Over the last decade, China has become an important player in the global aid scene. Because of its growing economy and its increasing influence as a regional and global player, China has gained much attention worldwide. Significantly, the volume of official development assistance (ODA) from China is rising. China has been increasing its outward flow of aid at a remarkable rate. On July 10, 2014, China released its second white paper on foreign aid following its first paper in 2011. According to the paper, China provided 89.34 billion yuan ($14.4 billion) in foreign assistance through grants, interest-free loans, and concessional loans in the three-year period. With an annual average of about $5 billion, this makes China the world’s ninth- or 10th-largest donor.
China brings different types of financing and skills to the development community. China prefers not to be seen as a donor and considers its development assistance to be a form of economic and technical cooperation, mutually benefiting both donor and recipient countries. Africa and Asia are the two largest recipients of Chinese aid. Over half of the aid, 51.8 percent, went to Africa, while 30.5 percent went to Asia.
We can identify several features of China’s aid policy.
First, China’s aid is foreign-policy driven and mutually beneficial. China’s aid has been used to strengthen relations with other developing countries in order to gain support for foreign policy objectives such as the One-China policy. According to official Chinese sources, China’s new aid commitment in 1990 rose by 68 percent as a direct result of deepening diplomatic battles with Taiwan. Aid has also been directed to developing countries that are of special interest, usually to gain access to strategic markets and raw materials.
In recent years, China’s various concessional loans from its export-import bank to resource-rich African countries such as Angola, Nigeria, Sudan, Tanzania, and Zambia have been largely driven by energy security objectives and other industrial policy objectives. China does not treat ODA separately from other instruments. Trade relationships, export promotion and development cooperation are all handled by the Ministry of Commerce.
Second, China’s aid mostly comes with certain conditions. According to China Exim Bank regulations, one of the required criteria for receiving concessional loans is that “Chinese companies shall be selected as the project contractor. And for procurement projects, equipment supply shall come from a Chinese exporter in principle; priority shall be given to equipment, materials, technology or services from China. In principle, no less than 50 percent of total procurement shall be made in China.” Chinese workers often migrate permanently to recipient countries after completing contracts.
Third, China does not impose policy conditions on its aid recipients. This reflects its respect for recipient sovereignty and its rejection of what it perceives to be “the interventionist approach.” This makes aid from China more attractive to recipients, especially those unable to easily meet traditional donors’ conditions.
Finally, China’s aid ― both in terms of modalities and sectors ― is directly shaped by its experience, which China is keen to impart and from which recipients are keen to learn. China has supported partner countries’ priorities in infrastructure and economic development. Drawing from its own experience in domestic poverty reduction programs, it prefers to focus on developing poor people’s productive capacity and places less emphasis on the provision of services and cash transfers.
China recently established the Asia Infrastructure Investment Bank, and on July 15, 2014, announced with Brazil, Russia, India and South Africa the creation of the New Development Bank to provide infrastructure financing. China now has growing influence on issues affecting global development and is challenging traditional donors’ authority in setting the standards and norms for development aid. It appears that the creation of the New Development Bank is aimed at challenging the American-led global economic order. China tends to use its aid strategically and its aid is shaped by political and economic factors.
By Park Kang-ho
Park Kang-ho, a former diplomat, is a professor at the Korea National Diplomatic Academy. ― Ed.