One Road, One Belt, One Regime Type: The Limits of Chinese Influence in Developing States

• In Event: The New Silk Road: Chinese Foreign Policy and the One Belt, One Road Initiative

Abstract

This qualitative comparative study analyzes efforts by the Chinese government to influence developing state governments to support foreign investments by Chinese firms. The high levels of political risk and corruption along with weak rule of law usually found to deter foreign direct investment (FDI) in many of these states present both difficulties and opportunities for Chinese firms seeking to expand abroad. Policies of the Chinese state in support of these firms attempt to overcome the difficulties and make the most of the opportunities by gaining the support of foreign state leaders in order to protect China's outward FDI. A range of cases of Chinese investment efforts on several continents show that regime type -the degree to which a state is comprised of authoritarian or democratic institutions- is the key independent variable in determining the extent to which China is able to influence foreign governments in support of Chinese FDI in developing states. While authoritarian institutions in the FDI receiving state provide opportunities for China to influence the host government by expanding the resources available for it to retain power, even imperfect democratic institutions offer voice to opponents of Chinese investments and provide incentives for politicians to reject the financial resources China provides in order to gain the support of voters and a broader range of interest groups. This increases the likelihood of opposition to Chinese firms’ investments, particularly investment by China’s state owned enterprises, in developing, democratic states.

Author

• Daniel O'Neill, University of the Pacific