China's Dual Personality

07/30/2012 12:43 pm ET | Updated Sep 29, 2012
  • Daniel Wagner CEO of Country Risk Solutions / co-author of the forthcoming book "Global Risk Agility and Decision Making" (Macmillan, 2Q/2016)

China's emergence on to the global political and economic stage may be best characterized as a combination of manifest destiny -- as it claims what it sees as its rightful place as a leading power in the 21st century -- and a teenager taking its first test drive in a car. On one hand, China has ably influenced the course of global political affairs through deft diplomacy and the multilateral institutions, and the course of the global economy through enormous foreign direct investment, bilateral trade agreements, and disbursement of foreign aid. On the other hand, it has stumbled on a host of issues, such as attempts to project its power regionally and numerous violations of its WTO obligations.

Such a dichotomy may be expected of any country stepping on to the global stage; there is no way that a nation the size and significance of China could flex its muscles without others noticing, or objecting. But China's debut as a global player over the past decade has been complicated by its chosen dual role as both a developed and developing nation. It is at once a major donor to poor nations and a recipient of multilateral aid from development banks -- in essence, the 'poor' developing country that seeks to combat poverty at home and the global superpower that projects its power skillfully. China's leadership promotes this duality -- wanting to be thought of as a country that must continually strive to 'develop,' while at the same time acting like a superpower.

This duality naturally makes it more difficult for China to achieve its international economic objectives, from the perspective of developed countries, since China can be accused of wanting to have its cake and eat it, too. It wants to have the benefits of multilateral development assistance normally afforded to 'developing' countries, while wanting to be able to flex its muscles in international fiscal and monetary affairs. Yet this 'dual personality' also makes it easier for China to establish relationships with developing countries by being able to both identify with the plight of poor countries while at the same time acting as a lender to them.

Similarly, having a dual approach to political affairs has net positives and negatives. On the positive side, China has been able to pull its weight at the UN and other international political organizations, as well as form meaningful alliances with other emerging powers. On the negative side, China is often seen as an opportunistic player that forms relationships with unsavory regimes and cares little about human rights. In a sense, China has the best of both worlds, being at once a combination of kingmaker and 800-pound gorilla, while at the same time being a friend to countries that have few if any allies, and being willing to lend a helping financial hand when developed countries and multilateral development banks (MDB's) fall short.

In the course of this decade, China will need to make up its mind what it wants to be, because it cannot have it both ways indefinitely. It will either decide to embrace its 'destiny' as a global superpower and gradually discard its dual 'poor cousin' image, or it will fail in its efforts to try to be all things to all countries. Inevitably, the MDBs will scale down their lending to China -- the second largest economy in the world, with the largest foreign exchange reserves (by far), and a currency that has already become a de facto trade currency. That the MDBs continue to lend to China while China is itself lending to poorer countries makes no sense, and takes much needed funding away from genuinely poor countries that need the money. The MDBs are as much to blame here by continuing to play the game.

More the point, once China becomes the world's largest economy (in the next decade) and perfects its diplomatic statecraft (over the course of the current decade), it can no longer be seen as a 'developing' country. After all, when a country is the largest economically, and one of the most powerful politically, continuing its 'duality' play becomes more and more disingenuous and less and less defensible.

China certainly has the financial means to resolve its remaining poverty issues, but in truth, the rate of poverty is lower in China than it is in the United States at the present time. Perhaps the US should apply for financial assistance from the MDBs, since it is in more need of assistance at the present time than China. It would be interesting to see what the banks' response would be, and whether the US could be successful at playing the duality game.

For now, China is having its cake and eating it too. Hopefully and presumably, once China rises to the zenith of its power in the coming years, it will mature to the point where it will no longer want to be seen as both a developing and developed country. Stepping up to the plate is part of what is required to be a true global superpower. China is capable of accepting that challenge.

*Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk consulting firm based in Connecticut (USA), and author of the new book Managing Country Risk (