In this book, we introduced and analyzed the 1.0 version of AidData’s global dataset of Chinese ODA- and OOF-financed projects. Shortly after we completed our manuscript (Chapters 1–9), we collaborated with AidData to publish a new (2.0) version of the dataset based upon an improved version of the TUFF methodology (Custer et al. 2021). The 2.0 dataset, which was published in September 2021, captures 13,427 Chinese ODA- and OOF-financed projects worth US$843.1 billion across 165 countries. These projects were financed by more than 330 Chinese government institutions and state-owned entities. The dataset covers projects approved (i.e., officially committed) between 2000 and 2017—and implemented between 2000 and 2021—in every low-income, lower-middle income, and upper-middle income country and territory across Africa, Asia, Oceania, the Middle East, Latin America and the Caribbean, and Central and Eastern Europe.

In this chapter, we use the new data to investigate which factors influence the allocation of Chinese development finance across countries, and how these motivations compare to those of traditional donors and creditors such as the World Bank. We specifically test the claim that Beijing is primarily using its economic largesse to cement alliances with political leaders, secure access to natural re- sources, and create exclusive commercial opportunities for Chinese firms. We run statistical models to examine the cross-country allocation of Chinese aid and debt, arguing that these two flows are motivated by different strategic objectives. Our results show that Chinese aid and debt are means to different ends. Like Western donors, Beijing allocates aid in response to levels of poverty and uses aid to reward countries that adopt its foreign policy positions and punish those that do not.Contrary to the conventional wisdom, Beijing is no more likely than major Western donors to provide aid to corrupt or authoritarian regimes. None of these findings are consistent with the notion that China is a “rogue donor” compared to its Western peers. However, Beijing’s loans issued at or near market rates are more likely to go to corrupt and authoritarian countries. The conflation of aid and credit seems to be at the heart of the confusion: Western politicians and journalists use “rogue donor” as a shorthand term for all of China’s overseas development projects, but many of these projects are not aid.

Social science research on the aims and impacts of Chinese development finance remains in its infancy because Beijing shrouds its overseas portfolio of grants and loans in secrecy. This chapter introduces the Tracking Underreported Financial Flows (TUFF) methodology that the authors have developed to assemble a comprehensive dataset of Chinese aid and debt-financed development projects around the globe. It also provides an overview of previous attempts to quantify Chinese development finance, and explains how the authors’ methods and data are different from those of others. This chapter also tests whether an alternative approach—field-based data collection—might yield more useful and reliable re- sults. Drawing upon evidence from a “ground-truthing” exercise in Uganda and South Africa, the authors demonstrate that field-based and TUFF-based data collection methods produce similar results. However, the TUFF methodology is less vulnerable to detection bias and more readily scalable than field-based data collection.

Chinese foreign relations and foreign trade during the Cultural Revolution’s radical phase (1966–1969) were different than during the period from 1970 to 1976. The radicals’ control of the Foreign Ministry affected the Chinese missions in Switzerland between 1966 and 1969. Because of Switzerland’s function as the Chinese headquarters in Western Europe, Swiss diplomats were among the few foreigners who remained relatively unaffected by Red Guard measures and other events in Beijing. Although diplomatic tensions occurred between Switzerland and China, these did not lead to a rupture of official relations. This preferential treatment changed during the period from 1970 to 1976, when Switzerland lost importance because China established relations with the majority of the Western nations. The anti-capitalist and anti-Western fervour of the Red Guards did not stop trade between China and Switzerland completely. In fact, Sino-Swiss trade continued – albeit haltingly – during the radical phase of the Cultural Revolution. The improvement of political relations between China and Western European countries, however, also increased Western European interest in the Chinese market. The last part of the chapter, therefore, discusses how the Swiss government and Swiss companies tried to stave off this competition in the early to mid-1970s.

From the 1950s to at least the 1970s, China established and operated a variety of intelligence networks from Switzerland. The chapter relies on thousands of files by the Federal Police as well as Chinese memoirs, biographies, commemorative volumes of former agents, and publications on the history of Chinese intelligence to discuss different forms of intelligence activities carried out by Chinese diplomats in Switzerland. Showing just how intertwined Chinese foreign policy and intelligence were, the chapter argues that diplomatic staff were so often also active as intelligence agents that it could be argued that the Chinese used a hybrid form of diplomat–agent in Switzerland. Some of the national, international, and transnational intelligence networks that the Chinese operated from Switzerland show that Switzerland functioned as a Chinese intelligence hub in Cold War Europe. These include a network of UN officials, ethnic Chinese students and scientists, Chinese restaurants, and Chinese Indonesians. The chapter also describes the Swiss Federal Police’s counterintelligence measures as a reaction to the Chinese intelligence activities. The chapter begins with a discussion of the development of Communist Chinese intelligence in the 1930s and 1940s in order to show how this contributed to Chinese intelligence activities in Europe.

China’s use of Switzerland changed as a result of the Sino-Soviet split, as China tried to compensate for the loss of assistance from the Soviet Union and its allies by increasing its relations with Western Europe. The Swiss missions in Switzerland were important for China’s efforts to increase its presence in Latin America and Africa in the late 1950s and early 1960s. The case of nine Chinese who were arrested in Brazil in 1964 is used to demonstrate how China’s missions in Switzerland contributed to China’s global presence, and how the Swiss government and Swiss businesses were affected by Chinese actions abroad. Swiss support for Tibet and Tibetan refugees is discussed to show that the Swiss government also took advantage of the importance that Switzerland played for China, and managed to get away with actions that China did not tolerate from other nations. The chapter also discusses the effects that the Great Leap Forward had on Chinese and Swiss bilateral trade relations from 1958 to 1965, how Swiss companies and government officials tried to increase trade, and how the Sino-Soviet split led China to increase the scope of its network of embargo goods dealers that it operated out of Bern.

In 1965, the Swiss satirical journal Nebelspalter published a cartoon about the large number of staff at the Chinese embassy in Bern. In the cartoon, a smiling Chinese man has his legs rooted by a large clew of two-headed worms, which symbolise Chinese intelligence and propaganda activity. Under the cartoon, a caption states that the worms are trying to turn ‘Swiss soil into Chinese soil’ (see Figure 0.1).

BEYOND MARKET AND STATE: A FRAMEWORK FOR EXAMINING THE CHINA MODEL

“Modern capitalism can no longer work,” warned French president Emmanuel Macron at the virtual World Economic Forum Davos Agenda Meeting on 26 January 2021. He contended that contemporary capitalism and the market economy, which once provided the middle class with opportunities for upward mobility, has resulted in a downward spiral and confronts a profound moral and economic crisis. As a response, he called on global leaders to make efforts to tackle inequality and climate change. Macron's words should be understood against the background of increasing social protests in recent years in Western countries, in particular the severe social conflicts and divisions revealed in the 2020 US presidential election, and the inability of many so-called neoliberal economies in containing the Covid-19 pandemic. One cannot help but ask what is going wrong with “modern capitalism”. Is it a failure of the market, of the state, or of both?

Obviously, calls for more state intervention are resonating around the world. For example, in his recent book People, Power, and Profits (Stiglitz 2020), the Nobel Prize-winner Joseph Stiglitz argues that a society must envisage a role for the state in pursuing sustainable economic development and the orderly operation of a society and the establishment of a balance between market, state and civil society. The role for the state is at least twofold: one is the establishment of the rules and institutions required for the market to operate; the other is state support for and investment in public goods, including research and development, education, health care and basic infrastructure. In this situation a consequential question is: what does more state intervention imply? Does it mean that a different socio-economic system is taking shape? Or does it mean that analytical approaches that treat market and state as antipodes are no longer meaningful?

Indeed, binary distinctions between states and markets and between liberal market capitalism and state capitalism are persistent. The market involves a logic of exchange embedded in private property rights and mediated by monetary relations, and gives rise to greater efficiency, whereas the state is an institutionally ordered domain of governmental practices, mediated by the play of politics and social struggles, and acts as an obstacle (Peck 2021).

INTRODUCTION

China is a geographically large country, with diversity in terms of natural environment, levels of development, population composition and local cultures (Zhang & Peck 2016). Therefore, it is imperative that the state deal with central– local relations (Zhang & Chen 2014). Spatial governance is an important part of the China model, equipping the state and the regions and socially embedding them in a spatial market economy system. The role of spatial governance is, on the one hand, to establish and adjust the rules and conditions that are required for facilitating market operation and, on the other, to promote social justice and balanced regional development. Hence, spatial governance is one of the most distinctive features of the China model, as a tool for the “state” to intervene in the market and society and coordinate them to achieve sustainable development. In promoting this goal, the spatial governance is not static but is adjusted and improved, to reflect requirements and feedbacks from the market and society.

Generally speaking, spatial governance plays a role in the China model in two ways. One is spatial plans and planning systems, which act as regulations guiding development. The other is the control of productive factors, including land (Lin 2014), and population, including labour in space (Yang & Dunford 2018; Chen & Fan 2016; Sun & Fan 2011; Fan 2002).

The implementation of spatial governance tools in China is much rooted in its governance culture, as described in Chapter 2. Dominated by Confucianism, benevolence is a central principle applied in an orderly social hierarchy, in which it contributes to the establishment of a stable social order (Dunford & Liu 2015). Profoundly affected by this thinking, when China shifted to a market economy its planning system did not collapse (ibid.). Plans and planning are not considered emblematic features of a centrally planned economy distinctive from a market economy. Chinese leaders such as Deng Xiaoping regarded the market and planning systems to be just instruments for promoting economic development (see Chapter 1).