ABSTRACT
The chapter looks at the financial statecraft of China and Japan, showing how they have been learning from each other and how they are now increasingly competing with each other in this arena using similar means. Both countries have also tried to cement their leading role and thinking on aid provision in regional multilateral institutional settings. Japan has been more active in trying to shape the East Asian region as its own sphere of influence through financial power. China’s development lending has until recently been dispersed more widely on a global level, but the establishment of AIIB may portend changes to this approach. However, the evidence for Japan and China being successful in directly using development aid to further specific political goals, is more mixed. The historical legacy still weighs heavily and tempers the ability of Tokyo or Beijing to go-all out in pursuing geostrategic objectives through development lending. This provides leverage to recipient countries in circumstances where Tokyo or Beijing put high emphasis on maintaining good political relations with recipients.
