- Dr Gong Xue, Assistant Professor, China Programme, IDSS, RSIS
- Dr Li MingJiang, Associate Professor, Coordinator of China Programme, IDSS, RSIS
Over the past decade, China has moved closer to accepting international infrastructure financing standards and sought to address those environmental and social problems that have occurred in many overseas projects funded by China. These new policies include enhancing the state regulatory regime, requiring the financial entities and business actors to adopt international best practices, and at the same time revamping various regulations in the financial sector. But, these reforms have not led to any fundamental change in the actual behavior of Chinese business actors’ sustainability performance on the ground. This paper addresses the question why the sustainability performance of China’s overseas financing is still ostensibly weak in despite of these government’s efforts. Building on the existing theoretical perspectives, for instance, economic statecraft theory, fragmented authoritarianism model, and governance weaknesses of the host countries, this research seeks to examine the role of China’s policy banks in supervising those infrastructure projects that they have financed. This study looks at three cases of infrastructure financing by China Development Bank and EXIM Bank in Southeast Asian countries in different periods. Drawing theoretical insights from normative institutionalism, this paper contends that the unsatisfactory sustainability performance of Chinese financing continues to take place because decision-making based on the logics of appropriateness-conforming to various informal political norms inside China-has prevented Chinese financiers from making accountable business decisions, leading to their failures in exercising effective oversight of those overseas infrastructure projects. The findings in this paper provide a better understanding of China’s overseas infrastructure development and contribute to the debate on China’s development financing, as well as the Belt and Road Initiative.