China’s geoeconomic playbook: Chinese economic statecraft in the Global South

This thesis examines how China uses financial and legal instruments as tools of economic statecraft in the Global South, and to what effects. It argues that Chinese loans and bilateral investment treaties (BITs) are strategically deployed to advance geopolitical objectives, particularly to widen the distance between developing countries and the United States, and that Chinese funds, when fungible, shape domestic political outcomes in recipient states. First, I show that, since Xi Jinping’s rise to power, China directs larger and more favourable loans to countries less aligned with the United States, consistent with a reward-based wedging strategy. I then introduce the concept of “bounded generosity,” demonstrating that China offers more investor-friendly BITs to similarly less aligned developing countries. Finally, I develop a theory of fungibility, showing that Chinese loans, due to their low conditionality and lack of transparency, enhance authoritarian regime survival, especially during periods of political vulnerability, whereas foreign direct investment (FDI) and multilateral lending do not. Together, the findings show that China repurposes economic instruments for strategic ends and that the political effects of external finance depend on its fungibility. The thesis contributes to the study of the political economy of lending and FDI, Chinese foreign policy and the dynamics of specific mechanisms of interference in domestic politics, by identifying how different types of external engagement shape both international alignments and regime outcomes.