The US House of Representatives has voted to strip China of its status as a developing country. China has condemned the move and refuses to join the ranks of developed or "wealthy" nations. At stake are critical economic and geopolitical issues for the world’s second-largest economy.
The US House of Representatives was unanimous; the Chinese response was unanimously furious. Ironically, it was a bid by US lawmakers to raise China’s status on the official development scale that has enraged Beijing.
China has been declaring itself a major global power and adopting “great power diplomacy” over the past few years. But that’s on the geopolitical scale. When it comes to dollars and cents, the world’s second-largest economy prefers to pitch its tent, and throw its weight, at the back of the development room.
On March 27, the US Congress's lower house unanimously approved a bill seeking to deprive China of its “developing country” status. Bill HR (House of Representatives) 1107, asking the US Secretary of State to work towards stripping the People’s Republic of China (PRC) of its “developing country” status, was passed by a resounding 415-0 vote.
The 'PRC Is Not a Developing Country Act' has now moved to the Senate Foreign Relations Committee and is a long way from the US president signing it into law, but the reaction from China was swift.
“It represents another example of US policy aimed at containment of China,” said the China Daily, the official press organ of the Chinese Communist Party. “Faced with a rising China and the collapse of a unipolar world, centered on the US, to one which is multipolar, with China playing a major role, the United States is using every play in its book to prevent such occurring.”
Even the South China Morning Post, a more independent Hong Kong daily, warned that the House vote "will be seen by Beijing as another trick by Washington to contain and suppress the nation’s development”.
A Trump obsession with bipartisan support
Addressing the House on the day of the vote, Young Kim, a California Republican and sponsor of the measure, noted that China receives preferential treatment in international organisations due to its developing country status.
“The People’s Republic of China is the world’s second largest economy, accounting for 18.6% of the global economy,” said Kim. “However, the PRC is classified as a developing country, and they’re using this status to game the system and hurt countries that are truly in need,” she added.
The battle to bring China into the club of middle-income, or even developed, countries is not new. It was one of Donald Trump's obsessions during his years in the White House. In 2019, Trump complained about countries "cheating" with the international rules in a Twitter post. A few months before losing the 2020 presidential election, Trump repeated his assertions that China should lose its status as a developing country.
Trump may be a deeply partisan figure in US domestic politics, but when it comes to foreign policy – and especially on China – his views now have bipartisan support.
What’s in a name?
There are no universally agreed yardsticks to measure whether a country is "developed" or "developing". Over the past few decades, the semantics around the "developing country" grouping have been a source of discourse, and occasional discord, evolving from “less-developed countries (ldcs)” to the more acceptable “developing countries".
Politically, most countries in this group now refer to themselves as the “Global South”. The Global South term is widely deployed despite its geographical inaccuracies – Australia and New Zealand, for instance, are firmly in the Global North. The UN’s Finance Center for South-South Cooperation lists 78 countries, but at times qualifies them as a “group of 77 and China”.
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When it comes to classifying countries into developed and developing countries on the basis of GDP (Gross Domestic Product), experts note that it’s hard to fit China into the latter category. "Can we consider the first industrial power in the world and the second-largest exporter of cars a developing country?" asked Jean-François Dufour, an expert on the Chinese economy and co-founder of Sinopole, a resource centre on China.
"In Washington’s eyes, China is also adopting actions typical of developed countries, such as the Belt and Road Initiative and the enormous resources allocated to modernising its army," noted Xin Sun from King's College London, referring to China’s vast BRI infrastructure project better known as “the new Silk Road” and the defence budget increases that now give China the world’s second-largest military budget.
China wants to stay poor... on paper
Beijing does have arguments for remaining in the developing countries group. "According to the World Bank's country classification criteria [Human Development Index], and the one used by the United Nations [per capita income], China is just below the most-developed countries," noted Sun. This means that on the World Bank and UN scales, China is in the same category as Mexico or Malaysia.
China's wealth is also centered upon metropolises such as Beijing and Shanghai. "We are always a bit quick to forget the invisible China, that is, the rural areas, where 64% of the population is still concentrated. Living conditions – whether in terms of access to health care, quality of infrastructure or even heating – are still at the level of developing countries," said Carlotta Rinaudo, a China specialist at the International Team for the Study of Security (ITSS) Verona.
The Washington-Beijing clash over classification is based on hard economics. "The main interest of this developing country status is that it provides benefits from preferential trade terms,” explained Dufour. World Bank loans to developing countries have lower interest rates, and these countries can impose tariffs on imports from so-called rich countries. In addition, "developing countries are under less pressure in the fight against global warming," noted Sun.
The US wants to put a stop to this because it believes that "Beijing uses the advantages of this status to assert its influence on the international scene at the expense of Washington", explained Rinaudo.
China can therefore obtain preferential loans from international organisations financed mainly by the US and then invest in countries where Beijing is competing with Washington for influence. In other words, the US fears that some of the money it provides to institutions such as the World Bank ends up in the pockets of China, which it then uses against US interests.
Abandoning the victims club comes with a price
But Beijing insists that it does not use money from international institutions to invest in foreign countries. China believes this US campaign is aimed at slowing its growth and destroying Chinese jobs. "The economic consequences can be very real. Indeed, without this status, Beijing would no longer be able to impose tariffs on imports [which raise the price of goods produced abroad] and these companies would become less competitive, which could force some to lay off workers," explained Sun.
This semantic tug-of-war also has geopolitical implications. "China has often played the card of the leader of the group of developing countries against the so-called rich countries led by the US," noted Sun.
If Washington succeeds in promoting China into the elite club of developed countries, "it will be more difficult for Beijing to present itself as an alternative to the 'ugly' rich countries. China will be forced to do an about-turn and officially become a power that can dominate others and then will no longer be able to pass itself off as a 'brother country' sharing the same problems," said Dufour.
The battle over China's development status is likely to be a long one. If and when the US law passes, it will still be necessary to convince the international institutions, "which could take years", said Sun.
There’s one country that will probably follow the discussions very closely: India. Indeed, if China is no longer considered a developing country, India has a lot to gain by taking the newly vacated space at the head of the developing nations bloc. What’s more, India appears to be the natural candidate for this position – and that’s precisely what strengthens China's determination to fight to keep its current status, according to the experts interviewed by FRANCE 24. Beijing is not likely to give up its place to its main rival in Asia without a diplomatic fight.
(This article is a translation of the original in French.)
