Infrastructure finance, late development, and China's reshaping of international credit governance

How is the rise of China affecting international governance? This paper examines the domain of infrastructure finance by focusing on China's two policy banks, which are the main creditors of China's overseas infrastructure projects. While the incumbent international credit regimes led by the Organisation for Economic Co-operation and Development (OECD) distinguish development-oriented aid from commercially oriented export credits, emerging late-developed economies blur this dichotomy by largely funding development projects with state-backed export credits. The way China alters the OECD's credit governance, this paper argues, demonstrates both the generality of late development and the peculiarity of "Chinese" development. Rather than directly subsidizing firms' international business with the state's fiscal revenue, policy banks financialized host country's state-owned and state-coordinated assets using various market instruments. By doing so, they gave Chinese firms a comparative advantage in the markets of less developed regions, allowing them to undertake projects that firms from advanced industrial countries cannot. This financing mechanism has reshaped the international development regime by transforming the dominant means of credit allocation from state-led aid-giving to market-based exchange, and rewritten the liberal rules of the international export credit regime by financing the developing world in a both statist and liberalist manner. As a result, China has built a paralleled regime in regions insufficiently covered by the existing financial schemes of incumbent credit regimes.