank
among the “trading powers” during this period rose markedly, from number
32 in the world in 1978 to number 10 in 1995. See Kemenade, China, Hong
Kong and Taiwan, Inc., p. 33.
81. Bergsten et al., China’s Rise, p. 9.
82. Susan L. Shirk, China: Fragile Superpower (London: Oxford University Press,
2007), p. 19.
83. Sarah Y. Tong and John Wong, “China’s Economy,” in Robert E. Gamer
(ed.), Understanding Contemporary China (third edition) (Boulder, CO: Lynne
Rienner, 2008), p. 119.
84. “China Overtakes the U.S. in Exports,” Associated Press, April 12, 2007
(online at lexisnexis.com). This happened in the last half of 2006.
85. Tse, The China Strategy, p.39. It is worth noting that more than half of China’s
exports were accounted for by foreign-funded enterprises: $790.6 billion of a
total of $1.43 trillion.
87. Growth that year was 3.9 percent. See China Statistical Yearbook 1990.
88. See Bruce Gilley, Tiger on the Brink: Jiang Zemin and China’s New Elite
(Berkeley: University of California Press, 2005), chapter 6.
89. Evans, Deng Xiaoping and the Making of Modern China , pp. 305–06. Evans
notes, for example, that the national media under the control of leftists ignored
an article Deng wrote and was published in a Shanghai in the spring of 1991.
90. Deng visited Wuhan, the special economic zones of Shenzhen (near Hong
Kong) and Zhuhai (near Macao) and Shanghai. Deng’s speeches were picked
up by the media in Hong Kong (which was still a British colony) and were
read and/or heard by millions in South China without being filtered by the
leftist-controlled media in China. In Beijing people and party and government
officials heard the loud voices of support in the South for Deng’s ideas. Chen
Yun, a former supporter of Deng but now his nemesis, told Deng his views
were antisocialist. Deng said that socialism and capitalism were not opposites
in terms of economic planning or the role of the market. He said that left-
ism had done terrible harm to the party in the past and that China should
guard against leftist thinking. He also said that seeking truth from facts (by
which Deng meant pragmatism) was the quintessence of Marxism. See Evans,
Deng Xiaoping and the Making of Modern China , pp. 306–7.
91. Overholt, The Rise of China, p. 31.
92. A. Doak Barnett, “Political Overview,” in Shao-chuan Leng (ed.), Reform and
Development in Deng’s China (Lanham, MD: University Press of America,
1994), pp. 5–6.
93. See Orville Schell, Mandate of Heaven: The Legacy of the Tiananmen Square
and the Next Generation of China’s Leaders (New York: Touchstone Books,
1994), p. 404.
94. Naughton, The Chinese Economy, p. 7
95. Brahma Chellaney, Asian Juggernaut: The Rise of China, Japan and India (New
York: Harper Collins, 2010), p. 80.
Notes ● 219
96. Country Profile 2001: China (London: Economist Intelligence Unit, 2001),
p. 15. This amounted to around 5 percent of China’s gross domestic product.
About 9 percent of this investment came from the United States. Meanwhile,
China’s total investment received by 2000 was US$348.3 billion. See Robert
Andre LaFleur, China: A Global Studies Handbook (Santa Barbara, CA: ABC
CLIO, 2003), p. 107.
97. Tse, The China Strategy, p. 38. The author cites statistics from the Ministry of
Commerce.
98. “Japan and China: Aid Proceeds Trade,” Economist, December 8, 1979 (online
at economist.com).
99. Brautigam, The Dragon’s Gift, pp. 48–49.
100. See Naughton, “Economic Growth,” in Joseph Fewsmith (ed.), China Today,
China Tomorrow Domestic Politics, Economy, and Society (Lanham, MD:
Rowman & Littlefield, 2010), p. 73.
101. Ibid., pp. 74–75.
102. Ibid., p. 78.
103. Naughton, “The Dynamics of China’s Reform-Era Economy,” in Womack
(ed.), China’s Rise in Historical Perspective, p. 132.
104. Naughton, “Economic Growth,” in Fewsmith (ed.), China Today, China
Tomorrow, p. 80.
105. See Sebastian Heilmann, “Policy Experimentation in China’s Economic Rise,”
Studies in Comparative Economic Development, March 2008, pp. 1–26.
106. Naughton, “The Dynamics of China’s Reform-Era Economy,” in Womack
(ed.), China’s Rise in Historical Perspective, pp. 132–33.
107. Ibid., p. 135.
108. “Let a Million Flowers Bloom,” Economist, March 12, 2011, pp. 79–80.
109. 2012 Report to Congress of the U.S.-China Economic and Security Review
Commission (Washington, DC: U.S. Government Printing Office, November
2012), p. 47.
110. Michael Pillsbury, The Hundred-Year Marathon: China’s Secret Strategy
to Replace America as the Global Superpower (New York: Henry Holt and
Company, 2015), p. 168.
111. Ibid., p. 169.
112. Ibid., p. 166.
113. Ibid., p. 157–58.
114. “Let a Million Flowers Bloom,” pp. 79–80.
115. 2012 Report to Congress, p. 48.
116. Ibid., p. 49.
117. Ibid., p. 56.
118. Ensuk Hung and Laixiang Sun, “Dynamics of Internationalism and Outward
Investment: Chinese Corporations’ Strategies,” China Quarterly, 2006,
p. 624.
119. Ivan Tselichtchev, China versus the West: The Global Power Shift of the 21st
Century (Singapore: John Wiley and Sons, 2012), p. 7.
220 ● Notes
120. “Supply Chain News: For First Time in More Than 100 Years, US Set to Lose
Place as World’s Largest Manufacturer,” Supply Chain Digest, August 12, 2008
(online at scdigest.com).
121. “Top 15 Manufacturing Countries in 2009,” Bullfax.com, January 4, 2011
(online at bullfax.com).
122. CIA World Factbook 2011 (online at cia.gov).
123. Much more will be said about the SEZs later. Suffice it to say here, they were
a combination of free-market principles and SOEs.
124. There were 35 SEZs in Asia in the 1980s. See Naughton, The Chinese Economy,
p. 407.
125. Min Ye, “Foreign Direct Investment: Diaspora Networks and Economic
Reform,” in Joseph Fewsmith (ed.), China Today, China Tomorrow,
pp. 132–36.
126. Michael West Oborne, China’s Special Economic Zones (Paris: Organization for
Economic Cooperation and Development, 1986), p. 11.
127. Naughton, The Chinese Economy, p. 410.
128. CIA World Factbook 2011. pp. 9–11.
129. China accumulated considerable debt that provincial governments had to
bear. But this was a problem to deal with later.
130. Naughton, “Economic Growth,” in Fewsmith (ed.), China Today, China
Tomorrow, p. 85.
131. Tselichtchev, China versus the West, p. 5.
132. Naughton, The Chinese Economy, p. 143
133. Bergsten et al., China: The Balance Sheet, p. 18.
134. Bill Emmott, Rivals: How the Power Struggle between China, India and Japan
Will Shape Our Next Decade (Boston: Houghton Mifflin Harcourt, 2008),
p. 56. The author states that China’s economy in 1978 was $228 billion in
GDP; in 2007 it was $3.3 trillion. The GDP per capita increased tenfold dur-
ing this period.
135. Will Hutton, The Writing on the Wall: Why We Must Embrace China as a
Partner or Face It as an Enemy (New York: Free Press, 2006), p. 6.
136. Ezra F. Vogel, Deng Xiaoping and the Transformation of China (Cambridge,
MA: Belknap Press, 2012), p. 693; C. Fred Bergsten, Charles Freeman, Nicolas
R. Lardy and Derek J. Mitchell, China’s Rise: Challenges and Opportunities
(Washington, DC: Peterson Institute, 2008), p. 3.
137. World Economic Outlook Database (Washington, DC: International Monetary
Fund, April 2007). The 2007 figure was a projection. It is predicted that
China will account for 18 to 20 percent in the year 2020. See Jacques, When
China Rules the World , p. 186.
140. Oded Shlenkar, The Chinese Century: The Rising Chinese Economy and Its
Impact on the Global Economy, the Balance of Power, and Your Job (Upper
Saddle River, NJ: Wharton School Publishing, 2005), p. 11. Data are for
2004.
Notes ● 221
141. China in fact became an attractive market for developing countries seeking
export venues to stimulate their economic growth. As will be noted later, mar-
ket access became an important element of China’s foreign aid giving as it has
been in the case of the United States and in some ways reminiscent of China
granting access at part of its tribute diplomacy.
143. Eamonn Fingleton, In the Jaws of the Dragon: America’s Fate in the Coming Era
of Chinese Hegemony (New York: St. Marin’s Press, 2008), pp. 12–13.
144. Martin Wolf, Fixing Global Finance (Baltimore, MD: Johns Hopkins
145. See Gordon G. Chang, The Coming Collapse of China (New York: Random
House, 2001).
146. See Michael Pettis, The Great Rebalancing: Trade, Conflict, and the Perilous
Road Ahead for the World Economy (Princeton, NJ: Princeton University Press,
2013).
147. Michael Pettis, Avoiding the Fall: China’s Economic Restructuring (Washington,
DC: Carnegie Endowment for International Peace, 2013), p. 22.
148. Ibid., chapters 6 and 7.
149. For a detailed assessment of China’s future economic prospects, see Arvind
Subramanian, Eclipse: Living in the Shadow of China’s Economic Dominance
(Washington, DC: The Peterson Institute, 2011). For an update of this book
see Arvind Subramanian, “The Inevitable Superpower,” Foreign Affairs,
September 2011, pp. 66–78.
150. Shamin Adam, “China May Surpass US by 2020 in “Super Cycle’ Standard
Chartered Says,” Bloomberg, November 14, 2010 (online at bloomberg.com).
151. Robert Fogel, “$123,000,000,000,000,” Foreign Policy, January/February
2010, p. 70.
152. See John Wong and Huang Yanjie, “China Coming to the End of Its High
Growth,” in Gungwu Wang and Yongnian Zheng (eds.), China: Development
and Governance (Singapore: World Scientific, 2012) pp.103–16.
153. Taiwan sustained economic growth at 8 percent for more than 40 years. Hong
Kong and Singapore for as long a period and both are doing well today. South
Korea is also doing well economically. See Emmott, Rivals, p. 56.
154. Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic
Hatred and Global Instability (New York: Random House, 2003). In recent
years, China has been the largest and fastest growing location of entrepreneur-
ial start-ups. See also Tse, The China Strategy, p. 16.
155. See Jacques, When China Rules the World. The author notes also that China’s
population is still 50 percent in the countryside, indicating it is only around
halfway through its economic takeoff (p.192). Even 20 years from now, he
says, 20 percent of China’s population will still be rural (p. 215).
156. See Charles A. Kupchan, No One’s World: The West, The Rising Rest, and
the Coming Global Turn (Oxford: Oxford University Press, 2012). Kupchan
believes, for a variety of reasons, developing countries will continue to grow at
a rate faster than the developed countries.
222 ● Notes
157. Subramanian, Eclipse, pp. 72–75. In this connection, it should be noted that a
large part of China is still poor and will probably remain that way for a decade
or so. Some writers regard this as an inevitable and potent trend and one that
has and will continue to affect the nature of international politics. See, for
example, Kupchan, No One’s World.
158. This point is discussed further in the concluding chapter of Volume 3.
159. On these points, see Jacques, When China Rules the World , pp. 401–3; Ann Lee,
What the U.S. Can Learn from China: An Open-Minded Guide to Treating Our
Greatest Competition as Our Greatest Teacher (San Francisco: Berrett-Koehler
Publisher, 2012), pp. 30–37; Shambaugh, China Goes Global, pp. 241–45.
Also see “The Original Genius Bar,” Time, July 22, 2013. The author sug-
gests that China, which barely competed with the United States for doctoral
students is now doing so and that China will surpass US spending in a decade
based on a 20 percent annual increase in R&D compared to US increases of
5 percent or less (p. 41 and p. 43).
160. Lee, What the U.S. Can Learn from China, pp. 65–67; Eric X. Li, “The Life
of the Party: The Post-Democratic Future Begins in China,” Foreign Affairs,
January/February 2013, pp. 34–46.
161. See James R. Gorrie, The China Crisis: How China’s Economic Collapse Will
Lead to a Global Depression (Hoboken, NJ: John Wiley and Sons, 2013). The
author argues that because of slow growth in the United States and Europe the
world economy has become very dependent on China’s economic health and
growth.
162. See “The limits of central authority,” Economist, June 10, 2011 (online at
economist.com). Also see Dwight H. Perkins, “The Centrally Planned
Economy (1949–84),” and Wuy Jinglien and Wu Shitao, “China’s Economic
Reforms: Process, Issues, and Prospects (1978–2012),” in Gregory C. Chow
and Dwight H. Perkins (eds.), Routledge Handbook of the Chinese Economy
(London: Routledge, 2015). Dealing with these problems has slowed down
China’s GDP growth recently; but in the long run so acting will likely preserve
high growth.
163. Fingleton, In the Jaws of the Dragon, p. 247.
164. Eckstein, China’s Economic Revolution, p. 45 and p. 169.
165. See Copper, China’s Global Role, p. 62.
166. See Overholt, The Rise of China , p. 65, and Fishman, China, Inc., p. 77.
167. Fingleton, In the Jaws of the Dragon, p. 128.
168. Joshua Kurlantzich, “The Dragon That Ate Wall Street,” Mother Jones, May/
June 2009, p.14.
169. People’s Republic of China: 2006 Article IV Consultation (Washington, DC:
International Monetary Fund, 2006), p. 6. The US savings rate at that time
was said to be between 1 and 2 percent.
170. Wolf, Fixing Global Finance, p. 165.
172. A number of writers have noted that while Maoist policies were bad for China’s
economic growth at the time, they did create a situation that favored high
Notes ● 223
growth under Deng’s capitalist model, such as low debt. See Aiguo Lu, China
and the Global Economy since 1840 (New York: St. Martin’s Press, 2000), p. 11.
173. Nicholas R. Lardy, “China and the International Financial System,” in
Elizabeth Economy and Michel Oksenberg (eds.), China Joins the World:
Progress and Prospects (New York: Council on Foreign Relations, 1999), p. 209
and p. 211.
174. Robert G. Sutter, Chinese Foreign Relations: Power and Policy since the Cold
War (Lanham, MD: Rowman and Littlefield, 2010), p. 102.
175. Fishman, China, Inc, p. 15.
176. Ibid., pp. 26–27.
177. Gary Clyde Hufbauer and Yee Wong, “China Bashing 2004,” International
Economics Policy Briefs, (Washington, DC: Institute for International
Economics, September 2004), p. 27.
178. Gillian Wong, “China Rises and Rises, yet Still Gets Foreign Aid,” Associated
Press, September 25, 2010. The main donors were Japan at $1.2 billion fol-
lowed by Germany at half that amount and then France and Britain.
179. Ibid.
180. Ibid., p. 206.
182. Zachary Karabell, Superfusion: How China and America Became One Economy
and Why the World’s Prosperity Depends on It (New York: Simon and Schuster,
2009), p. 109.
183. James Fallows, “The $1.4 Trillion Question,” Atlantic Monthly, January/
February 2008 (online at theatlantic.com).
184. For a discussion on these issues, see Gregory C. Chow, Interpreting China’s
Economy (Singapore: World Scientific, 2010), chapter 17.
186. “A Survey of Asian Finance,” Economist, February 8, 2003, p. 15.
187. Fishman, China Inc., p. 259.
188. Wayne M. Morrison and Marc Labonte, “China’s Holdings of U.S. Securities:
Implications for the U.S. Economy,” Congressional Research Service
Report for Congress, May 19, 2008 (online at assets.opencrs.com/rpts/
RL34314_20080519.pdf)
189. Emmott, Rivals, p. 62.
190. Michael Pettis and Logan Wright, “Hot Money Poses Risks to China’s
Stability,” Financial Times, July 13, 2008.
191. “China’s Foreign-Exchange Reserves Surge, Exceeding $2 Trillion,” Bloomberg
News, July 15, 2009 (online at bloomberg.com).
192. China also became the largest holder of US Treasury bonds at this time, val-
ued at $801.5 billion. See Tse, The China Strategy, p. 9.
193. “China Foreign-Exchange Reserves Jump to $2.65 Trillion,” Bloomberg,
October 13, 2010 (online at bloomberg.com).
195. “$4 Trillion Peak in China’s FX Hoard Frees PBOC’s Hands: Economy,”
Bloomberg, January 11, 2015 (online at Bloomberg.com).
224 ● Notes
196. Michael Mandelbaum, The Road to Global Prosperity (New York: Simon and
Schuster 2014), p. 54.
197. When confronted with this problem, Chinese officials often pointed out that
while China did have a huge trade surplus with the United States, it often
ran a deficit with Japan, South Korea, and much of the European Union
and thus it was not a question of what China made or how. See Karabell,
Superfusion, p. 216.
198. One author notes that in 2007, 97.7 percent of China’s trade surplus related
to sales to the United States and in 2008 it was 90 percent. See Gordon G.
Chang, “The Dollar’s New Best Friend,” The Weekly Standard, June 29/July
6, 2009, p. 13. As will be noted in subsequent chapters China allows a trade
deficit with a number of countries to help their economies and many have
called this a type of foreign aid.
199. Mandelbaum, The Road to Global Prosperity, pp. 60–61.
201. This point is discussed in depth in the next chapter.
202. Wolf, Fixing Global Finance, p. 138
203. It is estimated that more than $200 billion in overseas investment deals
have fallen through for China because of political opposition and regulatory
obstacles from 2005 to 2012. See “ODI-lay hee-ho,” Economist, January 19,
2013, p. 48.
204. China made a bid of $18.5 billion for the company, which had oil concessions
or leases in a number of other countries that made it a good buy for China.
Congress and a number of government officials and business leaders criticized
the idea since Unocal was considered a strategic asset. There also seemed to
be anti-Chinese feelings that came into play. See David Barboza and Andrew
Ross Sorkin, “Chinese Company Drops Bid to Buy U.S. Oil Concern,” New
York Times, August 3, 2005 (online at nytimes.com).
206. See China loves Fannie Mae and Freddie Mac,” Open Salon, June 22, 2010
(online at open.salon.com).
207. “Much Ado in China about Fannie and Freddie,” China Real Time Report,
February 12, 2011 (online at blogs.wsj.com); Aaron Back, “China Could Lose
450 Billion in Fannie and Freddie,” Wall Street Journal , February 13, 1011
(online at worldaffairsboard.com).
208. “Streaks of Red,” Economist, July 2, 2011, pp. 52–54.
209. Michael D. Swaine, America’s Challenge: Engaging a Rising China in the Twenty-
First Century (Washington, DC: Carnegie Endowment, 2011), p. 204.
210. Sovereign wealth funds are state-owned funds created from a balance of pay-
ments surplus, foreign currency operations, proceeds from privatization, gov-
ernment transfer of funds, surplus of capital resulting from balance of trade
surplus. Many are of recent origins.
211. For details on how they work, focusing on the China Investment Corporation,
see Catherin Chong Siew Keng, “An Update on China’s Sovereign Wealth
Notes ● 225
Fund: China Investment Corporation,” Wang and Zheng (eds.), China:

Development and Governance, pp. 1999–2006.
212. Pillsbury, The Hundred-Year Marathon, pp. 135–36.
213. For further details, see Copper, China’s Foreign Aid, pp. 117–18.
214. Ibid. See also John F. Copper, “China’s Military Assistance,” in John F. Copper
and Daniel S. Papp (ed.), Communist Nations’ Military Assistance (Boulder,
CO: Westview Press, 1983), pp. 98–108.
215. It is worth noting that China gave very little aid to other countries in the
early years. In fact, before the mid-1950s China gave no aid to any non-bloc
nation.
216. Barnett, Communist China and Asia, pp. 226–31.
217. Gittings, The World and China, p. 59. Mao said this in his work On Protracted
War and in a Central Committee meeting in October 1938.
218. According to one author’s interpretation, the Soviet Union helped Chiang
Kai-shek take Manchuria but then gave arms to Mao’s Communists, hoping
neither side would be able to establish itself there. See Harrison Salisbury,
War between Russia and China (New York: Norton, 1969), p. 95.
219. Only two loans, one granted at this time and another in 1954 are traceable,
the two totalling US$430 million. See G. F. Hudson, Richard Lowenthal and
Roderick MacFarquhar, The Sino-Soviet Dispute: Documented and Analyzed
(New York: Praeger, 1961), p. 36. The authors, however, note that China
maintained a trade imbalance with the Soviet Union for some years and that
must have been accounted for by economic assistance. Another writer says it
was worth somewhere in the range of US$1 billion from 1950 to 1960. See
Dwight Perkins, “The Economic Background and Implications for China,” in
Herbert J. Ellison (ed.), The Sino-Soviet Conflict: A Global Perspective (Seattle:
University of Washington Press 1982), p. 94. The author estimates the amount
was US$1.3 billion, though one-quarter of this went to pay for joint stock
companies in China. Eckstein states that the total value of Soviet aid to China
was not disclosed even though the value of Soviet and Chinese aid to North
Korea was. This, and the fact that negotiations were protracted suggest the
aid was not large. See Alexander Eckstein, China’s Economic Development: The
Interplay of Scarcity and Ideology (Ann Arbor: University of Michigan Press,
1976), p. 232.
220. Ibid., p. 209.
221. Alexander Eckstein, Communist China’s Economic Growth and Foreign Trade:
Implications for U.S. Policy (New York: McGraw-Hill, 1966), p. 169 and
Perkins, “The Economic Background and Implications for China,” p. 94.
222. Li Hsien-nien, “Final Accounts for 1956 and the 1957 State Budget,” (report
to) National People’s Congress June 29, 1957, Current Background, July 5,
1957, cited in Barnett, Communist China and Asia, p. 229.
223. Eckstein, China’s Economic Development, p. 232. The author states the amount
was increased in 1954 to $117 million and that it totaled around US$1 billion
over a period of ten years.
226 ● Notes
224. Barnett, Communist China and Asia , p. 229.

225. Choh-ming Li, “Economic Development,” China Quarterly, January-March
1960, reprinted in Franz Schurmann and Orville Schell, Communist China
(New York: Vintage Books, 1967), p. 199.
226. Henry Kissinger, On China (New York: Penguin, 2011), p. 117.
227. Eckstein, Communist China’s Economic Growth and Foreign Trade, p. 169.
228. See Li, “Economic Development,” p. 199. The author states that China started
repaying Soviet loans in 1954.
229. Perkins, “The Economic Background and Implications for China,” p. 94.
Salisbury calls it a “pittance” and says the terms “were those of a miser,” p. 106.
He further notes that much of the aid was used to build joint stock companies,
in which the Soviet Union retained 51 percent ownership, calling these deals
“not much different from the kind of deals Standard Oil or Shell Petroleum
made with weak colonial countries.”
230. Donald S. Zagoria, The Sino-Soviet Conflict: 1956–61 (New York: Atheneum,
1964), p. 86. One explanation is that the Soviet Union was preoccupied with
Eastern Europe at the time and extended large credits to several countries
there. China, however, was angry over the fact that “rebellion yielded better
reward than loyalty.” See Hudson et al., The Sino-Soviet Dispute, p. 37.
231. Barnett, Communist China and Asia , p. 228–29.
232. Sidney Klein, The Road Divides: Economic Aspects of the Sino-Soviet Dispute
(Hong Kong: Green Pagoda Press, 1966), p. 66 and 68. This aid was also inter-
preted as “intended to encourage the Nehru government’s policies directed
against communism, against the people and against socialist countries.” See
Yahuda, China’s Role in World Affairs, p. 159.
233. Li Hsien-nien, “Final Accounts for 1956 and 1957 State Budget,” cited in
Barnett, Communist China and Asia, p. 229.
234. Ibid.
235. See Copper, China’s Foreign Aid, chapter 2. This is not to mention, again
using Chinese data, China’s foreign aid to other nations worth $165 million in
1955, $171 million in 1956, $192 million in 1957, $116 million in 1958, and
$253 million in 1959. For these figures, see Barnett, Communist China and
Asia, pp. 229–230.
236. Jung Chang and Jon Halliday, Mao: The Untold Story (New York: Knopf,
2005), pp. 381–85. The authors note also that Mao was determined to build
China into a strong military power, including obtaining nuclear weapons and
this motivated Mao to spend less on agriculture, resulting in food shortages.
They note that 61 percent of the Chinese government’s budget went to mili-
tary and arms-related industries. Just over 8 (8.2) percent was allocated to
education and health care and that official government documents mention
cutting consumption to satisfy the need for exports.
237. Ibid.
238. Some other information may also be relevant. Meanwhile, Mao’s Stalinist
model for development showed very visible signs of failing. Mao could
not wring more capital investment from the agricultural sector to finance
Notes ● 227
expanding heavy industry, which was not doing what Mao expected any-
way. There were no external sources of capital without improving relations
with the West, which Mao would not do. There was a growing gap in wages
between the cities and countryside that Mao found objectionable for political
reasons. Mao had to find another approach to development.
This came in the form of Mao’s “Great Leap Forward” launched in 1958.
Instead of retreating from his efforts to build heavy industry while ignor-
ing the agricultural sector, Mao sought to take a big step forward toward
the ultimate goal of Communism. He attempted to link the countryside and
the cities economically and utilize spiritual incentives to lift productivity in
addition to communes that would turn the peasants into efficient workers.
Instead, factories which were brought to the rural areas (including “backyard
steel plants”), produced little that could not be used. Peasants hid their tools
and ate their animals before entering the communes and adopted lazy habits
once there. In addition, cadres, who did not know how to run factories or
farms, made policies for both.
239. Jung Chang and Jon Halliday, Mao: The Untold Story (New York: Alfred
Knopf, 2005), p. 383.
240. Ibid.
241. Ibid.
242. Frank Dikötter, Mao’s Great Famine: The History of China’s Most Devastating
Catastrophe, 1958–1962 (New York: Walker Publishers, 2010).
243. Ta Kung Pao, October 13, 1959, cited in Copper, China’s Foreign Aid, p. 1.
244. “Quarterly Chronicle and Documentation,” China Quarterly, November-
December 1962, cited in ibid.
245. Ibid., p. 442.
246. Chang and Halliday, Mao: The Untold Story, p. 461.
247. Ibid.
248. Ibid.
249. Ibid., p. 462.
250. Ibid.
251. Ibid., p. 586.
252. Gregory T. Chin and B. Michael Frolic, “Emerging Donors in International
Development Assistance: The China Case,” IDRC/CRDI, December 2007
(online at www.idrc.ca/uploads/user-s/12066374801China_find_summary.
pdf ).
253. See John W. Garver, Foreign Relations of the People’s Republic of China
(Englewood Cliffs, NJ: Prentice Hall, 1993), p. 243 and 312.
254. The four modernizations were (in order) agriculture, industry, science and
technology, and national defense. Zhou Enlai invented them before Mao
died, but they became the banner of Deng’s reforms in 1978. They were said
to define Deng’s goals of modernizing China by the end of the century and
were connected to China’s Ten-Year Plan. China lacked the infrastructure
and the foreign exchange to fulfill the modernizations and had to concentrate
on both. See Colin Mackerras, Pradeep Taneja, and Graham Young, China
228 ● Notes
since 1978: Reform, Modernization and “Socialism with Chinese Characteristics”

(Melbourne: Longman Cheshire, 1994), p. 63.
255. See Thomas G. Moore and Dixia Yang, “Empowered and Restrained: Chinese
Foreign Policy in the Age of Economic Interdependence,” in David M.
Lampton (ed.), The Making of Chinese Foreign and Security Policy in the Era of
Reform, 1978–2000 (Stanford, CA: Stanford University Press, 2001), p. 226.
256. World Development Report 1991: The Challenge of Development (New York:
257. World Development Report 1990: Poverty (New York: Oxford University Press,
1990), p. 216.
258. Yearbook on China’s Foreign Economic Trade (various years) and “Investment
Data,” China Business Review, May-June 1996, p. 40, cited in Margaret
M. Pearson “China’s Integration into the International Trade and Investment
Regime,” in Elizabeth Economy and Michael Oksenberg (eds.) China Joins the
World: Progress and Prospects (New York: Council on Foreign Relations, 1999),
p. 171.
259. Jonathan Watts, “China Shifts from Receiving to Giving Foreign Aid as
Economic Boom Continues,” The Guardian, December 15, 2004 (online at
guardian.co.uk). It is worth noting that the author cites James Morris, head of
the World Food Program, as saying that China, with an average growth rate
of 9 percent in recent years, has lifted up to 500 million people out of poverty
and does not need us.
260. See, for example, Keith Bradsher, “China Faces Backlash at Home over
Blackstone Investment,” New York Times, August 2, 2007 (online at nyt.com).
261. Ken Miller, “Coping with China’s Financial Power,” Foreign Affairs, July/
August 2010 p. 100.
262. Lampton, The Three Faces of Power, p. 243.
263. Elizabeth C. Economy and Michael Levi, By All Means Necessary: How China’s
Resource Quest Is Changing the World (New York: Oxford University Press,
2014), pp. 47–49.
264. Samuel P. Huntington, The Clash of Civilizations and the Remaking of the
World Order (New York: Simon and Schuster, 1996), p. 229.
265. Aaron L. Friedberg, A Contest for Supremacy: China, America, and the Struggle
for Mastery in Asia (New York: W. W. Norton, 2011), p. 157.
267. See Pillsbury, The Hundred-Year Marathon, chapter 1.
4 China’s Foreign Policy Goals and Its Foreign

1. See Kerry Dumbaugh and Michael F. Martin, “Understanding China’s
Political System,” Congressional Research Service, December 31, 2009. As
noted earlier, information about China’s foreign aid giving is considered a
state secret. Notwithstanding this, it is possible to know something about the
Notes ● 229
decision-making process and certainly about the magnitude, kind, and condi-
tions of its aid as will be seen in subsequent chapters.
2. See A. Doak Barnett, The Making of Foreign Policy in China: Structure and
Process (Boulder, CO: Westview Press, 1985) p.77 for information that puts
this body in the context of the policy-making bureaucracy. Dumbaugh and
Martin suggest that leading small groups “facilitate consensus building and
coordination.” They are mentioned in the Party’s constitution. See Dumbaugh
and Martin, “Understanding China’s Political System,” p. 11. Also see Linda
Jakobson and Dean Knox, “New Foreign Policy Actors in China,” Stockholm
International Peace Research Institute, September 2010.
3. Ibid. This Leading Small Group was established in 1958, but disappeared dur-
ing the Cultural Revolution.
4. It is almost certain its members consider it a party group, even though the
party’s name is not always used.
5. Barnett suggests that the foreign minister convenes meetings. Lu says that
it was reorganized after the 13th Party Congress and that it was headed by
Premier Li Peng and one of its members was now the defense minister. He says
that in 1998 Chinese Communist Party secretary general Jiang Zemin took
charge. Lu says that its functions were not well defined from the onset.
6. Barnett suggests the Central Committee picks them, but, if true, this is prob-
ably a formality. See Barnett, The Making of Foreign Policy in China , p. 77.
7. See Lu Ning, “The Central Leadership, Supraministry Coordinating Bodies,
State Council Ministries, and Party Departments,” in David M. Lampton
(ed.), The Making of Chinese Foreign and Security Policy in the Era of Reform
(Stanford, CA: Stanford University Press, 2001), p. 45.
8. Lu, “The Central Leadership,” p. 47. One writer describes its functions to
include “coordinating the work of several agencies and ensuring Party super-
vision over government activities.” See Wei Liang, “Bureaucratic Politics
Interministerial Coordination and China’s GATT/WTO Admission
Negotiations,” in Ka Zeng (ed.), China’s Foreign Trade: The New Constituencies
(London: Routledge, 2007), p. 24.
9. Gregory T. Chin and B. Michael Frolic, “Emerging Donors in International
Development Assistance: The China Case,” International Development
Research Centre (Canada), December 2007, p. 6. Regarding foreign aid deci-
sion making, its responsibility is said to be “programming” aid.
10. Lu, “The Central Leadership,” p. 47. Also see Robert G. Sutter, Chinese Foreign
Relations: Power and Policy since the Cold War (Lanham, MD: Rowman and
Littlefield, 2010), p. 59. Both writers connect the growing importance of this
body to the fact, at least during the period 1998 to 2003, that it was headed by
Premier Zhu Rongji.
11. The others are: Politics and Law, Hong Kong and Macau, Taiwan Affairs,
Propaganda and Ideology, and Party Building. See Alice Miller, “The CCP
Central Committee’s Leading Small Groups,” China Leadership Monitor,
No. 26.
230 ● Notes
12. Ibid. See also Dumbaugh and Martin, “Understanding China’s Political
System,” p. 11.
13. See Barnett, The Making of Foreign Policy in China , chapter 6.
14. Ibid., p. 81.
15. Chin and Frolic, “Emerging Donors in International Development Assistance,”
p. 6.
16. Jakobson and Knox, “New Foreign Policy Actors in China,” p. 8.
17. Barnett, The Making of Foreign Policy in China, pp. 93–94. Before 2003, the
Ministry of Commerce was the Ministry of Foreign Economic Relations and
Trade; in 1982 was formed from the Ministry of Foreign Trade, the Ministry
of Foreign Economic Relations (which had a major role in China’s foreign aid
at one time), the State Import and Export Commission, and the State Foreign
Investment Commission.
18. “China’s Foreign Aid,” Part V.
19. This suggests this is a growing motivation for aid giving. This is confirmed in
chapters of this book that follow.
20. Carol Lancaster, “Foreign Aid in the Twenty-First Century: What
Purposes?” in Louis A. Picard, Robert Groelsema, and Terry F. Buss (eds.),
Foreign Aid and Foreign Policy: Lessons for the Next Half-Century (Armonk,
NY: M. E. Sharpe, 2008), p. 47. Also see Jakobson and Knox, “New Foreign
Policy Actors in China,” p. 10. The Ministry of Commerce, or more accu-
rately its predecessors, and their counselor offices around the world worked
closely with recipient countries and acquired considerable experience and
expertise in giving aid. As China’s economy was decentralized under Deng
Xiaoping, it lost some of its authority over aid giving. This was restored
to some degree when China’s economy was subsequently recentralized.
See Shuaihua Cheng, Ting Fang Hui-Ting Lien, “China’s International
Aid Policy and Its Implications for Global Governance,” Working Paper
(Research Center for Chinese Politics and Business Indiana University),
June 2012, pp. 5–6.
21. Chris Alden, China in Africa (London: Zed Books, 2007), p. 24.
22 . Chin and Frolic, “Emerging Donors in International Development Assis-
tance,” p. 6.
23. Deborah Brautigam, “China’s Foreign Aid in Africa: What Do We Know?” in
Rotberg (ed.), China into Africa: Trade, Aid, and Influence (Washington, DC:
Brookings Institution, 2008), p. 201.
24. Ibid.
25. Ibid.
26. Zhang Yuan Shan, “The Primary Responsibilities of the Ministry of Commerce
Have Been Defined with the Approval of the State Council,” Guoji Shangbao
May 3, 2003, p. 1 (Translated by FBIS Document ID: CPP20030624000249).
The essential article reads: “Taking responsibility for China’s foreign aid work,
formulating and executing foreign aid policies and programs, and signing and
executing related agreements; organizing and executing foreign aid plans,
Notes ● 231
supervising and investigating the implementation of foreign aid projects, man-

aging foreign aid funds, preferential loans, special funds, and other foreign aid
funds of our government; promoting the reform of foreign aid methods.”
27. Carol Lancaster, “The Chinese Aid System,” Center for Global Development,
June 27, 2007, cited in Jakobson and Knox, “New Foreign Policy Actors in
China,” p. 10.
28. Barnett, The Making of Foreign Policy in China, p. 81. Another writer says
the Minister of Commerce is responsible for “designing China’s . . . economic
aid strategies under guidelines established by the central leadership.” See Ka
Zeng and Andrew Mertha, “Introduction,” in Ka (ed.), China’s Foreign Trade
Policy, p. 4.
pp. 6–7.
31. Ibid., p. 7.
32. Alden, China in Africa, p. 24.
33. “Ministry of Finance: The World Bank’s Counterpart Agency in China,”
World Bank (no date given) (online at go.worldbank.org/TOFZXVBVRLQO,
viewed on March 10, 2009).
p. 8.
35. Jakobson and Knox, “New Foreign Policy Actors in China,” p. 12.
36. “PRC: MOFTEC, Other Agencies Issue Notice on Supervision over Foreign
Aid Goods,” Ministry of Foreign Trade and Economic Cooperation Foreign
Assistance Document No. (2002) 560, translated by FBS, January 7, 2003
(Document ID: CPP20030212000126).
38. Ibid. However, judging from how aid decisions are made in other countries
one wonders how true this is.
39. Henry Wing Yep, “China’s Foreign Aid: Promoting a “Win-Win’ Environment”
(unpublished master’s degree thesis), pp. 7–9. Helping the Chinese economy
and creating jobs are issues that are discussed later in this chapter.
40. See “Brief Introduction,” The Export-Import Bank of China (online at exim-
bank.gov.cn), viewed on March 10, 2009. By 1999, according to a Chinese
source, the bank had extended loans totaling $385 million for 50 projects in
27 nations. They were preferential loans targeted at promising manufacturing
projects in developing countries and for the purchase of Chinese mechanical
and electronic products. See “China: Loan to Increase Bilateral Trade,” China
Daily, August 27, 1999 (online at chinadaily.com.cn).
41. Takasaki Kobayashi, “Chugoku no Enjo Seisaku: Taigai Enjo Kaikaku no
Tenkai,” Kaibatsu Kiyu Kenkyuhoko, 2007, pp. 119–22, cited in Watanabe,
“China’s Foreign Aid,” in Kim and Potter (eds.), Foreign Aid Competition in
Northeast Asia (Sterling, VA: Kumarian Press, 2012), p. 67.
42. Ibid.
232 ● Notes
43. See, “Loans to Overseas Investment Projects,” The Export-Import Bank of

China (online at eximbank.gov.cn), viewed on March 10, 2009. The Chinese
Communist Party, of course, likely sets these as goals.
44. Brautigam, “China’s Foreign Aid in Africa,” p. 201.
45. Its own annual report mentions that it has been effective in boosting the eco-
nomic and social development of the recipient countries and has also improved
friendly economic and trade cooperation between China and other developing
countries.” This was stated in its 2002 annual report. See Joshua Kurlantzick,
Charm Offensive: How China’s Soft Power Is Transforming the World (New
Haven, CT: Yale University Press, 2007), p. 98. It is well known that it
provides loans for overseas construction and various other kinds of invest-
ments. See Todd Mass and Sarah Rose, “China Exim Bank and Africa: New
Lending, New Challenges,” Center for Global Development (Washington,
DC) November 2006, p. 1.
46. Paul Hubbard, “Chinese Concessional Loans,” in Rotberg (ed.), China into
Africa, pp. 220–21.
47. See Bates Gill and James Reilly, “The Tenuous Hold of China Inc. in Africa,”
Washington Quarterly, Summer 2007, pp. 37–52.
48. Harry Broadman, Africa’s Silk Road: China and India’s New Economic Frontier
(Washington, DC: World Bank, 2007), pp. 249–50.
49. Barry Naughton, The Chinese Economy: Transitions and Growth (Cambridge,
MA: MIT Press, 2007), p. 457.
50. Brautigam, “China’s Foreign Aid in Africa,” p. 143 and p. 201.
51. The People’s Bank of China that has been “experimenting” in nongovernment
securities and other instruments suggests that it has gone beyond its basic
mandate of capital preservation, liquidity, and profit. See Ken Miller, “Coping
with China’s Financial Power,” Foreign Affairs, July/August 2010, p. 98.
52. See its website at chinainternationalfund.com.
53. See Catherine Chong Siew Keng, “An Update on China’s Sovereign Wealth
Fund: China Investment Corporation,” in Wang and Zheng (eds.), China:
Development and Governance, pp. 201. Alternative investments grew from
6 percent in 2009 to 21 percent in 2010.
54. See Huang Yanjie, “China’s State-Owned Enterprises: The Dilemma of
Reform,” in Wang and Zheng (eds.), China: Development and Governance,
pp. 190–91. However, it need be noted as mentioned in Volume 1, Chapter 3,
that many of China’s large enterprizes have been cut in size or their growth
limited in recent months.
55. Brautigam, Chinese Aid and African Development, p. 48.
56. Alden, China in Africa, p. 24. According to Brautigam, the economic counsel-
ors, from the commercial offices in the embassy, often make decisions separate
from the ambassadors. See Brautigam, Chinese Aid and African Development,
p. 48.
57. See Jakobson and Knox, “New Foreign Policy Actors in China,” chapter 4.
58. It is worth noting, though, that there is no constituency in China that pro-
motes aid as there are to some extent in some Western countries. Also think
Notes ● 233
tanks have very little interest in the subject and, therefore, little input. See
Lancaster, “The Chinese Aid System,” p. 5.
59. This began with the Opium War, which many see as marking the beginning
of a 100-year period of China’s humiliation, which included embarrassment
caused by Western countries and Japan taking advantage of China. One writer
comments that the pre-Communist history of modern China was “essentially
one of weakness, humiliation and failure.” See Harold C. Hinton, Communist
China in World Politics (Boston, MA: Houghton Mifflin, 1966), p. 6.
60. One scholar notes that communism to Mao was “vengeance against the past
and the West.” See Joseph Levenson, Revolution and Cosmopolitanism: The
Western Stage and the Chinese Stages (Albany, NY: State University of New
York Press, 1971), p. 54.
61. See A. Doak Barnett, Communist China and Asia: A Challenge to American
Policy (New York: Vintage, 1960), chapter 2. Mao, it is widely known,
wanted to rid China of its past. But much he kept, especially that which
facilitated his totalitarian rule. Elegant notes, “habits of the mind were
congenial.” He also argues that Mao simply shifted loyalty from the fam-
ily to the state and kept the Confucian dedication to Utopia, “unimpaired
by doubts to human capabilities.” Finally he notes that the insistence on
conformity, the reliance on the written word, and the preference for forms
rather than reality” were in common. See Robert S. Elegant, The Center
of the World: Communism and the Mind of China (New York: Funk and
Wagnalls, 1968), p. 197.
62. Hinton, Communist China in World Politics, chapter 3.
63. Barnett, Communist China and Asia , pp. 68–69.
64. Greg O’Leary, The Shaping of Chinese Foreign Policy (New York: St. Martin’s
Press, 1980), p. 17.
65. Harold C. Hinton, China’s Turbulent Quest (New York: Macmillan, 1970),
p. 31.
66. Chiang’s forces on Quemoy conducted various military forays into China
after 1949 for some years. The United States supported Chiang’s efforts, at
least tacitly, and debated a policy of making Taiwan permanently separate
from China. See Thomas E. Stolper, China, Taiwan and the Offshore Islands
(Armonk, NY: M. E. Sharpe, 1985), pp. 10–11, and David M. Finkelstein,
Washington’s Taiwan Dilemma, 1949–1950: From Abandonment to Salvation
(Fairfax, VA: George Mason University Press, 1993), chapter 7. Within
China, anti-Communist guerrilla activities persisted until 1952. See Barnett,
Communist China and Asia, p. 12.
67. Hinton, Communist China in World Politics, pp. 122–23. It certainly looks like
this in retrospect.
68. John W. Garver, Foreign Relations of the People’s Republic of China (Englewood
Cliffs, NJ: Prentice Hall, 1993), pp. 41–42. Also see Hinton, China’s Turbulent
Quest, p. 38.
69. Andrew J. Nathan and Andrew Scobell, China’s Search for Security (New York:
Columbia University Press, 2012), pp. 70–71.
234 ● Notes
70. Mao said: “Internationally we belong to the anti-imperialist front, headed by

the Soviet Union.” He further stated that we “can only look for genuine and
friendly aid from that front and not from the imperialist front.” See Mao Tse-
tung, On People’s Democratic Dictatorship (Peking: English Language Service
of the New China News Agency, 1949), p. 9. Mao made his “lean to one side”
comment in this same publication.
71. The Chinese Communist Party, as seen in early documents and manifestos,
had long taken the view that due to imperialism China was “still dominated
by a feudal system of militarists and bureaucrats” and that “until the Chinese
proletariat is able to seize power” this would not change. See Benjamin
Schwartz, Chinese Communism and the Rise of Mao (New York: Harper and
Row, 1951), p. 39.
72. Hinton, China’s Turbulent Quest, pp. 37–40.
73. Garver, Foreign Relations of the People’s Republic of China, p. 41.
74. Liu wrote this at the time. See Liu Shao-ch’i, Internationalism and Nationalism
(Peking: Foreign Languages Press, 1949), p. 11 cited in Barnett, Communist
China and Asia, p. 343.
75. See Michael B. Yahuda, China’s Role in World Affairs (London: Croom Helm,
1979), p. 40.
76. For further details on the so-called “last chance” theory, see Garver, Foreign
Relations of the People’s Republic of China, p. 41.
77. Hinton, China’s Turbulent Quest, p. 41.
78. Barnett, Communist China and Asia , p. 345. Also see Alan J. Day, Sian Kevile,
and Peter Jones, China and the Soviet Union, 1949–84 (New York: MK Books,
1985), pp. 2–3.
79. See Yahuda, China’s Role in World Affairs, p. 41.
80. Ibid. The author stresses that Mao certainly thought this was the case.
81. See Barnett, Communist China and Asia , pp. 220–23. China’s trade with the
Soviet Union before World War II was less than 1 percent of China’s total
trade. It rose to 33.5 percent in 1950, 78.1 percent in 1952, and 82 percent in
1955. It declined thereafter.
82. See the various estimates of China’s aid to different regions of the world in
Volume 1, Chapter 1.
83. For a list of events that engendered Sino-Soviet differences, their dates and the
importance of them, see Yahuda, China’s Role in World Affairs, chapter 1.
84. Zagora, who has arguably written the best analysis of the causes for the split,
sees it as beginning in 1956 based on differences in views on how to “build
socialism,” the relationship among Communist parties, and how best to
struggle against the West. Chinese leaders have supported this view. Zagoria
also notes that at this juncture China adopted a different strategy from the
Soviet Union on Eastern Europe and began seeing itself as a separate source
of Communist doctrine. See Donald S. Zagoria, The Sino-Soviet Conflict:
1956–1961 (New York: Atheneum, 1964), p. 7.
85. Observers have noted that even though American forces (and bases) surrounded
China, the United States threatened China only on the periphery and not its
Notes ● 235
borders. Mao in fact noted that the United States did not have a clear military
or political purpose. He described the United States as “an ox with its tail
tied to a post.” On the other hand, the Soviet Union threatened China’s bor-
ders, and was a greater intimidator relative to China’s heartland. See Jonathan
D. Pollack, “China’s Agonizing Reappraisal,” in Herbert J. Ellison (ed.), The
Sino-Soviet Conflict: A Global Perspective, (Seattle: University of Washington
Press, 1982), p. 57.
86. The dispute also had global ramifications. Some writers, in fact, see it as the
most important factor in international politics for two decades or more. See
G. W. Choudhury, China in World Affairs: The Foreign Policy of the PRC Since
1970, (Boulder, CO: Westview Press, 1982), p. 126.
87. See Steven Goldstein, “Nationalism and Internationalism: Sino-Soviet
Relations,” in Thomas Robinson and David Shambaugh (eds.), Chinese Foreign
Policy: Theory and Practice (Oxford, NY: Clarendon Press, 1994), pp. 224–265.
88. These included the permanent stationing of Soviet forces in Dairen and Port
Arthur in northeast China, the establishment of a joint Pacific Fleet under
Moscow’s control, setting up naval communications facilities in China under
Soviet auspices, and more. See Chun-tu Hsueh, “Introduction,” in Chun-tu
Hsueh (ed.), China’s Foreign Relations: New Perspectives (New York: Praeger,
1982), pp. 2–3. There were other provisions in the agreement such as provi-
sion for the joint administration of the railroads in Manchuria, joint stock
companies in the border areas of China, mining and petroleum extracting
companies, a company to build and repair ships in Dairen, and a civil avi-
ation company. China agreed to the status quo in Outer Mongolia, which
meant its independence and domination by Moscow. For details, see Barnett,
Communist China and Asia, p. 345.
89. A number of scholars have opined that Mao did not play a central role in the
decision to invade South Korea and was little more than informed about it.
This point is discussed in greater detail in Volume 2, Chapter 3.
90. A number of specialists in the field regard this as one of the major reasons
for the Sino-Soviet split. See, for example, Chun-tu Hsueh and Robert C.
North, “China and the Superpowers: Perception and Reality,” in Hsueh (ed.),
China’s Foreign Relations, p. 73. They call it one of the two major reasons.
They noted that Foreign Minister Chen Yi stated at the time that China would
have an atomic bomb “even if the Chinese people do not have pants to wear.”
Others suggest that the dispute between China and the Soviet Union has a
long history and there was much more to it than the Offshore Island matter
in 1958. See Sidney Klein, Politics versus Economics: The Foreign Trade and Aid
Policies of China (Hong Kong: International Studies Group, 1968), pp. 56–57.
It was clear that the Soviet Union did not respond as strongly as China and
came mainly after the fact. See Joseph Camilleri, Chinese Foreign Policy: The
Maoist Era and Its Aftermath (Seattle: University of Washington Press, 1980),
pp. 56–57.
91. Lawrance, China’s Foreign Relations since 1949 (London: Routledge, 1975),
p. 82.
236 ● Notes
92. For details, see Garver, Foreign Relations of the People’s Republic of China,
pp. 43–65. The break between the parties coincided with differences over
Cuba, an issue that will be discussed in a later chapter.
93. Beyond the Soviet criticism of China over Mao’s extremism and his destroying
the party, the territorial issue between China and the Soviet Union became
more serious. Beijing spoke of the “lost territories” that Russia took in the past
and organized demonstrations in some border areas. See Camilleri, Chinese
Foreign Policy, p.76.
94. See Jonathan D. Pollack, “China’s Agonizing Reappraisal,” in Ellison (ed.),
The Sino-Soviet Conflict, p. 50.
95. Chinese leaders perceived there was a danger the Soviet Union might take
similar actions against China. Thus the Sino-Soviet dispute deepened. See
Hinton, China’s Turbulent Quest, p. 159.
96. See A. Doak Barnett, China and the Major Powers in East Asia (Washington,
DC: Brookings, 1977), p. 52.
97. The Sino-Soviet Dispute (New York: Charles Scribner’s Sons, 1969), p. 29;
China and the Soviet Union: 1949–84 (New York: Facts on File Publications,
1985), p. 21. Also see the various sources cited in this section about the
dispute.
98. See Klein, Politics versus Economics, chapter 2 for an explanation of the Sino-
Soviet rift from purely an economic perspective.
99. Dangdai zhongguo waijiao, pp. 117–18 cited in Shu Gang Zhang, “Beijing’s
Aid to Hanoi and the United States-China Confrontations, 1964–1968,”
in Priscilla Roberts (ed.), Behind the Bamboo Curtain: China, Vietnam and
the World Beyond (Washington, DC: Woodrow Wilson Center Press, 2006),
p. 260.
100. China and the Soviet Union: 1949–84, p. 21. The writers cited Beijing Radio.
101. Dangdai zhongguo waijiao, pp. 117–18 cited in Shu Gang Zhang, “Beijing’s
Aid to Hanoi and the United States-China Confrontations, 1964–1968,”
p. 260.
102. Shu Gang Zhang, “Beijing’s Aid to Hanoi and the United States-China
Confrontations, 1964–1968,” p. 261. China perceived that the break with the
Soviet Union not only created stress between the two countries and over their
border issues but also increased tension with the United States, which would
exploit the situation. When the Kennedy administration subsequently shifted
US strategic policy from brinkmanship to a limited war policy, China saw this
as a major threat and an increase in the possibility of conflict.
103. One writer states: “The Chinese leadership must have chosen to buy increas-
ing self-reliance and freedom of action in foreign affairs at the price of eco-
nomic development at home.” See Alexander Eckstein, Communist China’s
Economic Growth and Foreign Trade (New York: McGraw-Hill, 1956), cited in
Schurmann and Schell, Communist China, p. 418.
104. China and the Soviet Union: 1949–1984, p. 24. The Soviet Union at this time
broke relations with Albania, which was at the time receiving considerable aid
from China.
Notes ● 237
105. The author here is taking China’s official aid at face value as reported in vari-
ous publications cited in Volume 1, Chapter 1. Using these figures China’s aid
in 1961 was nearly threefold the previous years.
107. Alan Hutchison, China’s African Revolution (London: 1975), p. 206. Also
see Bruce Larkin, “Chinese Aid in Political Context: 1971–73,” in Warren
Weinstein (ed.), Chinese and Soviet Aid to Africa (New York: Praeger, 1975),
p. 238.
108. See Klein, Economics versus Politics, p. 145. The author states that China saw
neither India nor Taiwan as its primary foe in Asia; rather it was the Soviet
Union. He cites nine countries in Asia where economic competition pre-
vailed: North Korea, North Vietnam, Outer Mongolia, Indonesia, Burma,
Cambodia, Ceylon, Nepal, and Pakistan.
109. Ibid.
110. This document is discussed in detail in Volume 1, Chapter 1.
111. Some observers noted that China’s aid guidelines amounted to an “ill-
disguised” effort to draw invidious comparisons with Soviet aid.
112. Hinton, China’s Turbulent Quest, p. 194. Also see Yahuda, China’s Role in
World Affairs, pp. 160–61. Yahuda states that, just as much as criticizing
Soviet aid, China was also touting its own foreign aid.
113. At this time China was providing much needed economic and military aid
to Vietnam as will be seen in the next chapter. It is worth noting here that
in 1963, China gave its permission for arms delivered to North Vietnam to
be used in the conflict in South Vietnam. Hanoi, in return, took a more
pro-China position regarding the Sino-Soviet dispute. See Hinton, China’s
Turbulent Quest, p. 119.
114. William E. Griffith, “Sino-Soviet Relations, 1964–1965,” China Quarterly,
January-March 1966, pp. 60–63.
115. Yahuda, China’s Role in World Affairs, p. 161.
116. See Copper, China’s Foreign Aid, pp. 75–76 for details.
117. See Wolfgang Bartke, China’s Economic Aid (New York: Holmes and Meier,
1975), pp. 10–11 for this estimate.
118. One author notes that after 1970 China made “almost revolutionary changes”
in its foreign policy to deal with the threats from Moscow. The same writer
also notes that China engaged in frequent condemnations of the Soviet Union
after it became a member and was much less harsh on the United States. See
Choudhury, China in World Affairs, p. 4 and p. 131.
119. C. G. Jacobsen, Sino-Soviet Relations since Mao: The Chairman’s Legacy (New
York: Praeger, 1981), chapter 3.
120. Ibid., chapter 2.
122. Many instances of this are cited in following chapters.
123. John F. Faust and Judith F. Kornberg, China in World Politics : Policies, Processes
and Prospects (Boulder, CO: Lynne Rienner, 2005), p. 111. It is interesting to
note that China even extended a “gift” to Russia (not to mention paying for
238 ● Notes
large quantities of oil and gas) for US$ 400 million for a feasibility study on
building a spur to the East Siberian-Pacific Ocean pipeline that would go to
China. “CNPC to Issue $400 Mln Grant to Build ESPO Pipeline Branch to
China, Interfax, March 22, 2006, cited in Michael R. Chambers, “Framing the
Problem: China’s Threat Environment and International Obligations,” in Roy
Kamphausen and Andrew Scobell (eds.), Right-Sizing the People’s Liberation
Army: Exploring the Contours of China’s Military (Carlisle, PA: U.S. Army War
College, 2007), p. 38.
124. Camilleri, Chinese Foreign Policy, p. 5.
125. Ibid., p. 5. Also, see Henry Kissinger, On China (New York: Penguin, 2011).
Kissinger pursues this theme throughout the book.
126. Mao noted that reformists during the Qing Dynasty, Sun Yat-sen, and Chiang
Kai-shek were all preoccupied if not obsessed with this purpose. Their means,
of course, were quite different. Mao noted that both Sun and Chiang tried to
improve China’s status not only by trying to adopt Western culture and poli-
tics, but also by enhancing China’s self-identity and by fostering patriotism.
But in Mao’s view they failed because they did not go far enough and did not
espouse the right ideology.
127. Barnett, Communist China and Asia , p. 67. Mao may also have believed that
China would not be a Soviet satellite in the “usual sense.” See Hinton, China’s
Turbulent Quest, p. 35.
128. Anne Gilks and Gerald Segal, China and the Arms Trade (New York: St.
Martin’s Press, 1985), p. 20.
129. Mao Tse-tung, “Cast Away Illusions, Prepare for Struggle,” in Mao Tse-tung,
Selected Works, Volume 4 (Peking: Foreign Languages Press, 1969). Mao at
the time declared: “All those wars of aggression, together with political and
cultural aggression, have caused Chinese to hate imperialism.”
130. Mao’s xenophobia in this regard can be seen both as a manifestation of nation-
alist sentiment and a return to dynastic policies (of some dynasties including
the most recent one) in the past. See Ross Terrill, The New Chinese Empire and
What It Means for the United States (New York: Basic Books, 2003), p. 129.
131. Mao, in fact, connected the two. One writer calls Mao the “embodiment of
anti-imperialist nationalism.” See Edward Friedman, National Identity and
Democratic Prospects in Socialist China (Armonk, NY: M. E. Sharpe, 1995),
p. 117.
132. Barnett, Communist China and Asia , p. 10. Barnett and other writers refer to
Mao’s rule as totalitarian and see it as a very efficient political system.
133. Ibid., p. 1. Barnett calls Mao’s China the most “dynamic, disrupting, and
disturbing influences on the world scene.”
134. Chou En-lai, “The Present International Situation, China’s Foreign Policy,
and the Question of the Liberation of Taiwan,” (report to the National People’s
Congress), Current Background , July 5, 1956, cited in Barnett, Communist
China and Asia, p. 65.
135. Xinhua, March 17, 1954, cited in ibid.
136. Barnett, Communist China and Asia , p. 66.
Notes ● 239
137. Ibid., pp. 66–67. Also see Hinton, China’s Turbulent Quest, p. 174. Hinton
notes that the modern era has hence seen China try to improve its status and
transform itself into a nation. In fact, one can say that the most complex of
all of China’s foreign policy goals has been its preoccupation with status and
influence and restoring its exalted position in the world.
138. Speech by Mao Tse-tung to the Supreme Soviet of the USSR on September 21,
1957, in Current Background , November 13, 1957.
139. There were a number of newspaper, magazine, and book accounts of China
that portrayed what Mao had done as frightening. This certainly reflected a
kind of respect the West now gave China.
140. See John F. Copper and Daniel S. Papp (eds.), Communist Nations’ Military
Assistance (Boulder, CO: Westview Press, 1983), preface.
141. Hinton, China’s Turbulent Quest, p. 303. The United States sought to avoid
provoking China from direct involvement in the Vietnam War and thus
restrained its military actions.
142. See Harold C. Hinton, Three and a Half Powers: The New Balance in Asia
(Bloomington, IN: University of Indiana Press, 1975).
143. As noted earlier, this theme was put forward in Lenin’s book Imperialism: The
Highest Stage of Capitalism. Lenin argued that through imperialism, especially
colonialism, the rich industrial countries exploited their colonies’ peoples
more than their own workers, due to differences in race, culture, etc., and
made huge profits that they used in part to bribe their own workers out of
being revolutionary. Thus the vanguard of the Communist revolution became
Third World countries.
144. Lin Piao, “Long Live the Victory of People’s War,” September 3, 1965, from
K. Fan (ed.), Mao Tse-tung and Lin Piao: Post Revolutionary Writings (Garden
City, NY: Anchor Books, 1972), p.401.
145. This point is discussed in Volume 1, Chapter 1.
146. Cited in John Wilson Lewis and Litai Xue, China Builds the Bomb (Stanford,
CA: Stanford University Press, 1968), p. 238.
147. Garver, Foreign Relations of the People’s Republic of China, pp. 260–61.
148. China called this an important event. Premier Zhou Enlai immediately called
for the complete prohibition of nuclear weapons. Clearly China could not be
excluded from the issue of nuclear weapons that was a matter of the big pow-
ers. See Wilson Lewis and Litai, China Builds the Bomb, p. 1.
149. China’s decision to go nuclear, of course, came from the fact that in addition
to it giving China face, China had been intimidated by the United States with
nuclear weapons and China was upset with the Soviet Union. See Garver, The
Foreign Policy of the People’s Republic of China , pp. 260–61.
150. Barnett, China and the Major Powers in East Asia , p. 160. The author says this
was a major point of disagreement between the Soviet Union and China and
related to China’s efforts to attain global status.
151. This point will be discussed in following chapters. China’s aid in this realm
was quite restricted. But, suffice it to say here, doing this put China in the
same class as the United States and the Soviet Union.
240 ● Notes
152. See Copper, China’s Foreign Aid, p. 1.

153. As one author notes when assessing China’s economy: “When all the quali-
fications are considered, it is the case that changes in the relative economic
strength of nations have had the greatest influence on shifts in the interna-
tional balance of power in the twentieth century.” Dwight H. Perkins, “The
International Consequences of China’s Economic Development,” in Richard
H. Solomon (ed.), The China Factor: Sino-American Relations & the Global
Scene (Englewood Cliffs, NJ: Prentice-Hall, 1981), p. 124.
154. See Copper, China’s Global Role, Chapter 1.
155. Charles A. Kupchan, No One’s World: The West, The Rising Rest, and the
Coming Global Turn (Oxford: Oxford University Press, 2012), chapter 5.
156. See Chapter 3 for details on China’s economic success. For a recent assessment
of what this means, see Stefan Halper, The Beijing Consensus: How China’s
Authoritarian Model Will Dominate the Twenty-First Century (New York: Basic
Books, 2010).
157. Zhang Weiwei, The China Wave: Rise of a Civilizational State (Hackensack,
NJ: World Century, 2011); Ann Lee, What the U.S. Can Learn from China:
An Open-Minded Guide to Treating Our Greatest Competitor as Our Greatest
Teacher (San Francisco, CA: Berrett-Koehler, 2012); Eric X Li, “The Life of
the Party: The Post-Democratic Future Begins in China,” Foreign Affairs,
January/February 2013.
158. Yong Deng, China’s Struggle for Status: The Realignment of International
Relations (New York: Cambridge University Press, 2008), p. 1.
159. Camilleri, Chinese Foreign Policy, p. 8.
160. Chin-Hao Huang, “China’s Soft Power in East Asia: A Quest for Status and
Influence?” National Bureau of Asian Research Special Report #42, January
2013, p. 5.
161. Deng Xiaoping, “Heping Fazhan Shi Dangdai (Shijie De Lingda Wenti,” Peace
and Development are the Two Major Issues in the Contemporary World), in
Deng Xiaoping Wenxuan, Vol. 3 (Selected Works of Deng Xiaoping) (Beijing:
Remin Chubanshe, 1993), p. 105.
162. Deng, China’s Struggle for Status, p. 2.
163. Ibid., p. 3.
164. Deng, China’s Struggle for Status, p. 8; Nathan and Scobell, China’s Search for
Security, chapter 10.
165. David Shambaugh, China Goes Global: The Partial Power (Oxford: Oxford
166. Huang, “China’s Soft Power in East Asia,” pp. 6–7.
167. Shambaugh, China Goes Global, pp. 210–16.
169. Foreign aid is not normally defined as soft power. But to China it is. Or at least
it grew out of the growth of China’s major element of hard power: economic
power. See Nathan and Scobell, China’s Search for Security, p. 318.
170. Huang, “China’s Soft Power in East Asia,” p. 8.
Notes ● 241
171. Lye Liang Fook, “China’s External Relations and Global Governance,” in
Wang and Zheng (eds.), China: Development and Governance, pp. 294–95.
172. Nathan and Scobell, China’s Search for Security, pp. 321–22
173. Lai Hongyi, “China’s Soft Power,” in Wang and Zheng (eds.), China:
Development and Governance, p. 502.
174. Ibid., p. 503.
175. Huang, “China’s Soft Power in East Asia,” pp.8–9.
176. Nathan and Scobell, China’s Search for Security, pp. 322–23.
177. David Lampton, The Three Faces of Chinese Power: Might, Money and Minds
(Berkeley: University of California Press, 2008), p.172. This point is discussed
at greater length in chapter 7.
178. Thomas J. Christensen, The China Challenge: Shaping the Choices of a Rising
Power (New York: Norton, 2015), p. 18.
179. M. Taylor Fravel, Strong Borders, Secure Nation: Cooperation and Conflict in
China’s Territorial Disputes (Princeton, NJ: Princeton University Press, 2008),
pp. 46–47.
180. See the two chapters on China’s aid to African countries that follow. Of
course, China’s policy of not attaching conditions to its aid was also appreci-
ated elsewhere.
181. Deng, China’s Struggle for Status, pp. 222–23.
182. Thomas G. Moore and Dixia Yang, “Empowered and Restrained: Chinese
Foreign Policy in an Age of Economic Independence,” in Lampton (ed.), The
Making of Chinese Foreign and Security Policy, pp. 220–22.
183. David Piling, “Vice-Premier Defends Chinese Policy, Financial Times, January
28, 2010.
184. Sutter, Chinese Foreign Relations, p. 86.
185. See Michael D. Swaine, America’s Challenge: Engaging a Rising China in the
Twenty-First Century (New York: Carnegie Endowment, 2011), p. 210, includ-
ing the sources he cites in footnote no. 115.
186. Deng, China’s Struggle for Status, p. 223.
187. Kupchan, No One’s World, p. 95.
188. See Jonathan D. Pollack, “China as a Military Power,” in Onkar Marwah and
Jonathan D. Pollack (eds.), Military Power and Policy in Asian States: China,
India, Japan (Boulder, CO: Westview Press, 1980), p. 44.
189. It is believed in the West that China was not historically a militaristic power.
However, comparing the Roman Empire at its peak and Han Dynasty China,
with about 60 million in population each, the Roman Empire had an estimated
350 thousand-man army while China had an army of one million. Rome ruled
by controlling the top of each area that it governed; China forced the assimila-
tion of people it ruled. See Steve Mosher, Hegemon: China’s Plan to Dominate
Asia and the World (San Francisco, CA: Encounter Books, 2000), pp. 30–32.
According to a Chinese scholar, China engaged in 6,000 battles from the
twenty-sixth century BC to the early 1900s, more than one-third of the battles
that occurred in the world at this time. See Peng Guangqian and Yao Youshi,
242 ● Notes
The Science of Military Strategy (Beijing: Military Science Publishing House,

2005), p. 3, cited in Lampton, The Three Faces of Power, p. 15.
190. See Robert G. Sutter, Chinese Foreign Relations: Power and Policy Since the
Cold War (Lanham, MD: Rowman and Littlefield, 2008), p. 137. Over the
first three decades of its existence the People’s Republic of China deployed
its military 11 times beyond its borders. See Allen S. Whiting, “The Use of
Force in Foreign Policy by the People’s Republic of China,” The Annals, July
1972, pp. 55–66. Of the three major conflicts after World War II, the Korean
War, the Vietnam War, and the Sino-Vietnam War, China was involved in
all of them. See Kishore Mahbubani, “America’s Place in the Asian Century,”
Current History, May 2008, p. 195.
191. For this, China’s military weakness and now its strength have also been very
salient issues in recent history and in international politics. See Pollack, “China
as a Military Power,” p. 43.
192. Mosher, Hegemon, introduction.
193. According to the Stockholm International Peace Research Institute, this will
happen by 2035. For further details, see Douglas Stuart, “San Francisco 2.0:
Military Aspects of the U.S. Pivot Toward Asia,” Asian Affairs, October-
December 2012, pp. 206–7.
194. See Nathan and Scobell, China’s Search for Security. In fact, this is the theme
of this book.
196. See, for example, Jenny Clegg, China’s Global Strategy: Towards a Multipolar
World (London: Pluto Press, 2009). More relevant to China’s foreign aid, one
writer states that China cannot cope with American military power directly
and therefore must rely on its “massive economy to counter . . . balancing efforts
against it.” Aaron L. Friedberg, “Bucking China: An Alternative to U.S-China
Policy,” Foreign Affairs, September/October 2012, p. 50.
198. Michael D. Swaine and Ashley J. Telis, Interpreting China’s Global Strategy
(Santa Monica, CA: Rand Corporation, 2000).
199. Nathan and Scobell, China’s Search for Security, pp. 319–26.
200. See Mao Tse-tung, “Address to the Preparatory Committee of the New Political
Consultative Congress,” and “The Chinese People Have Stood Up,” both in
Selected Works of Mao Tse-tung (Peking: Foreign Languages Press, 1977).
201. For details, see Copper, China’s Global Role, chapter 5. The reason for the large
number of ships and planes was that the government took almost all planes
and ships when it assumed power.
202. See, for example, Arthur Huck, The Security of China (New York: Columbia
University Press, 1970). A Chinese map reprinted on page 8 shows the pres-
ence of US forces surrounding China.
203. This was called Mao’s “paper tiger” theory of American imperialism. He argued
that America may have a temporary tactical advantage, but strategically it was
doomed to failure. According to one writer, it was a “vivid propaganda slogan”
Notes ● 243
needed to raise morale at a time when the “overbearing might of the United
States was likely to depress it.” This writer also calls it the “spiritual factor” of
mass revolutionary consciousness. See John Gittings, The World and China,
1922–1972 (New York: Harper and Row, 1974), p. 147.
204. A US government report records that China provided US$2.6 billion (in 1975
dollars) from 1967 to 1976 to Third World countries—making it the fifth
largest arms exporter. See World Military Expenditures and Arms Transfers,
1967–1976 (Washington: U.S. Arms Control and Disarmament Agency,
1978), p. 126.
205. This was true during the first part of the Korean War; then it failed. As in
the past China often used aid to fight or avoid wars only to have to engage
later.
206. Liselotte Odgaard, China and Coexistence: Beijing’s National Security Strategy
for the Twenty-First Century (Baltimore, MD: Johns Hopkins University Press,
2012), p. 1.
207. For a very thorough assessment of this problem, see Bruce A. Elleman,
Stephen Kotkin, and Clive Schofield (eds.). Beijing’s Power and China’s Borders
(Armonk, NY: M. E. Sharpe, 2013). Also see C. Fred Bergsten, Bates Gill,
Nicholas R. Lardy, and Derek Mitchell, China: The Balance Sheet (New York:
Public Affairs, 2006), back cover.
209. Copper, China’s Foreign Aid, p. 9. Specific instances of China using foreign aid
donations to negotiate border agreements are discussed in subsequent chapters
of this book.
210. Ibid., p. 118.
211. Ibid., pp. 11–13.
212. Specific instances of various countries supporting China on these matters are
cited in following chapters.
213. Choudhury, China in World Affairs, p. 253.
214. Ibid.
215. Details of this will be provided in Volume 2, Chapter 2.
216. In 1979, after China’s People’s Liberation Army fought a difficult war with
Vietnam and did not perform well, Deng had the opportunity to extinguish
egalitarianism and politics from the military and upgrade the military’s capa-
bilities to fight more advanced conflicts.
217. Gilks and Segal, China and the Arms Trade, p. 1.
218. As will be seen below this connected to China’s need for energy, raw materials,
and markets.
219. For details, see Paul H. B. Godwin, “The PLA Faces the Twenty-First
Century: Reflections on Technology, Doctrine, Strategy and Operations,” in
James R. Lilley and David Shambaugh (eds.), China’s Military Faces the Future
(Armonk, NY: M. E. Sharpe, 1999), p. 48.
220. As we will see in following chapters, China usually opted simply for use of
bases. The standard explanation is that China wanted to avoid giving the
244 ● Notes
impression it was an expansionist power. Another explanation is that China’s

“assimilative definition” of the Chinese state and the consequent difficul-
ties in building alliances or an alliance system (which China has obviously
rejected) are incompatible with its acquiring bases. See Odgaard, China and
Coexistence, p. 198.
221. Lampton, The Three Faces of Chinese Power, p. 42.
222. For details on China’s intent in expanding its military capabilities and espe-
cially in developing power projection capabilities, see Richard D. Fisher
Jr., China’s Military Modernization: Building for Regional and Global Reach
(Stanford, CA: Stanford University Press, 2010), pp. 171–73.
223. This issue is discussed in detail in Volume 2, Chapter 1.
224. This issue is discussed in detail in Volume 2, Chapter 1 and Volume 2,
Chapter 2.
225. Sutter, Chinese Foreign Relations, chapter 5.
226. China used aid funds to enhance its domestic intelligence gathering. It also
used aid money to expand efforts to inspect containers and ships going to
the United States. See Michael D. Swaine, “China’s Strategy and Security in
the Post-Cold War Era,” in Brantley Womack (ed.), China’s Rise in Historical
Perspective (Lanham, MD: Rowman Littlefield, 2010), p. 92.
227. This issue will be pursued in detail in the next chapter.
228. Swaine, “China’s Strategy and Security in the Post–Cold War Era,” in Womack
(ed.), China’s Rise in Historical Perspective, p. 93.
229. Rosemary Foot and Andrew Walter, China, the United States, and Global
Order (Cambridge, MA: Cambridge University Press, 2010), p. 46.
230. Bates Gill and Chin-Hao Huang, “China’s Expanding Peacekeeping Role: Its
Significance and Policy Implications,” SRI Policy Brief, February 2009.
231. Howard J. Dooley, “The Great Leap outward: China’s Maritime Renaissance,”
Journal of East Asian Affairs, Spring/Summer 2012, p. 72.
232. Ibid., p. 53 and 62–63.
233. “Colonel: China Must Establish Overseas Bases, Assume the Responsibility of
a Great Power,” Global Times, February 5, 2009. (Global Times is connected to
People’s Daily the official newspaper in China and its articles often reflect the
views of the Chinese Communist Party and the government.) This view stands
in sharp contrast to China’s previously announced position on foreign bases.
A 1995 white paper dealing with arms control stated, “China does not station
any troops or set up any military bases in any foreign country. China’s 2000
National Defense White Paper said the same thing. See Michael S. Chase and
Andrew S. Erikson, “Changes in Beijing’s Approaches to Overseas Basing?”
China Brief, September 24, 2009.
234. Ed Blanche, “Enter the Tiger and the Dragon,” The Middle East, April 2009,
pp. 7–9.
235. Chase and Erickson, “Changes in Beijing’s Approaches to Overseas Basing?”
The authors note that the United States used this policy at one time.
236. China’s major exports until the mid-1980s were (in order) energy (petro-
leum and coal), textiles, and food. See Susumu Yabuki, China’s New Political
Notes ● 245
Economy: The Giant Awakes (Boulder, CO: Westview Press, 1995), pp. 155–56.
In the mid-1980s, China was the Far East’s largest petroleum exporter. See
David Zweig and Bi Jianhai, “China’s Global Hunt for Energy,” Foreign
Affairs, September-October 2005 p. 25.
237. There are a few exceptions to this. The Tan-Zam Railroad China build in
Tanzania and Zambia that helped Zambia ship its copper to port, which China
needed at the time, is the most obvious one. See Copper, China’s Foreign Aid,
p. 102.
238. This is shown by the fact that the Ministry of Commerce and the National
Development and Reform Commission have published lists of countries and
resources where investment that is subsidized by the government is to be
directed. See, Zweig and Bi, “China’s Global Hunt for Energy,” p. 26.
239. This issue, of course, will be pursued in the following pages.
240. Kang Wu, Fereidun Fesharaki, Sidney B. Westley, and Wadhyawan
Prawiraatmadja, “Oil in Asia and the Pacific: Production, Consumption,
Imports, and Policy Options,” Asia Pacific Issues, August 2008, p. 5.
241. Ibid.
242. Statistical Review of World Energy, 2008 cited in Edward A. Cunningham,
“Energy Governance: Fueling the Miracle,” in Joseph Fewsmith (ed.), China
Today, China Tomorrow: Domestic Politics, Economy and Society (Lanham,
MD: Rowman Littlefield, 2010), p. 224. Data here are for 2000–2007.
243. Erica S. Downs, “China’s Energy Rise,” in Womack (ed.), China’s Rise in
Historical Perspective, p. 171.
244. World Energy Outlook 2007 (Paris: OECD, 2007), p. 80.
245. “Iron Rations,” Economist, March 15, 2008, p. 8.
246. Adding to the concern is the fact China lacks large strategic reserves. In 2008
it was 30 days compared to Japan’s 131 days. See Ryan Clarke, “Chinese
Energy Security: The Myth of the PLAN’s Frontline Status,” The Letort
Papers (Strategic Studies Institute, U.S. Army), August 2010, p. 18.
247. Carrie Liu Currier and Manochehr Dorraj, “The Strategic Implications
of China’s Energy Engagement with the Developing World,” in Carrie Liu
Currier and Manochehr Dorraj (eds.), China’s Energy Relations with the
Developing World (New York: Continuum, 2011), p. 6.
248. Bo Kang, An Anatomy of China’s Energy Insecurity and Its Strategies (Richmond,
WA: Pacific Northwest Laboratory, December 2005), p. 11, cited in Lampton,
p. 245.
249. Kang Wu et al., “Oil in Asia and the Pacific: Production, Consumption,
Imports, and Policy Options,” p. 3.
250. Naughton, The Chinese Economy, pp. 334–36. Exacerbating the situation,
China’s use of energy has been and remains quite inefficient. China uses three
times the global average to produce a unit of the gross national product, four
times the United States and eight times Japan. See Will Hutton, The Writing
on the Wall: Why We Must Embrace China as a Partner or Face It as an Enemy
(New York: Free Press, 2006), p. 25.
251. Naughton, The Chinese Economy, pp. 333–34.
246 ● Notes

253. Elizabeth Economy, “The Great Leap Backward,” Foreign Affairs, September-
October 2007, p. 46. The estimate came from the Chinese Academy of Social
Sciences.
254. Hutton, The Writing on the Wall, p. 25.
256. In 2010, Premier Wen Jiabao declared he would use an “iron hand” to improve
energy use. Subsequently the government closed more than 2,000 cement
plants, steel mills, and other factories regarded as energy inefficient. See China
Daily, May 6, 2010, and September 20, 2010.
257. This point will be discussed throughout the next five chapters.
258. Cited in Ben Barber, “Beijing Eyes South China Sea with Sub Purchase,”
Washington Times, March 7, 1995.
259. The document can be found at novexcn.com/maritime_law_main.itml. For
an assessment of it, see Wu Huanning, “China’s Maritime Law,” unpublished
paper (online at austlii.edu.au/au/journals/ANZMLJ/1988/2.pdf).
260. Cao Zhi and Chen Wangjun, “Hu Jintao Emphasizes . . . A Powerful People’s
Navy That Meets the Demands of Our Army’s Historic Mission,” Xinhua,
February 17, 2006.
261. In 2003 Chinese President Hu Jintao spoke of what he called “the Malacca
Dilemma,” noting that if “certain major powers” (referring to the United
States) were bent on controlling the strait, China would have no indepen-
dent source of energy except for what it could get over land. See U.S.-China
Economic and Security Review Commission, “2010 Annual Report to
Congress,” Chapter 3, Section 1, November 2010. (online at uscc.gov/annual_
report/2010/Chapter3_Section_1%28page119%29.pdf).
262. Robert D. Kaplan, “Center Stage for the Twenty-First Century: Power Plays in
the Indian Ocean,” Foreign Affairs, March/April 2009, p. 28.
264. Ed Blanche, “Weaving a New Silk Road,” The Middle East, May 2009, p. 14.
265. Wen Han, “Hu Jintao Urges Breakthrough in ‘Malacca Dilemma,’” Wen Wei
Po, January 14, 2004 (online at wenweipo.com).
266. Hutton, The Writing on the Wall, p. 26. While China has expended consider-
able aid in helping recipient nations build pipelines, rail lines, and railroads
to transport oil and gas, China’s net reliance on sea transport will likely con-
tinue to increase. See 2012 Report to Congress of the U.S.-China Economic and
Security Review Commission, p. 331.
267. William H. Overholt, Asia, America and the Transformation of Geopolitics
(New York: Cambridge University Press, 2008), p. 55.
268. 2012 Report to Congress of the U.S.-China Economic and Security Review
Commission, p. 330.
269. Overholt, Asia, American and the Transformation of Geopolitics, p. 134. It may
also be noteworthy that the United States has made little or no effort to con-
struct a regional organization that would deal with energy security, but rather
Notes ● 247
(especially from the Chinese point of view) has made efforts to strengthen its
security relations with Japan and India. See p. 241.
270. Sutter, Chinese Foreign p. 30.
272. Ibid.
273. Michael T. Calare, Resource Wars: The New Landscape of Global Conflict
(New York: Henry Holt and Company, 2001), p. 112.
274. Justin McCurry, “Obama says US Will Defend Japan in Island Dispute with
China,” Guardian, April 24, 2014 (online at theguardian.com).
275. Cited in 2012 Report to Congress of the U.S.-China Economic and Security
Review Commission, p. 329.
276. This issue is discussed further in the concluding chapter of Volume 3, includ-
ing different figures on the amounts and percentages of its aid and investments
for this purpose.
277. Jian Dong, “China Stresses Imminence of Changing Extensive Development
Model,” China Economic News, August 1, 1005, pp. 1–2, cited in Bergsten
et al., China: The Balance Sheet, p. 33.
278. “Iron Rations,” p. 6.
279. “A Ravenous Dragon,” Economist, March 15, 2008, p. 4.
280. Martin Jacques, When China Rules the World: The End of the Western World
and the Birth of a New World Order (New York: Penguin, 2012), pp. 168–69.
281. Brian McCartan, “China Rubber Demand Stretches Laos,” Asia Times,
December 19, 2007 (online at atimes.com).
282. “The Perils of Abundance,” Economist, March 15, 2008, p. 22.
283. It should be noted that these are the critical problems for China, not the costs
of resources. As of 2004, China was spending around 4 percent of its gross
domestic product for energy and resource imports—less than Japan or Taiwan
spent during their periods of rapid economic growth and less than many
oil-importing countries during the 1970s after the increase of oil prices. See
Bergsten et al., China: The Balance Sheet, p. 33.
285. Ibid., p. 251.
286. Lampton, The Three Faces of Power, p. 243.
287. John Wong, “How Secure Is China’s Food Security?” in Wang and Zheng
(eds.) China: Development and Governance, p. 64.
288. Ibid., pp. 64–65.
289. Nathan and Scobell, China’s Search for Security, p. 18. The authors note
that north China has suffered from a severe water shortage since the early
1980s and China launched a large water transfer project. Also, China’s
water shortage will be exacerbated by global warming, about which Chinese
leaders are aware.
290. Wong, “How Secure Is China’s Food Security,” p. 65.
291. See “Buying Farmland Abroad,” Economist, May 21, 2009 (online at econ-
omist.com). China has obtained access to 2.8 million hectares of land,
248 ● Notes
compared to South Korea that ranks second with less than 800,000. Also see
Corin Smaller, Qui Wei, and Liu Yalan, “Farmland and Water: China Invests
Abroad,” International Institute for Sustainable Development,” August 2012,
p. 1. The authors found reports of 86 Chinese projects involving 8.3 million
hectares of land of which they could confirm half of these. This point is dis-
cussed further in the concluding chapter of this book.
292. At first China’s economy was said to be a “birdcaged” one, meaning that the
bird (the economy) was allowed to fly, but within the cage (kept in bounds).
293. In early 1982 Chen Yun (the Chinese Communist Party’s top economic expert
at the time) spoke of a policy of “taking the planned economy as primary
and market adjustments as secondary.” Chen’s comments were published
in People’s Daily, January 26, 1982, cited in Yabuki, China’s New Political
Economy, p. 43.
294. Ezra Vogel, Deng Xiaoping and the Transformation of China (Cambridge, MA:
Belknap Press), chapters 15 and 16.
295. Ibid., p. 45.
296. Maurice Meisner, The Deng Xiaoping Era: An Inquiry into the Fate of Chinese
Socialism, 1975–1994. (New York: Hill and Wang, 1996), p. 208.
297. Ibid.
298. James A. Gregor, Marxism, China and Development: Reflections on Theory and
Reality (New Brunswick, NJ: Transaction Publishers, 1995), p. 102.
299. Yabuki, China’s New Political Economy, p. 213.
300. Ibid., pp. 216–17.
302. Ibid., p. 24. No time frame is cited, but it assumed this is before or up to 2005
(when the book was published).
303. Ho-fung Hung, “A Caveat: Is the Rise of China Sustainable,” in Ho-fung
Hung (ed.), China and the Transformation of Global Capitalism (Baltimore,
MD: Johns Hopkins University Press, 2009), p. 194.
304. Official data in China indicated that in 2002 there were 83 million workers
employed in manufacturing, though estimates were much higher (109 million).
Either figure dwarfed other countries. The total of the G-7 major industrial
countries was 53 million. There did not seem to be ways to increase manufac-
turing jobs any more. See Judith Banister, “Manufacturing Employment in
China,” Monthly Labor Review, July 2005, p. 11.
306. Maria Hsia Chang, The Labors of Sisyphus: The Economic Development of
Communist China (New Brunswick, NJ: Transaction Publishers, 1998),
pp. 114–15.
307. Ibid. p. 235. The author cites Wang Shan, Looking at China through the Third
Eye for the view of the unemployed being a threat to the government.
309. Sarah Y. Tong and John Wong, China’s Economy,” in Robert E. Gamer (ed.),
Understanding Contemporary China (Boulder, CO: Lynne Rienner, 2008),
pp. 146–47.
Notes ● 249
310. World Factbook (available online at https://www.cia.gov/library/publications/

the-world-factbook/print/ch.html). This reference book is updated periodi-
cally. It was viewed in February 2009. The data are for 2008.
311. Tony Saich, China: Sociopolitical Issues, 2005–2010 (Cambridge, MA:
Kennedy School of Government, Harvard University, 2005) cited in Hutton,
The Writing on the Wall, p. 31.
312. Ted C. Fishman, China Inc.: How the Rise of the Next Superpower Challenges
America and the World (New York: Scribner, 2005), p. 75. It is worth noting
that few unemployed workers had unemployment insurance. According to one
source, only 2 percent had either full or partial insurance. See China Human
Development Report 2005, p. 42, 65 and 87, cited in Lampton, The Three Faces
of Chinese Power, p. 222.
313. Ibid., p. 40.
315. Ibid., p. 31.
317. See Elizabeth J. Perry, “Popular Protest: Playing by the Rules,” in Joseph
Fewsmith (ed.), China Today, China Tomorrow (New York: Rowman and
Littlefield, 2010), p. 27.
318. Tom Orlik, “Unrest Grows as Economy Booms,” Wall Street Journal, September
26, 2011 (online at wsj.com).
319. James Kynge, China Shakes the World: The Titan’s Rise and Troubled Future—
and the Challenge for America (Boston, MA: Houghton Mifflin, 2006),
pp. 52–53.
320. “China’s Unemployment Still Serious despite Labour Shortage—PM,” BBC
Monitoring International Reports, February 27, 2010 (online at find.gale-
group.com).
321. George W. Bush, Decision Points (New York: Crown Publishers, 2010),
p. 427.
322. Chinese Military and Economic Programs in the Third World: Growing
Commercial Emphasis,” Central Intelligence Agency, June 12, 1984, cited in
Shino Watanabe, “China’s Foreign Aid,” in Kim and Porter (eds.), Foreign Aid
Competition in Northeast Asia, p. 64.
323. “Chinese Government Concessional Loans,” Export-Import Bank of China,
cited in Henry Wing Yep, “China’s Foreign Aid to Asia: Promoting a ‘Win-
Win Environment” (unpublished master’s degree thesis), p. 30.
324. In 1998, Jiang Zemin encouraged going abroad to promote the restructur-
ing of domestic industries. See Hideo Ohashi, “China’s Regional Trade and
Investment Profile,” in David Shambaugh (ed.), Power Shift: China and Asia’s
New Dynamics (Berkeley: University of California Press, 2005), p. 88.
325. Jianwei Wang, “China’s New Frontier Diplomacy,” in Sujian Guo and Jean-
Marc F. Blanchard (eds.), “Harmonious World” and China’s New Foreign Policy
(Lanham, MD: Lexington Books, 2008), p. 24. The “go out” policy was estab-
lished in 1999 by the Chinese government with the help of the China Council
for the Promotion of International Trade.
250 ● Notes
326. Martin Wolf, Fixing Global Finance (Baltimore, MD: Johns Hopkins
327. Harry Harding, “The Uncertain Future of U.S.-China Relations,” in Guoli
Liu (ed.), Chinese Foreign Policy in Transition (New York: Aldine De Gruyter,
2004), p. 184.
328. David M. Lampton, “Think Again China,” in Liu (ed.) Chinese Foreign Policy
in Transition, p. 169. Lampson cites noted economist Marcus Noland.
330. Ibid., pp. 165–66.
331. “China Faces Overproduction in 11 Sectors,” People’s Daily, December 18,
2005 (online at http://english.peopledaily.com.cn/200512/18/eng20051218_
228948.html).
332. As will be seen in the chapters following, China has provided a number of
countries with tariff-free privileges for their exports and has given aid to offset
difficulties caused by China’s exports.
334. In 2005, China revalued the Yuan by 23 percent. Given China’s foreign cur-
rency reserves were around 700 billion at the time and 70 percent was in US
dollars, China suffered a loss of more than 100 billion. In 2007, the Chinese
government established the China Investment Corporation to invest China’s
foreign exchange better, but it suffered heavy losses. If China were to have
revalued its currency in 2012 by the same amount as 2005 with a much larger
foreign exchange position, its loss would have been around half a trillion.
335. Ibid.
336. “‘Marshall Plan’ with Chinese Characteristics,” Beijing Review, July 23, 2009,
p. 3.
337. “Chinese Unemployment Will Become ‘More Severe,’ Wen Jiabao Warns,”
Reuters, July 18, 2012. The news service quotes the China Securities Journal,
suggesting that the Chinese government viewed this as a security problem.
338. Tom Orlik, “Chinese Survey Shows a Higher Jobless Rate,” Wall Street Journal,
December 7, 2012 (online at wsj.com).
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Index
22nd Soviet Party Congress of the aid and investment monies blurred, 9,
Communist Party of the Soviet 22–3, 27–8, 37–8
Union, 137 aid and investment terms used
alternatively, 37–8
Academy of International Business aid competition with Soviets, 78–9,
Officials, 126 136–9, 143, 151–2
ADB (Asian Development Bank), 107 air pollution, 157
Afghanistan, Sino-Soviet split and, 139 Albania
Africa aid competition with Soviets, 138
aid without conditions and red tape, Chinese aid terminated, 20
147 feud over China’s US policies,
China’s aid (1956–1973), 29 117–18
China’s aid terms, 13 military aid from China, 13, 14, 34
concessional aid to, 2009, 146 as recipient of China’s aid (1953–
estimates of aid to, 32 1964), 30
financial help in 2008 recession, 25–6 analysts’ and scholars’ differences in aid
foreign non-bond investments in, 36 reporting, 29–31
free-trade zones in, 25 ancient China, prosperity of, 84–5
Afro-Asian Conference, 78, 138, 152 anti-China alliances against military
agriculture aggression, 149
agricultural aid vs. industrial aid, 5 antigovernment protests, 164
agricultural communes, 89, 91–2, anti-ideological/nonideological
160–1 worldview (Deng), 63
agricultural production issues, Arab countries, foreign non-bond
160–1 investments in, 36
agricultural reforms under Deng, armament as strategic area, 99
91–2 arms as foreign aid. See military aid
lack of focus on under Mao, 87–8 from China
from surplus to deficit, 2001–2004, ASEAN (Association of Southeast
120 Asian Nations), 25, 147
266 ● Index
Asia Pacific Economic Cooperation Burma

meeting, 53 end of tribute system, 51
Asian Development Bank (ADB), 107 as recipient of China’s aid
Asian Dragons’ development plans, (1953–1964), 30
97, 103
Asian financial crisis (Asian meltdown), Cambodia, aid from China (Mao), 29,
China’s aid during, 24, 144, 148 31, 134
Association of Southeast Asian Nations capitalism and communism,
(ASEAN), 25, 147 antagonistic contradiction of, 54
asymmetric warfare, 154 capitalism introduced (Deng), 44
Australia, China’s tribute system capitalist autocracy, 144
and, 52 Cayman Islands, investment funds in, 22
autarky, China as, 49, 64, 94–5, 105, cellular economy, 87
143 Central Committee of Chinese
automobile industry, 99 Communist Party, on Deng’s view
of foreign aid, 80
balance of power system, 62 Central Financial and Economic
balance of trade as source of capital, Affairs Leading Small Group, 125
108 Ceylon, aid data on, 31
Bandung Conference, 1955, 56 charity/humanitarian aid, 7, 17
Bank of China, 163 Chen Yi, 142
Bear Stearns, investment in, 111 Chen Yun, 95
Beijing consensus, 73, 81, 144 Chiang Kai-shek
Beijing University, 146 alliance with US, 131
beneficial cooperation for common New Life Movement, 47–8
prosperity, 146 people’s war against (Mao), 57, 150–1
bipolar system of superpowers, 55–6 reform and growth, 86
Blackstone, investment in, 111, 119–20 relocation to Taiwan, 56
bloc unity/bloc solidarity, 113, 130–4 Ch’in (Qin) Dynasty, as legalism, 46
Board of Rites (China’s foreign China, People’s Republic of
ministry), 50 from aid donor to recipient after
border dispute agreements and 1978, 79, 118–19
concessions, 147, 151, 155 as ancient meritocracy, 45
borrowing program, conservative ancient political philosophy, 44–9
(Deng), 108 as autarky, 49, 64, 94–5, 105, 143
Brezhnev Doctrine, 136 as biggest recipient of foreign
Buddhism, 46 investment, 2003, 107
“Build Toward a Harmonious World borrowing from global institutions
of Lasting Peace and Prosperity” and Western countries, 19
(Hu UN speech), 145–6 as capitalist economy, 21
Bureau for International Economic claims of Western aid given with
Cooperation (Ministry of agendas, 23–4
Commerce), duties and comprehensive national power, 70
responsibilities re foreign aid, as conduit for Soviet aid to Korea
126 and Vietnam, 112–13, 114–15
Index ● 267
consumption vs. gross national regional organizations, shift to, 25

product, 97–8 on rise as West declines, 53
decentralization under Deng, 26 seen as aggressive, 149, 153
early aid in relation to economy, 38 seen as generous with aid giving, 141
economic growth during global as socialist market economy, 162
recession, 72–3 as Third World country per Lin, 59
economic growth plan in, 63–4 UN, relations with, 17
economic situation, 1949, 86, 88–9 variety of forms, 15
established October, 1949, 133, 140 weathering recessions, 104
foreign aid to others in times of own China Daily (newspaper)
famine, 137 conflicting aid reports, 34
foreign exchange oversupply, 26, on Exim Bank foreign assistance
105–12 loans, 128–9
foreign investments, 22, 26–7 China Development Bank, 127, 129
formal split with Soviets, 135–6 China Dream (Liu), 49, 74
as fulcrum between US and USSR, 65 China International Center for
future foreign policy goals, 121–2 Economic and Technical
generous foreign aid policies, reasons Exchanges, 126
for, 116 China International Fund, 129
global hegemony pursuit expected, 121 China Investment Bank, 108
global influence with prosperity and China Investment Corporation, 111, 129
trade, 121 China Is Unhappy (Song), 74
goal of displacing US per Liu, 74 China National Petrol, 130
historical isolation and wealth of, 49 China Network Corporation World,
history of morality in government, 43 146
as “immature giant” re energy needs, China Statistical Yearbook foreign aid
156 reports, 33–4
isolation in 1950s, 10–11 China Trust and Investment
as largest holder of foreign exchange Corporation for Foreign Economic
reserves from 2006, 109 Relations and Trade, 108
military status increase after China-Africa Development Fund, 129
Tiananmen, 69 China-Japan confrontation, 158–9
as model for developing countries Chinamerica, 74
(Deng), 143–4 China’s Destiny (Chiang), 48
moderation of foreign policy, 1955, Chinese Academy of Sciences, 127
56–7 Chinese civil war, 58, 86, 88, 113, 142
national interest and foreign Chinese Communist Party
assistance relationship, 38–9 abandonment of ideology under
as net recipient to net giver, 2004– Deng, 21, 65, 84, 92, 97, 109
2005, 119 combating imperialism as goal, 131
as nuclear threat to West, 142–3 concern over too much aid giving, 19
peaceful coexistence in Constitution, criticism of aid and investment
151 mistakes, 120
posture of humility and self-restraint as decimated under Mao, 61
(Deng), 66 on Deng’s foreign aid policies, 80
268 ● Index
Chinese Communist Party—Continued communications networks in poor

Deng’s reforms attacked, 67 countries, 146
divisions and functions, 125–6 communism and capitalism,
economic growth as first priority, 97 antagonistic contradiction of, 54
hostility to US, 88 Communist Bloc nations
Hu as head (2002), 70 advantages of China joining, 130–2
Jiang as head (1989), 48, 67, 95 aid to, 10–11
mercantilism policy, 109 bloc unity/bloc solidarity, 113,
non-tariff barriers to imports, 101 130–4
opposition to Deng’s alignment with as China’s community under Mao,
US, 64 55, 77, 113
popularity with citizens, 148 Communist bloc aid, 10–11, 112
SOEs and, 98 military aid for government
on soft power, 143–4 destabilization, 7
support of economic policies, 97 relationship decline under Mao, 59,
united front view of the world, 60 78–9
on wasted years under Mao, 90–1, trade and diplomatic relations with,
143 133–4
Xi’s forecasts for, 76 Communist (Soviet) worldview
See also Mao Zedong adopted, 1949, 44
Chinese currency, valuation problems, Comprehensive National Power
28 doctrine, 150
Chinese laborers and technicians concessional loans, 19, 34, 128–9, 165
as foreign aid. See technical Confucian Institutes and classrooms
assistance as foreign aid abroad, 145
Chinese Red Cross, emergency aid to Confucianism, 45–8, 67
disaster areas, 17 construction industry, 99
Chinese universal kingship, 140 consumerism as low priority, 163
Chinese view of China, 85 Cuba
Ch’ing (Qing) Dynasty, 51, 86, 149 $60 million unrepaid loan, 117
Chunxiao gas field, 158 aid from China under Mao, 134
city and countryside world division, 59 culture/cultural diplomacy as factor of
civil aviation as strategic area, 99 national power, 145–6
clean energy projects, 25, 147, 157 currency devaluations during Asian
Clinton, Bill, 52–3, 69 Financial Crisis, 148
coal as strategic area, 99 currency inflation rates, grant factor
coal consumption, 156–7 and, 14
Cold War
China’s military spending after, 153 DAC (Development Assistance
China’s situation after, 68, 119 Committee), foreign aid defined,
Cold War mentality vs. 1–2
multilateralism, 71 Dai Bingguo, 74
“new cold war” between China and Dalian harbor, 114
US (Deng), 149 debate on foreign aid effectiveness,
Western aid giving during, 5 117–18
Index ● 269
debt cancellation announcements, 26, Department of Aid to Foreign

34, 146 Countries (Ministry of
decentralization under Deng, 92–3 Commerce), 126
defensive realism, 66 Department of Policy Planning
democratic centralism, 131 (MOFA), 126
Democratic Republic of the Congo, developing countries
China’s aid for peacekeeping, 25 aid for access to resources, 27
Deng Xiaoping arms aid to, 33
capitalism introduced, 21, 44 China as competitor for aid, 11, 79,
decentralization under, 26, 130 118
development plan drew international China as developing country, 27, 143
investors, 106–7 China Investment Corporation and,
economic growth under capitalist 111
model, 84 China vs. US aid to, 39
economic plan, terms for, 144 China’s development model and, 54
economic reforms launched, 19 China’s use of UN veto power for,
energy and resource import needs 119
under, 156 economic growth, 38, 103–4
era of reform, 61–2 financial help for under Mao, 77–9
foreign aid cutbacks, 79–80 foreign aid vs. investments, 29
foreign assistance programs industry growth facilitated by
objectives, 44 Communist aid, 5
hostility to Soviets, 139 investments in, 22, 37, 129
humility with power, 144 loan repayment conditions, 4, 9
ideologies attributed to, 61–3 Mao’s goals in helping, 13
independent foreign policy Mao’s intermediate zone cultivated,
introduced, 64–5 77–8
instructions on leaving office, 66 Mao’s worldview of, 142
military, shifts and improvements Marshall Plan-like foreign assistance
in, 152–3 program (2009), 167
nonideological/anti-ideological technical assistance as foreign aid, 7,
worldview, 63 15–16, 19–20, 24, 34, 113, 115
Open Door Policy, 64 as tools of imperialism, 142
political acumen and people skills, 93 unequal market access problems,
as proponent of ethical government, 8, 166
48 united front view of the world
reversals of Mao’s policies, 91–2 and, 60
SEZs established, 100 Zhao on, 79–80
“socialism with Chinese Development Assistance Committee
characteristics,” 162 (DAC), foreign aid defined, 1–2
south coastal China trip, 95–6 Diaoyu or Senkaku Islands, 159
technology and material incentives domestic consumption, control of, 102
in aid program, 21 domestic economy, risk of investment
Three Worlds theory, 60 in, 120
worldview of, 61–7 dual adversary theory, 59
270 ● Index
East Germany, aid to, 116–17 ethics in government, foreign aid

Eastern China, prosperity of, 84–5 policies and, 47
economic and technological European bond purchases, 146
cooperation principles (1983), 19 European investments, 111
economic deterrence, 74 European-style socialism, 162
economic growth Executive Bureau of International
under capitalist model, capital Cooperation, 126
accumulation and, 105–8 Eximbank (Export-Import Bank of
developing vs. developed countries, China), 21–2, 127, 128, 165
103–4 export growth, 94–5, 100
optimism for continuation, 103 external investments not defined by
vs. other countries, 1978–present, FDI, 36
101
sustainability, 102–3 Fannie Mae, investment in, 111,
vs. United States, 101, 103 119–20
economic miracle, sustaining, 95–105 fatalism, moral connection to, 46
educational facilities, 104 FDIs (foreign direct investments), 8, 36
egalitarianism, 21 financial assistance as alternative term
Egypt to foreign aid, 2
aid data on, 31 financial help
as recipient of China’s aid as alternative term to foreign aid, 2,
(1953–1964), 30 37–8
as recipient of China’s aid announced vs. delivered, 2–3
(1956–1973), 29 China’s aid as, 24
“Eight Guidelines on Foreign five elements as rule by manipulation,
Economic and Technological 46
Aid,” 137–8 Five Principles of Peaceful Coexistence,
eight point plan, 25 1954, 56
eight principles of foreign aid, Five Year Plan (1953–57), budget data,
18–19, 40 31
Eight Virtues of ancient times, 48 FOCAC (Forum on China-Africa
Eighth National People’s Congress, 163 Cooperation), 25
Eleventh Five-Year Plan (2006–2010), food as foreign aid, 116–17
80 food needs and security, 160–1
emperor as t’ ien-tzu (Son of Heaven), Forbes Global 500 on SOEs, 130
44–5, 47, 50 Foreign Affairs (journal), on Hu’s
energy and resource needs, 154, 155–61 worldview, 71
enterprise resident, 8 Foreign Affairs Leading Small Group,
entrepreneurial spirit of Chinese 125
people, 103 foreign aid
equity capital transfers, 8 as access to oil and raw materials, 21,
ethical diplomacy, 57 84, 156, 160
ethical rule and moral government vs. aid giving without conditions, 16–17
legalism, 46 to alleviate aggression fears, 153–4
Index ● 271
alternative definitions, 2 to countries richer than itself, 14

author’s definition, 37 economic cooperation,
bilateral aid preferred, 27–8 1970s–1980s, 11
claims of altruism for, 12–15 effect on world conflicts in early
Communist countries’ rationale and years, 38
emphasis, 5 few external investments, 36
conditions imposed with, 5 increases in after 1960, 113
conflicting and inconsistent reports loans, 1960s, 14
of China’s aid amounts, 28–37, 39 military aid not acknowledged,
criticisms of China’s aid policies, 11–12
26–7 military aid to North Korea, 10
as defined by DAC, 1–2, 27–8 as recipient of global aid, 11
difficulty in defining, 1 reduction in 1970s, 31
difficulty measuring, 28–37, 39 in socialist economy, 10
emergency aid to disaster areas, in spite of poor economy, 112
20, 24 foreign aid 1980–present (period two)
multilateral aid, lack of (period to acquire overseas military bases, 153
one), 17 analysis of aid during, 31–2
as obligation of rich countries, 7–8 in capitalist economy, 10
pledged but not delivered, 12 cutbacks under Deng and Zhao,
policies condemned by West, 81 79–80
policy shift to mutual cooperation eight principles, 18–19
(Deng), 19–20 giving cautiously resumed, 1990s,
as political act, 2 119
to promote China’s culture, 145 as good global politics (Deng), 144
publicity for, 146–7 increase in aid and investments,
scholarships as, 16, 35, 127, 146 1990s–2008, 11
small-project aid, 14–16 to increase markets for goods and
as soft power, 145, 150 services, 165–6
as tool of foreign policy, 84 as marketing tool, 1990s, 80
transformed to profit-making policy statements, 2005, 24
enterprises (period two), 20 vs. West and USSR, 18
against US military power by proxy foreign aid apparatus, 124–30
(Mao), 150–1 foreign aid war. See aid competition
to US via treasury bond and product with Soviets
purchases, 166–7 foreign assistance
Western countries’ rationale and as alternative term to foreign aid, 2,
emphasis, 5 37–8
See also military aid from China; as challenge to US, 38–9
technical assistance as foreign aid principles rather than policies, 40
foreign aid 1950–1979 (period one) as state secrets, 39–40
aid to non-Communist countries, Foreign Commerce and Foreign Affairs
10–11, 13 Ministries, 80
analysis of aid during, 31 foreign direct investments (FDIs), 8, 36
272 ● Index
Foreign Economic Liaison Bureau, 117 free aid, 4

foreign exchange oversupply, 26, free trade mixed with mercantilism,
105–12 144
foreign investments by China Fujian Province, 94
data from recipient countries, 32–3 funds transferral to international
difficulty in defining, 1, 28, 41, 120 organizations, 5–6
as foreign direct investments (FDIs),
8, 36 G-2 (US and China), 74
“going out/going global” policy, 22, G-8 (Group of 8), 73
70, 80, 165 G-20 (Group of 20), 73
historical growth, 9–11 Geneva Conference on Indochina, 56
increases in, 80–1 global governance, 81
during period two, 36, 123 global recession
SAFE and, 129 China’s financial help for recovery,
as soft power, 121 148
as version of foreign aid, 22, 37–8 China’s worldview changes with,
White Paper on Foreign Aid (2011) 72–4
on, 126 minimal effect on China, 100–1,
See also Eximbank 104, 167
foreign investments in China slowdown of Chinese overproduction
China as world’s highest recipient purchases, 166–7
(2003), 107 urban to rural migration due to
decline after Tiananmen Square unemployment, 167
incident, 95 global stability, as Deng’s goal, 63–4
under Deng, 93–4 global status, search for, 139–48,
economic growth from, 105 143–4
growth in, 96 globalism
record-breaking investments, 96–7 as advantage to China, 20, 44
SEZs and, 100 under Deng, 62, 64, 79, 94–5, 122
foreign military bases, 153, 155 Jiang as advocate, 70, 80
foreign policy goals, 121–4 Mao against, 132
foreign policy influence, economic as progressive, 6
development of recipients as Xi’s worldview, 75–6
and, 38 “going out/going global,” 22, 70, 80,
foreign policy shift under Deng, 64–5 165
foreign students in China, 16 Goldman Sachs on China’s GDP
foreign trade under Deng, 94–5, 161–3 growth, 103
Forum on China-Africa Cooperation Governance of China, The (Xi), 75–6
(FOCAC), 25 grant factor, 14
Four Cardinal Principles of ancient grants vs. loans, 3–4
times, 48 Great Leap Forward, 78, 89–90, 105,
four principles of China’s relations with 116
developing countries, 79–80 Great Proletarian Cultural Revolution,
Freddie Mac, investment in, 111, 61, 78, 89–90, 136
119–20 green energy, 157
Index ● 273
gross domestic product comparisons, IMF (International Monetary Fund).

90–1 See International Monetary Fund
Guangdong Province, 94, 100 imperialism
Guidelines for Investments in Overseas capitalism as leading to, 54
Countries’ Industries (Foreign as foreign policy preoccupation
Commerce and Foreign Affairs (Mao), 121, 140
Ministries), 80 human rights concerns by West seen
as, 69
Hainan Province as SEZ, 100 intermediate zones to counteract,
Han Dynasty, 46–7 58–9
Hanban (Office of Chinese Language Mao’s view of foreign commerce, 86
Council), 145 rapid economic growth leads to, 121
hard power vs. soft power. See soft Third World countries as tools of, 77
power vs. hard power viewed as source of weakness
harmonious world concept, 71–2 (Deng), 63
Heaven (t’ ien) as supreme governing Western aid seen as tool of (Mao), 4,
force, 44–5 10, 17–18, 142
heavyweight industries under Western imperialism, China’s aid in
government control, 99 opposition, 17–18
high-tech infrastructure, 104 Westphalian system as, 53
historical artifact displays, 146 Imperialism (Lenin), 131
Hong Kong India
as Deng’s economic model, 93 oil supply concerns with, 158–9
incorporated into China, 23 as security concern, 152, 155
as investor in China, 22, 94, 107 war with China, 52
Hong Kong Monetary Authority Indonesia
Investment Portfolio, 129 as recipient of China’s aid, 23, 29
horizontal aid, 13 remittance aid from Hong Kong, 23
Hu Jintao inflation problems, 1988, 95
adoption of Deng’s and Jiang’s inflation risks in domestic economy
policies, 70–1 investment, 120
on beneficial cooperation for Information Office of the State
common prosperity, 145–6 Council, China, white paper on
concern over oil importing, 158 China’s aid policies (2014), 28
critics of foreign policy, 72 information technology industry, 99
harmonious world concept, 71–2 infrastructure project funding, 159, 167
military for disaster relief and inter-agency coordination mechanism,
humanitarian efforts, 154 liaison for foreign aid, 128
promotion of economic growth, intermediate zones (Mao)
48–9 China’s courting of, 56
unemployment nightmares, 165 financial help for, 77–9
Hua Guofeng, 61 non-aligned nations bloc as, 55–7
human rights abuses, 61–2 revisionism as third world camp, 58
humanitarian/charity aid, 7, 17 as Third World bloc, 55–7
hundred-year marathon, 122 as two separate zones, 58–9
274 ● Index
International Bank for Reconstruction jen (benevolence) as Confucianism

and Development, 13 tenet, 47
international bonds as source of capital, Jiang Zemin
108 aid to Russia after Soviet collapse,
International Financial News, The, on 139
Freddie Mac and Fannie Mae as Chinese Communist Party head,
investments, 111 67, 95
international financial system Clinton administration, relationship
suggested, 73 with, 52–3, 69
International Liaison Office of Chinese Confucian schema and, 48
Communist Party Central economic development focus, 68
Committee, 127 as globalism advocate, 70
International Monetary Fund (IMF) on Soviet Union collapse, 68
Asian bailout help, 148 Jiaotong Universities, 146
China’s national income report,
1995, 96 Khrushchev, Nikita, 138
China’s rising percent of global Korea
economy, 101 end of tribute system, 51
increase developing nations’ input suzerainty with in Mao’s time, 51–2
in, 73 Korean War, 56, 141–2
relationships established, 107 See also North Korea
International Monetary System, 73
international organizations, oversight labor reforms under Deng, 92
of foreign aid, 5–6 land to population ratio as unfavorable,
internationalization of Chinese 86
companies, 22–3 Laos, aid from China under Mao, 134
intra-company loans/debt Latin America
transactions, 8 financial help in 2008 recession,
investiture, 50 25–6
investment and aid monies blurred, as recipient of China’s aid
27–8 (1953–1964), 30
“investments” as renaming foreign law of comparative advantage, 161
aid, 120 Leading Small Group of Politburo as
iron, steel, and nonferrous metals directional decision makers, 125
industry, 99, 160, 166 legalism vs. ethical rule and moral
isolationism, development of, 85–6 government, 46
Italy, tribute in Ch’ing dynasty, 51 Lenin, Vladimir, 56
Leninist dialectic of backwardness, 4
Japan Leninist worldview, Mao’s
China-Japan confrontation, 158–9 understanding of, 131
investment capital sought from li (propriety) as Confucianism tenet, 47
(Deng), 94 Li Keqiang, 35
loans and grants to China, 19, 97, Li Peng, 95, 158
107 liberal doctrine of foreign assistance, 4
people’s war against (Mao), 150–1 Lin, Justin, 98–9
Index ● 275
Lin Biao, 59, 142 Chinese worldview of Third World

Liu Mingfu, 74 nations rising, 142
Liu Shaoqi, 132–3 on communism, 141
loans, foreign aid Communist Bloc’s appeal to, 130–3
analysis of, 31–3 conceptual pillars abandoned, 20
arms sales vs., 35 conflict with Soviet worldviews, 44
China Development Bank and, 129 on Confucian teachings, 48
concessional loans to China, 19 denigration of Soviet aid, 114–16
under Deng, 105–8, 118 economic plan as egalitarian and
FDIs as, 8 Communist goal, 89–90
vs. grants, 3–4, 13–14 economic ups and downs, 90
investments as, 120 egalitarianism ideology, 21
from Japan to China, 97 foreign aid views, 76–7
preferential and concessional loans to global perspective of, 54–60
poor countries, 34–5 global status, search for, 140
repayment conditions, 4 hostage-taking of foreign officials, 55
sought by China, 79 imports of energy and resource needs
sovereign funds/sovereign wealth under, 155–6
funds as, 9 industrialized China as failed goal,
from Soviet Union, 115–16 83–4, 86–7
Zhu on illegal loans, 163 investment fund sources, 88
See also Eximbank lack of international trade, 86–7
Lushun naval base, 114 lack of subservience to Soviet
Union, 55
machinery industry, 99 on Mandate of Heaven, 48
Malacca problem (oil), 158 overpopulation problems, 87
malaria prevention, 147 as philosopher and theorist, 54–5
Malaysia, aid from China, 1997, 29 precepts adopted, 57
Malta as recipient of China’s aid Soviet model of economic
(1956–1972), 29 development, 86, 87–8, 132
Manchuria support of wars of national
concessions to Soviets, 114 liberation, 59
industrial base destroyed by war, 86 Three Worlds theory, 60
rehabilitated economy, 114 united front view of the world,
Mandate of Heaven, 45–6, 50 59–60
manufacturing growth, 1999–2010, US as enemy, 88, 132
99–100 views changed by Sputnik launch,
Mao Zedong 57–8
aid, claims of altruism for, 12–13 wars to restore China’s greatness,
aid, reasons for giving, 112 149, 150
aid policies criticized, 19 Maoist idealism, abandonment of, 63
aid to others in times of famine in market access, 8, 84
China, 116–17, 134 market Leninism, 144
aid to Vietnam, 1949, 38 market stealing accusations, 166
capital accumulation goals, 105 markets for China’s products, 161–7
276 ● Index
Marshall Plan-like foreign assistance Ministry of Foreign Trade and

program (2009), 167 Economic Cooperation, 21, 127–8
Marxism, 4–5, 131 Ministry of Health, 127
mass starvation during Great Leap Ministry of National Defense, 128
Forward, 105 Ministry of Science and Technology,
Mencius, Mandate of Heaven 127
expounded on, 45 Ministry of Transport, 127
mercantilism, 62, 101, 109 Mischief Reef island, 159
merchant marine, 154–5 MOFA (Ministry of Foreign Affairs),
meritocracy, 45, 85, 98 125–8, 145
metal and nonmetal resource needs, Mongolia
160 end of tribute system, 51
Middle East as recipient of China’s aid as recipient of China’s aid
(1953–1964), 30 (1953–1964), 30, 134
military aid from China Monroe Doctrine for Asia, 141
aid competition with Soviets, 79 morality as governance in China, 43
decreased under Deng, 153 Morgan Stanley investment, 119–20
grants vs. arms transfers, 34–5 multilateral aid, 6, 24–5
limited information on, 34 multipolarity, 62
under Mao, 134 Muslim population in China, 154
Ministry of National Defense
controls, 128 national security, search for, 149–55
not considered foreign aid, 29 nationalism
pros and cons, 6–7 balance with globalization (Deng),
Soviet aid to India countered, 152 144
as unannounced, 11, 28 Chinese dream as, 49
See also North Korea; North Deng’s ideology as pragmatic
Vietnam nationalism, 62–3
military forces distrust of Soviet Union and, 135
for disaster relief and humanitarian promoted by Mao, 140
efforts (Hu), 154 as reason for joining Communist
military demobilization (Deng), 163 Bloc, 131
military power growth, 149 world seen as Sino-centered, 66
shifts and improvements in (Deng), Nationalist government. See Taiwan
152–3 Nepal
as sign of strong country, 142 aid data on, 31
Ming Dynasty, 52, 86 end of tribute system, 51
Ministry of Agriculture, 127 equal status vs. tribute, 51
Ministry of Commerce, 36, 40–1, New Life Movement, 47–8
126–7 New Security Concept, 150
Ministry of Culture, 127 NGOs (private aid by nongovernmental
Ministry of Education, 127, 145 groups), 7, 17
Ministry of Finance, 127, 130 Nixon Doctrine, 60
Ministry of Foreign Affairs (MOFA), Nixon visit to China as tribute
125–8, 145 mission, 52
Index ● 277
Non-Aligned Movement, 151 Organization for Economic

non-aligned nations bloc, 55–6 Cooperation and Development
nongovernmental groups (NGOs) (OECD), 1, 30, 35–6, 107
giving private aid, 7, 17 Outer Mongolia
nonideological/anti-ideological China’s aid to, 115
worldview (Deng), 63 independence from China, 114
non-nuclear testing agreement, 143 overpopulation/food problems, 87, 90
non-tariff barriers to imports, 101 overproduction and unemployment,
non-zero sum system, Asian preference 5, 162–4, 166
for, 53 Overseas Chinese, investment capital
North Korea sought from (Deng), 94
China’s moderation of radical overseas development assistance
policies, 147 (ODA), 1–2, 33
China’s resentment of aid for, 135 Overseas Investment Guidance Catalog
military and economic aid, 1950s, (Foreign Commerce and Foreign
10, 13, 14, 34, 77–9, 134 Affairs Ministries), 80
North Vietnam overseas military bases, foreign aid to
aid competition with Soviets, 138 acquire, 153, 155
China’s tribute system and, 52
Chinese aid terminated, 20 Pakistan
military and economic aid, 1950s, aid to undercut India’s influence, 152
10, 13–14, 30, 34, 77–9, 134 as recipient of China’s aid
nuclear attack threat, 1958, 135 (1956–1973), 29
Nuclear Test Ban Treaty, 152 Sino-Soviet split and, 139
nuclear weapons, 34, 58, 63, 142–3, Paris Declaration on Aid Effectiveness,
147 ambiguously signed by China, 40
peaceful rise/peaceful development
Obama’s visits to China as tribute theory, 70–1
mission, 53 Peng Dehuai, 117
ODA (overseas development People’s Bank of China, 108, 129
assistance), 1–2, 33 People’s Daily
OECD (Organization for Economic on China-Japan confrontation near
Cooperation and Development). Chunxiao gas field, 158
See Organization for Economic on Exim Bank foreign assistance
Cooperation and Development loans, 128–9
Offshore Islands (Quemoy and Matsu) People’s Liberation Army, 25, 72, 158
crisis, 57–8, 135 people’s money, investment
oil/petrochemical industry as strategic responsibility for, 119–20
area, 99 people’s war (Mao), 150–1
oil war possibility, China and US, 159 perform or else policy, 92
Olympic Games, Beijing 2008, 73, period one. See foreign aid 1950–1979
146 period two. See foreign aid
open cities, 100 1980–present
Open Door Policy (Deng), 64 petroleum consumption and
Opium War, 51 dependency, 157–8
278 ● Index
Philippines rubber consumption, 160

Mischief Reef island territorial rural to city migration and
dispute, 159 unemployment increase, 164–5
remittance aid from Hong Kong, 23
policy shifts in China’s aid (period sacrifices made by China to give
two), 18–19 foreign aid, 116–17
Politburo of Chinese Communist SAFE (State Administration of Foreign
Party, 124–5 Exchange) Investment Company,
poor countries giving to poor 111, 129
countries, 84 SASAC (State Asset Supervision and
post-1978 economic boom, 91–5 Administration Commission), 99
power generation as strategic area, 99 savings levels, 97, 101, 105–6, 162
PPP (purchasing power parity), 103 scholars’ and analysts’ differences in aid
pragmatic nationalism (Deng), 62–3 reporting, 29–31
principles of the world four tenets, scholarships as foreign aid, 16, 35, 127,
69–70 146
private aid by nongovernmental SCO (Shanghai Cooperation
groups (NGOs), 7, 17 Organization), 25, 73
private vs. state businesses and sea power, 154–5
employment, 98 sea-lane protection, 153–4
privatization campaign under Deng, security interests as foreign aid goal,
92–3 124
projects as foreign aid, 5 security treaties, 49–50
purchasing power parity (PPP), 103 Selected Worlds of Jiang Zemin, The
(Jiang), 67
Qing Empire, 51, 86, 149 selective multilateralist policy, 81
Qinghua University, 146 Senkaku or Diaoyu Islands, 159
SEZs (special economic zones), 100,
raw materials. See energy and resource 129
needs Shanghai as foreign investment
recessions, weathering, 72–4, 101–2 recipient, 107
reforms, continuing, 104 Shanghai Cooperation Organization
reinvested earnings, 8 (SCO), 25, 73
religious aspects of ancient political ship hijacking, 155
philosophy, 44–5 shipping as strategic area, 99
remittances home from foreign Sian Incident, 48
workers, 7 Singapore as Deng’s economic
research and development emphasis, model, 93
104 Sino-American relations, Thirty Year
resident entity, 8 Treaty and, 133
revisionism as third world camp, 58 Sino-centric worldview, 43–4
revolution in military affairs (RMA), Sino-French War, 51
154 Sinopec, 130
RMA (revolution in military affairs), Sino-Soviet border war, 59, 60
154 Sino-Soviet relations under Mao, 54–9
Index ● 279
Sino-Soviet split, 134–9 Special Economic Zones (SEZs), 100

Sixteen Point document for economy, Special Economic Zones in Africa,
163 129
sixtieth anniversary of China’s foreign Sputnik satellite launch, 57
aid giving, 2010, 35 Sri Lanka as recipient of China’s aid
small groups in Chinese Communist (1956–1973), 29
Party, 125 Stalin, ideological split with Soviets
small-project aid, 14–16 after death of, 135
socialist market economy (Deng), 162 State Administration of Foreign
SOEs (State Owned Enterprises). See Investment (SAFE), 111, 129
State Owned Enterprises State Asset Supervision and
soft power vs. hard power, 121, 145, Administration Commission
150, 159 (SASAC), 99
Somalia as recipient of China’s aid State Council, on Deng’s view of
(1956–1973), 29 foreign aid, 80
Song Xiaojun, 74 State Council (China’s “cabinet”), 125,
South Asia, Sino-Soviet split and, 139 126, 163
South China Sea claimed by China, State Grid, 130
147, 158 State Owned Asset Supervision and
South Korea as Deng’s economic Administration Committee, 130
model, 93 State Owned Enterprises (SOEs)
Southeast Asia best were kept and restructured,
aid counteracting negative image 98–9, 129–30
in, 147 economy management with financial
Sino-Soviet split and, 139 institutions, 120–1
South-South cooperation, 27 under Finance Ministry or State
sovereign funds/sovereign wealth funds, Owned Asset Supervision and
9, 111, 129 Administration Committee, 2003,
Soviet model of economic development, 130
86–8 many phased out under Deng, 92,
Soviet Union 163
aid competition with China, 78–9, relationship decline under Mao, 99
136–9, 143, 151–2 state secrets, foreign assistance as,
aid to China, political motives for, 39–40
112–16 state vs. private businesses and
avoidance of confrontations with, employment, 98
151–2 state-controlled capitalism, 144
collapse, 68 steel production, 160, 166
as de facto enemy, 136 sterilization bonds, 110
dependency on under Mao, 135 Strait of Malacca (oil imports), 158
formal split with, 1962, 135–6 strategic areas of government control,
as funding source for China, 88 99
ideological differences with, 135 Sun Tzu, 150
termination of aid to China, 1960, superfusion, 74
11, 136–7 systems theory, 62
280 ● Index
Taipei, US defense treaty with, 57–8 Three Worlds theory, 60–1

Taiwan Tiananmen Square incident, 66–7, 95
Chiang’s relocation to, 56 Tibet, suzerainty with, 52
as Deng’s economic model, 93 t’ ien ming (heaven’s edict), 45
diplomatic influence and status vs. t’ ien-tzu (Son of Heaven), emperor as,
China, 10–11 44–5, 47, 50
gold and currency reserves taken, 86 trade sanctions avoided, 96–7
investment capital sought from transportation-based projects, 121
(Deng), 94 tribute system/tribute diplomacy
isolation as foreign aid goal, 124 advantages of in ancient China, 85
reunification goals, 64 destroyed by West, 51
reunification unrealized, 65–6 as development model, 53–4
“Taking the Path of Peaceful ethics in government and, 47
Development” (Dai), 74 foreign aid giving and, 76, 112
Tan-Zam Railroad, 14, 20 as forerunner of foreign aid, 49–54
Tanzania as recipient of China’s aid as ideal vs. reality, 51
(1956–1973), 29 in Mao’s time, 52
Taoism, 46 morality of governance as
tariff-free privileges to nations with forerunner, 43–4
diplomatic relations, 34 reestablishment of, 53
technical assistance as foreign aid, 7, seen as permanent situation, 50–1
15–16, 19–20, 24, 34, 113, 115 as soft power, 150
technology and material incentives in Twelfth Five-Year Plan (2011–2015), 80
aid program, 21
teh (morality) as Confucianism UN (United Nations). See United
tenet, 47 Nations
telecommunications as strategic unemployment. See overproduction
area, 99 and unemployment
Tendering Board for Foreign united front doctrine (Mao), 58,
Assistance Projects (in Ministry of 59–60
Commerce), 126 United Nations (UN)
Tenth Chinese Communist Party aid competition with Soviets and,
Congress, 60 139, 152
Thailand, aid from China, 1997, 23 boycott during Korean War, 56
Theory of the Differentiation of the China, relations with, 17
Three Worlds (Mao), 61 China’s aid for peacekeeping, 24–5
Third World countries. See developing market access, views on, 8
countries oversight of foreign aid, 6
Third World wars of national United Nations Children’s Fund, 19
liberation United Nations Development Program
aid support for, 12, 18, 59, 142, 151 (UNDP), 19, 118
end of aid support for, 20, 153 United Nations Food and Agricultural
Thirty Year Treaty of Friendship, Organization, 25
Alliance and Mutual Assistance, United Nations Fund for Population
133 Activities, grants to China, 19
Index ● 281
United Nations Millennium Wang Huning, 144–5

Development Goals, 71, 146 War on Terror, 154
United Nations peacekeeping efforts, wars as last resort to tribute system, 50
China support for, 154 wars’ effects on economy, 86
United States wars of national liberation
alliance with Chiang, 131 China’s aid terminated for (Deng),
challenged on terrorism policies, 72 20, 153
China as enemy and threat to world support as confrontational to US,
peace, 141 151
China’s investments in, 119–20 support under Mao, 59, 142
financial help to Dengist China, 64, unannounced aid for, 12
106 Washington consensus as Western
loans and grants to China, 19 model, 144
market access as form of aid, 8 water pollution, 157
no protection for Chinese oil Weltanschauung (worldview) of Mao
imports, 159 Zedong, 54–60
public and private aid, 8 Wen Jiabao
Sino-US relations under Deng, 94 debt cancellation announcements,
trade deficit with China, 165–6 146
unbalanced trade relationship international financial system
dilemma, 110–11 suggested, 73
undermining influence as foreign aid peaceful rise/peaceful development
goal, 124 theory, 70–1
as unipolar power, 68 rural to city migration, 165
Vietnam War loss, 60 unemployment concerns, 165, 167
United States Central Intelligence West Asia, foreign non-bond
Agency, China’s aid estimate investments in, 36
(1960–1989), 30 Western apprehension with China’s rise
United States Department of State, (Deng), 144
China’s aid estimate to 1965, 30 Western countries foreign aid
United States Navy as protector of conditions, 5–6, 16
China’s oil and shipping, 153 Western definition of aid and
United States treasury bond purchases, investments vs. China’s, 23
166 Western Hemisphere (non US), foreign
universities, improvement in rankings, non-bond investments in, 36
146 Western view of China’s aid
Unocal, attempted purchase, 111 policies, 81
urban reforms under Deng, 92 Westphalian system of sovereign
Ussuri River border fight, 136 nation-states, 53, 57, 62, 66
White Paper on Foreign Aid (2011),
veto power in United Nations Security 27–8, 33, 35, 41, 126, 127, 147
Council, 118 white paper on national defense, 1995,
Vietnam, end of tribute system, 51 68–9
Vietnam War, 60, 141–2 white papers on China’s aid policies,
See also North Vietnam 27–8
282 ● Index
willpower to become dominant Zambia as recipient of China’s aid

country, 104 (1956–1973), 29
Work Report on domestic and foreign zero-sum system, Western system
policies, 75 as, 53
World Bank Zhang Yimou, 73
estimates of aid, 32 Zhao Ziyang, 67, 79–80
infrastructure project funding, 97 Zheng Bijian, 71
Ministry of Finance, cooperation Zhou Enlai
with, 127 on Australian visit to China, 52
relationships established, 107 criticism of Khrushchev at Soviet
rules changes demanded by Party Congress, 137
China, 73 “Eight Guidelines on Foreign
SOE restructuring, 98–9 Economic and Technological
world reaction to China’s growth, 100–1 Aid,” 137–8
World Trade Organization (WTO), 8, financial aid pledged to Third World
96, 148, 161, 164 countries, 1964, 78
WTO (World Trade Organization). See Five Principles of Peaceful
World Trade Organization Coexistence, 1954, 56
on international issues, 140–1
xenophobia, 85 peaceful coexistence proposed, 151
Xi Jinping, 49, 53, 74–6 on revolutionary conditions in
Xinhua News Agency, 146 Africa, 59
Xinjiang, concessions to Soviets, 114 sought improvement of relations
with US, 59
Yalta, sellout of China, 1945, 132 unrepaid loan to Cuba, 117
yin-yang as rule by manipulation, 46 Zhu Rongji, 70, 121, 163
About the Author
John F. Copper is the Stanley J. Buckman Distinguished Professor of

International Studies emeritus at Rhodes College in Memphis, Tennessee.
He is the author of more than 30 books on China, Taiwan, and Asian
Affairs. Copper is listed in Who’s Who in America, Who’s Who in the World,
Men of Achievement, Contemporary Authors, and The Annual Guide to
Public Policy Experts. In 1997, Dr. Copper was recipient of the International
Communications Award. He has spent 15 years in Asia. China’s Foreign
Aid and Investment Diplomacy, Volumes I–III represent the culmination of
Professor Copper’s work on this subject over four decades.

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China’s Foreign Aid and Investment

Chapter 1 Introduction: The Nature and Scope of China’s

Providing aid and investment funds to developing or Third World coun-

Introduction: The Nature and

Defining Aid and Foreign Investments

in the case of many Western countries often when nobody is watching or

in order to increase the availability of natural resources the donor wants to

This is also a way of avoiding charges that aid is politically motivated or

However, many investments are made by national governments, large

accounting for two-thirds of the decline), South America experienced an

China’s Foreign Aid and Investments

status and its diplomatic influence. Chiang Kai-shek’s Republic of China

In any case it is incontrovertible that China’s aid was big-hearted in the

example).87 In addition, the Chinese government pledged aid to countries

period of application; (3) aid is usually announced at a lavish reception or

imperialism. Chinese officials spoke of China’s aid as generous and assumed

Shifts in China’s Aid and Investment Policies

received some elaboration.118 In ensuing years Chinese aid officials often

developing countries from extending foreign aid to pursuing co-operation

in the form of foreign investments.142 Foreign aid was viewed as promot-

in conducting its foreign relations; it also engendered criticism to the

by purveying significant financial support to the United Nations for peace-

as critical in preventing economic collapse. Many local leaders expressed

showed distrust of international organizations and did not want to abide by

Measuring China’s Aid and Investments

announced, largely due to extensive undisclosed military and military-related

of 2002.213 China’s balance of payments statistics, which shows that there

of China’s recipient nations selling weapons and even nuclear technology

The Scope and Purposes of This Book

is especially so when assessing China’s foreign policy objectives and linking

China’s Worldview and Its Foreign

China’s Ancient Political Philosophy

abandoned legalism and adopted Confucianism. Confucianism, which

Tribute as the Forerunner of Foreign Aid

framework. The tribute relationship even defined China’s borders, which

Chinese perspective, tribute bearers had simply changed suzerain or tribute

Mao’s Global Perspective

countries that heretofore were described as stooges of American imperialism

or not China’s shift of policy from a lean-to-one-side global perspective,

China.112 Washington proved its mettle in 1954-55 during the Offshore

was to promote resistance to the oppressive ruling classes and against

Deng Xiaoping’s Worldview

it was sometimes called, was especially difficult to harness. Others, includ-

The Worldviews of Deng’s Successors

economically—the basis of it becoming a big power and its means to exert

Assembly citing Zheng’s themes while advancing the UN system to be the

accompanied by negative economic growth. In that milieu China was able to

Another interpretation of global power trends underscoring China’s

policies. China is clearly to be a global power in Xi’s mind. He even made

China’s Worldview and Its Foreign Aid Giving

China’s Economy and Its Foreign

China’s Economic Performance under Mao

picture of China’s economy and what needed to be done in terms of new

self-reliance policy kept trade to a minimum and precluded the possibility

China’s Post-1978 Economic Boom

China’s peasants, dissatisfied with Mao’s agricultural policies (especially col-

this will be discussed later) a free-market one based on private ownership,

Sustaining China’s Economic Miracle

falling rate of domestic consumption as a percentage of economic growth