Is China justified in still calling itself a developing country?

In a speech on April 23rd America’s treasury secretary, Scott Bessent, laid out the Trump administration’s vision for the global financial system. Rather than announcing that America was leaving the imf and World Bank, as some had feared, Mr Bessent’s “blueprint to restore equilibrium” put the Bretton Woods institutions clearly at its centre. They are now to police abuses of the system, he said, including those committed by China.

Among Mr Bessent’s list of complaints was one that particularly raises the hackles of officials in Beijing, but also shines a light on China’s place in the modern world. “Treating China…as a ‘developing country’ is absurd,” he said, adding that if China wants to play a role in the global economy commensurate with its actual importance, then it needs to “graduate up”.

He has a point. China gets cheap loans, avoids billions of dollars in contributions to global climate-adaptation funds and earns itself extra years to phase out carbon emissions all by retaining its “developing” status. But Mr Bessent’s comments also highlight a contradiction that tells the world a lot about China’s perception of itself. It is not all about money.

China is obsessed with history, especially its history of humiliation. In a recent speech President Xi Jinping said: “The modernisation of Western countries is full of bloody crimes such as war, slave trade, colonisation and plunder, which have brought…suffering to…developing countries.” China, he said, is one of them.

Soon after the Communist Party took power in 1949, it began to present itself as a champion of the developing world. And it still sees itself in that way. China wears its developing-nation status as a badge of honour and a sign of moral superiority. (This support for the global south also helps create numerous voting allies at the United Nations and other organisations.)

Wang Yi, the foreign minister, has called China the global south’s “ex officio” member, and leaders are unlikely to give up that status lightly. No matter how rich China grows, said Mr Xi in 2024, it “will always belong to the developing world”.

Who are you?

Part of the challenge is that there is no agreed definition of a developing economy. In most international organisations, countries can simply declare themselves to have “developing” status. Half a century ago China’s gross national income per head was less than Sudan’s and Zambia’s. But China now nudges $13,400 in income per person and the World Bank reckons that puts it second, behind Costa Rica, among the “upper middle-income” economies. It is expected to join the high-income group next year.

Policymakers in Beijing point to lingering challenges, such as enduring rural poverty, to justify retaining their status. The billions of dollars in loans China receives at developing-country rates from the World Bank are tiny relative to gdp. Yet it insists it should not “graduate” from the scheme, so it can learn from the bank’s development expertise. Other countries, such as Qatar and Saudi Arabia, also claim “developing country” status.

There are other perks. Around 40 global bodies give special status to poor countries, to broaden access to global public goods and make it easier to comply with international rules. For example, low-income countries (but including China) pay a fraction of the ordinary fees to send mail across borders. In effect, rich countries subsidise the mail of poor ones. Developing states are allowed to subsidise some industries, such as agriculture, at a higher rate. They also get more time to comply with global trade rules, cheaper un membership fees and at least ten more years to achieve net-zero carbon emissions.

Mr Bessent’s comments seem reasonable when you consider how China’s power has grown with its wealth. It now has the world’s largest navy and is challenging the West’s technological dominance in fields from quantum computing to artificial intelligence. The World Bank’s statistics do not measure things like space programmes and aircraft-carriers, which soak up money that could be used to ease poverty.

Rich countries are eager for China to step up. Negotiations at the cop29 climate talks in November almost collapsed because rich-country envoys were unhappy that China, though it is the world’s largest carbon-emitter, initially refused to contribute money to help poor countries deal with climate change. Mr Xi’s envoy, Liu Zhenmin, told Chinese media: “The West has always wanted to separate China [from the global south]…we do not agree with this.”

In practice, Mr Xi gives up the perks when pushed. His cop29 delegation, at Europe’s urging, unblocked the talks with crafty accounting. It let some of China’s indirect climate lending be counted in the rich countries’ pile upon assurance that it was voluntary and did not imply a change in its “developing” status. Most new trade agreements prevent China accessing the benefits of its status, says Henry Gao of Singapore Management University.

There is some room for pragmatism; but maintaining the contradiction is difficult. China’s interests often reflect those of a great power, leaving its “developing-world champion” routine looking hypocritical. It is an unforgiving overseas lender itself. It drives a hard bargain when lending to the developing world, and it links projects in poor countries with how a recipient country votes at the un.

In changes being discussed at the imf and World Bank, China prefers “vote” reforms that would give more votes and influence to those with greater gdp, diluting the power of poorer states, notes David Passarelli of the unu Centre for Policy Research, a think-tank in New York. It is less keen on “voice” reforms that would give representatives from poor countries more top jobs and a better slice of resources.

The same dynamics are visible at the un, where China says it backs expanding the Security Council to include developing countries. But when America proposed a plan last year that would have created two (permanent non-veto) African seats, China rejected it, apparently because it would have included spots for India and Japan.

In Geneva, where a global pandemic treaty was recently agreed, China also played a double game. Poor countries wanted to force the rich to hand over intellectual property on vaccines and other things in times of crisis. Rich countries resisted, and so did China, looking to protect its own biotech industry.

Nevertheless, Mr Xi continues to view developing countries as keen on his push to remake the global order. Development is a permanent “political identity”, says Wang Yiwei of the Academy of Xi Jinping Thought at Renmin University. The party’s legitimacy depends in part on the riches yet to come.  “Once you are ‘advanced’,” says Mr Wang, “you are declining.” ■

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