All posts by Philippa Brant

Philippa Brant is completing a PhD on Chinese aid and the implications for the international aid regime. She is a Prime Minister's Australia Asia Endeavour Award Holder (2010) and has recently returned to The University of Melbourne after living in Beijing. She can be contacted via plbrant[AT]gmail.com.

China’s aid transparency woes.

“They need to to undestand it better,” said one western official. “It’s disappointing, but maybe they do not want to be put in the same box as traditional donors.” (Guardian)

In light of the current aid effectiveness negotiations at the High Level Forum in Busan and increased pressure on China to improve the transparency of its foreign aid program, I have been reflecting on the often overlooked domestic context of China’s aid policy.

A challenge for the Chinese Government as it increases information about its foreign aid is managing how it is received domestically. With more than 200 million people still classified as ‘poor’ and a nascent civil society that concentrates efforts on domestic poverty alleviation and development issues, a ‘domestic lobby’ that pressures improvement in aid quality (and quantity) – as seen in traditional donor countries – appears a long way off.

That’s not to say that there is no domestic influence on China’s aid program: Chinese companies who implement the projects or receive procurement contracts have an interest in the expansion of the aid budget, and in the continuation of China’s ‘mutual benefit’ tied aid policy. This in itself is not altogether unusual – similar business lobbies exist in Japan and Korea (and no doubt many other countries). What I’m finding particularly interesting though is the way that Chinese people – especially the ever-vocal netizens – are responding to specific information on Chinese foreign aid.

The most recent example relates to the Chinese Government’s donation of 23 school buses to Macedonia. Information was reported on the Chinese Embassy in Macedonia’s website on Friday, 10 days after a horrific incident in Gansu Province where 19 preschool children were killed in a school bus crash (in which 64 people were overloaded into a 9 seat bus). People were already angry about the poor quality of school buses and netizens had circulated a photo montage comparing Chinese buses to those in America (collated by chinaSMACK here but warning: some images may distress). Awareness of the announcement of the foreign aid donation prompted more than 500,000 mostly angry comments on Sina Weibo, many expressing sentiments along these lines: ‘Chinese children don’t have fine buses to deliver them to schools, and the Chinese government is actually sending buses to other countries’.

Jing Gao on the Ministry of Tofu website has an excellent overview of netizens’ reactions, including a chart made by an internet user that compares the disparities in living standards between Macedonia and China, and this telling cartoon.

The outcry prompted a response from the Global Times. It firstly reflects on the timing of the information:

‘The coincidental release of information should have been avoided’

But then seeks to defend the aid program:

‘However, China cannot simply stop its aid programs to foreign countries. There is not evidence to prove the excess of these programs’

And back to unfortunate timing:

‘The school bus donation to Macedonia would have gone unnoticed if the Gansu incident had never happened’

While not directly involving Chinese Government foreign aid, two controversies earlier this year – the ‘Guo Meimei Red Cross Scandal’ and the issues surrounding the China Africa Project Hope – raised related responses from the Chinese population. While both scandals were actually bound up more in issues with rich young Chinese and their misuse of charities, people were also concerned about the (in)appropriateness of helping other countries when there remain so many problems within China.

Traditional donors have spent considerable effort (and resources) to try to educate their domestic populations about their foreign aid programs. As China’s program continues to expand, and scrutiny of government spending (across all areas) increases, the Chinese Government will have to find effective ways to explain its foreign aid program to a domestic audience.

To coincide with the 60th Anniversary of China’s aid to foreign countries, celebrated in August 2010, and the release of the White Paper on Foreign Aid in April 2011, the Chinese media launched significant information initiatives, including special lift-out sections of the China Daily, a TV program, and summaries of key points of the White Paper. This was notable but generally shied away from specific details of individual projects.

Some voices are emerging that promote the idea of China providing foreign aid. One article, by Jin Chen (and translated here), for example, argues that ‘the Chinese Government, entrepreneurs, and NGOs should all participate more actively in international philanthropy’, as ‘this will impact on China’s global reputation and also global strategy in the future’.

However, the fact that people were ringing the bus manufacturer asking if they’d made the donations to Macedonia themselves (as reported in this Shanghai Daily article) is indicative of the lack of knowledge about how China’s foreign aid program works.

Whilst the potential is potentially there for social media channels to be leveraged to get transparency onto China’s aid agenda, the risk (and perhaps more likely scenario) is that the scrutiny makes the Chinese Government think twice about improving information about its foreign aid activities, particularly as the Government is already struggling to negotiate the changing boundaries and expectations of its citizens regarding domestic policies and accountability. Nevertheless, with an aid budget growing at almost 30% per year in recent years, and pressure from the international community to undertake its fair share of global responsibilities, the Chinese Government would be well advised to begin a conversation with its people about its foreign aid program.

We are starting to see signs of how it might be framed. It is unlikely to be presented as an ethical endeavour of ‘helping the poor’. And although promoting ‘win-win’ outcomes may help to explain the aid activities, this may be hard to explicitly prove, particularly if scrutinised at the level of specific individual projects. Given the increasing dislike about the unreasonable power of large state owned enterprises amongst some sectors of Chinese society, presenting Chinese aid projects as also benefiting these companies through contract and investment opportunities may not be the smartest way to go.

Instead, the Chinese Government may continue to explain its foreign aid program through the concept of China acting as a ‘responsible great power’ (of course whether or not it actually is is another question). In fact, under the headline ‘Nurturing nations: China practices global giving’, in the China Daily’s 2010 ‘Special Report’ on Chinese aid, examples of humanitarian assistance, multilateral programs, regional cooperation, debt relief, and assistance for achieving the MDGs are cited as evidence of the Chinese Government’s responsibility in global affairs. China Daily reporter, Yang Cheng, has also opened an article on Chinese aid stating: ‘As a responsible socialist and developing country, the nation has taken foreign aid as an important path to building a harmonious world.’

The Government response to the outcry of the school bus donations to Macedonia seem to be following this line too: ‘China is living up to its international obligations to help other countries as they had supported China during hard times’.

China is facing international pressure to improve the transparency of its foreign aid, but if and how it does this will in many ways be based on how it will be received in its own domestic context.

Is China challenging traditional donors’ development policy?

In the lead up to the Fourth High Level Forum (HLF4) in Busan, South Korea, in late November, development thinkers and practitioners are debating what the outcome document could and should reflect, and the role of South-South Cooperation (SSC) providers (often referred to as ‘emerging’ or ‘non-DAC’ donors) in influencing this process. It is within this context that the discussion about Chinese aid in the Western discourse has now shifted from concerns about motives and objectives to broader questions regarding the impact of China on the dominant development agenda.

This post will briefly cover four components that are significant to examine: China’s conception of development & the underlying norms and principles; the relationship to the aid effectiveness agenda; forms of development financing; and China’s role in agenda-setting.

Aid and Development Norms

The Chinese Government’s White Paper on Foreign Aid frames China’s provision of aid as operating within the context of China’s position as a developing country but also as part of fulfilling its international responsibilities. The objective of providing foreign aid is to “help recipient countries to strengthen their self-development capacity, enrich and improve their peoples’ livelihood, and promote their economic growth and social progress” (White Paper 2011). Three things stand out in the Chinese discourse: the promotion of self-development and self-reliance; non-interference and non-conditionality; and equality and mutual benefit. These are used by China, Western governments, and recipients – albeit in different ways – to distinguish China vis-a-vis traditional donors.

Chinese foreign aid stresses the importance of stimulating economic growth and implementing a development model based on each country’s specific requirements and circumstances. Although China supports the MDGs and has used international forums such as UN Summits to call upon all countires to help promote and achieve them, they are not in themselves a core focus of its aid programs. There is no rights-based or gender-mainstreaming programing and very little inclusion of monitoring and evaluation mechanisms – especially regrading the quality or impact of projects.

Although like other donors China utilises foreign aid towards a range of objectives, there is an interesting distinction in the rhetoric used to promote and justify its policy. ‘Mutual benefit’ and ‘win-win’ outcomes mark the cornerstone of Chinese aid – and SSC in general. China’s aid policy is conceptualised with the belief that recipients’ development contributes to China’s development and vice-versa. There is no strong domestic moral imperative for aid giving, nor is it steeped in a colonial, imperial, civilising mission. China also does not deny that it gets some benefit too; rather than approaching foreign aid as a form of giver-receiver relationship, the ‘gift’ of aid is generally explained as benefiting both governments. China dismisses the notion of ‘charity'; instead stressing the idea of ‘friendship’. In being grounded in notions of friendship rather than charity, China presents its aid as being normatively different from that of traditional donors; based upon equality and mutual benefit. This discourse serves both domestic and international imperatives for the Chinese government, but arguably also represents a significant discursive distinction –- and one that is symbolically important to many other developing countries.

A significant difference between China and ‘traditional donors’ appears in terms of the norm of non-interference and no political conditions. Chinese aid policies do not adopt the language of ‘good governance’ or ‘failing vs. effective states’, and in fact utilise the backlash against these (excessive) policy prescriptions by continually highlighting China’s own policy of ‘non-interference’ in other countries’ internal affairs. This is the element that Western donors are most critical of and that China (and many recipient governments) highlight to create a distinction between China and other donors. Of course, as China’s engagement intensifies there is an increasing disjuncture between its rhetoric and practice – particularly when commercial and foreign policy objectives diverge. The Chinese insist that the difference is that they don’t impose or require policy changes: “we’re not trying to change the structures of recipient countries”. This has the advantage of allowing more policy space for developing countries and is thus highly valued. Despite the hype, there is no real evidence thus far that this component of Chinese aid is fundamentally affecting traditional donors’ aid conditionality practices – though prompting a reassessment of the relevance of some of these conditions would be a good outcome.

There is much talk and consternation that China is presenting competition for ideas of development – the so-called ‘Beijing Consensus’. China clearly gives developing countries more options and more experience to draw upon, and can offer some potentially useful ‘lessons’ based on its own (ongoing) development experience. The reality seems to be, however, that most countries view China as a complementary source of development assistance, rather than a complete alternative. China itself doesn’t have a clearly articulated ‘model’ and it is not seeking to turn other countries into ‘Chinese-like’ structures. Of course, its authoritarian system will be appealing to some dictatorships – but arguably these countries haven’t listened to the advice of Western donors & Bretton Woods institutions anyway.

Aid Effectiveness Agenda

Western donors are also concerned that China may be undermining the aid effectiveness agenda and accepted ‘best practice’. Because many DAC donors themselves don’t necessarily follow the recommendations, one could argue that they are already weak and that China is no different in that regard – although it might slow down the process of adoption if other donors are disinclined to reform their practices if this means giving China a comparative advantage. Not being a DAC member, China is not required to be ‘measured’ against regime rules and expectations, nor has it agreed to be subjected to DAC reviews or comparisons (compared with other non-DAC donors such as the UAE). China has signed the Paris Declaration, but as a recipient not donor country.

Paris Declaration Components:

Ownership Yes
Alignment Yes
Harmonisation No
Results Yes (quantity not quality)
Accountability Yes, but not transparency
Conditionality Not political or policy (but tied aid)

Unlike traditional donors, China doesn’t develop specific country strategies or country programs with multiyear plans detailing individual projects and objectives. It does, however, advocate country ‘alignment’, frequently relying on recipients to select projects and prides itself on its aid being ‘recipient-focused’ and ‘responsive’ to a country’s needs. Its norm of non-interference arguably coincides with the idea of ‘ownership’, and the Chinese Government stresses the importance of each country developing and articulating its own development path. There are cases of nascent involvement in coordination and harmonisation efforts, though only when led by the host country and only at a participatory level rather than through support for sector wide approaches and pooled funds. Its aid is substantially tied to Chinese contractors – in line with its mutual benefit norm – and this is unlikely to change dramatically.

Other rules and expectations:

Like other donors, China has issued quite extensive debt relief throughout the world, and in this regard is abiding by one of the expectations of the development community. Because China doesn’t attached explicit conditions to its debt cancellation, however, there are concerns about debt sustainability, and potential problems posed by China’s resource-backed loans for the IFI’s preferred creditor status. Chinese lending is usually based upon an assessment of the individual project’s risk, not risk at a broader country level – which enables countries greater access to development finance as well as commercial loans. This has benefits and drawbacks and depends much upon the country’s ability and willingness to manage its levels of debt.

Transparency is a strong norm and is likely to be a key element in Busan. 18 donors that are not members of the DAC report through the DAC, and the IATI movement is gaining prominence. China’s transparency is still minimal – and is a concern of Western donors and within recipient countries. It has, however, improved markedly in recent years and in countries that have strong requirements there are cases where China is involved in recipient-led coordination and reporting efforts – the most significant being Cambodia where China reports its aid projects to a common database alongside other donors. The transparency norm currently only extends to ‘ODA’ – in terms of OOF (such as export credits) traditional donors are often as untransparent as China and there has been recent debate about this short-coming of the aid effectiveness agenda.

A common concern about Chinese aid relates to issues of corruption and governance. Since the majority of Chinese aid is ‘in kind’ or tied, the Chinese system doesn’t actually transfer funds to other developing countries. The Chinese (rightly) argue this reduces likelihood of aid money being siphoned off. However, details of contracts and procurement are often scarce and recipient communities have a legitimate issues with ensuring whether they are getting best value for money. There is also scope for corruption between Chinese actors, and Chinese Embassies have significant leeway to select projects and disburse grant funding (not the larger concessional loans though) – meaning that (good) project decisions depend on specific individuals.

A little surprisingly, China has actively advocated for countries to support LDCs and direct 0.15% of GNI to them, which is one of the DAC’s recommendations. A MOFCOM spokeswoman at the UN LDCs Conference in Istanbul in May this year stated: “We also call on the developed countries to fulfill their commitment as early as possible to allocate 0.15 percent to 0.2 percent of their Gross National Income as development aid to the LDCs“. The Chinese Government states that two-thirds of its aid goes to ‘least developed’ and ‘other low-income’ countries – though no definition of these categories is offered. It is an interesting example of China speaking of and embracing an important global development norm.

Development Financing

In most countries China is now a mid-level ‘donor’ but in some cases it is one of the main sources of development finance. The White Paper reveals an aid program that has been increasing at approximately 30% per year for the past few years, and its annual budget stands at about $4 billion (caution: not directly comparable with DAC ODA definitions) or less than 0.05% GNI (2009 PPP figures).

Interestingly, China now articulates a distinction between what it considers ‘foreign aid’ (see White Paper) and other forms of development finance (though definitions and boundaries within these categories are not coherently defined). This is arguably the combined result of pressure from the international community and a desire to be seen to be responding to the discussion about its expanding aid program.

However, it is crucial to realise that Chinese ‘aid’ is not conceived as a separate policy; aid flows are but one (small) element within China’s economic statecraft. The government draws upon a range of financial mechanisms when formulating economic and development agreements with other developing countries. Most of these –- such as official loans at commercial rates, export credits, suppliers’ credits – would be classified as ‘other official flows’ (OOF) under DAC definitions. The Chinese Government also utilises aid and investment ‘packages’ and (occasionally) resource-backed loans known as the ‘Angola Model’. As these other development financing mechanisms fall outside the DAC (and Chinese) definition of ‘aid’ they are also not encompassed in the aid effectiveness agenda. In the lead up to Busan some scholars are now starting to advocate for an extension of the effectiveness and transparency agendas to incorporate broader forms of development finance and thus include the dominant financing from providers of SSC.

China’s aid and development policy places emphasis on diverse economic initiatives such as (free) trade, reduction in tariffs, use of public and private sector within aid projects, establishment of special economic zones, and so forth. China (somewhat ironically) advocates utilising aid as a catalyst for generating profitable projects. Its grant-aid funded agricultural centres, for example, are explicitly designed to be run as profitable joint-ventures within the medium term. Aid is just a small part of its development relationship. Western donors have been working for years to ensure a distinction in their commercial and aid endeavours in a country and thus criticise the commercial aspect of Chinese aid as being self-interested. However concepts such as ‘aid for trade’ and the EU’s policy coherence for development agenda highlight the importance of thinking about the links between different aspects of global and bilateral relationships. China’s substantial new investment in the infrastructure sector, particularly in Africa, has also been a catalyst for renewed private sector interest and the reengagement of Western government apparatus’ such as US EXIM.

A new development agenda?

Whilst in the 2008 High Level Forum in Accra traditional donors were encouraging donors like China to follow the Paris Declaration, the Busan process has shifted towards finding ways to ensure the Paris Declaration remains valid in the context of other forms of development funding. It is possible we will see a stronger focus on outcomes rather than inputs, and a shift towards development effectiveness instead of the more specific aid effectiveness, and a change in language from ‘aid’ to ‘development cooperation’. Commentators such as Jonathan Glennie have suggested a ‘twin-track’ approach as a likely outcome, to take into consideration the differences between ‘traditional’ and ‘south-south’ development assistance.

Providers of SSC ardently stress its distinctiveness but appear reluctant to be subsumed within any more definitive framework or grouping. This is particularly the case for countries like Brazil, India and China, who’s provision of SSC and aid is part of their articulation and demonstration of rising global power. Despite the buzz around SSC – and the real potential benefits it can bring – definitions and guidelines for this modality are yet to be agreed upon.

Chinese aid – alongside other providers of SSC – is undoubtedly prompting reexamination of traditional donor aid policies and practices and provides the impetus and opportunity to reconsider the dominant development and aid structures and processes, but it is difficult to determine a clear normative challenge at this stage – nor is it certain that China wants to play its part in formulating it.

By the very nature of it’s involvement China is changing the development dynamics. The involvement of China and others should provide fresh opportunities for developing countries to further their own development agendas and for traditional donors to engage with them on new terms; not just as poor aid recipients.

At this stage, China is not attempting to overtly challenge the traditional donor development agenda, but appears to be embarking on a dual process of increasing acceptance of some norms and practices whilst continuing to stress its distinctiveness in other areas and it is likely to pick and choose which elements it accepts based on an assessment of its own best-interests at any given time.

 

Links:

State Council, White Paper on China’s Foreign Aid, April 2011

Busan conference offers chance to tackle aid effectiveness Jonathan Glennie

Who should lead the aid effectiveness debate in the future? Overseas Development Institute, Public Event, 6 July 2011

2011 Survey on Monitoring the Paris Declaration, OECD

Foreign aid with Chinese characteristics: China releases first White Paper on aid

The Chinese Government has just released its much-awaited White Paper on foreign aid, marking the most comprehensive (official English) collation of information and an important step in China’s efforts towards greater transparency in its aid policy.

http://www.youtube.com/watch?v=TZlaahrz0Gw

Although the White Paper itself is not long, what follows is a summary of the salient elements and some brief initial thoughts. Those of us who follow developments in Chinese aid closely will not find many surprises. Although, changes in language choice and reference to some components of international development discourse are significant to note.

The White Paper frames China’s provision of aid as operating within the context of China’s position as a developing country, but also as part of fulfilling its international responsibilities. In what can perhaps be regarded as the stated overall objective, China is providing foreign aid to “ help recipient countries to strengthen their self-development capacity, enrich and improve their peoples’ livelihood, and promote their economic growth and social progress”. There is a clear declaration that Chinese aid is a “model with its own characteristics”.

Up until the release of this White Paper, the Chinese Government would refer to three stages of Chinese aid provision: 1950-1978, 1978-mid 1990s, and 1990s-onwards, reflecting shifts in China’s own development situation and strategies. Of note, then, is the statement that “China’s foreign aid (has) entered a new stage”, marked particularly by expanded resources available for aid from 2004 (reported as increasing on average by 29.4% between 2004-2009) and a National Conference on Foreign Aid in August 2010, coinciding with the 60th anniversary of Chinese aid provision.

Chinese aid has traditionally been guided by the ‘Eight Principles for Economic Aid and Technical Cooperation to Other Countries’ espoused by Premier Zhou Enlai in the 1960s. This White Paper articulates related features that guide Chinese foreign aid today, and clearly states that China’s aid “falls into the category of South-South Cooperation”. The last feature is particularly notable in its reference to responding to changes in the development landscape.

Basic features of China’s foreign aid policy:

–       Unremittingly helping recipient countries build up their self-development capacity

–       Imposing no political conditions…respect(ing) recipient countries’ right to select their own path and model of development

–       Adhering to equality, mutual benefit and common development

–       Remaining realistic while striving for the best

–       Keeping pace with the times and paying attention to reform and innovation

Chinese foreign aid is provided in three forms: grants and interest-free loans (through state finances) and concessional loans administered through China EXIM Bank. To the end of 2009, China had provided a total of 256.29 billion yuan (US$39.3 billion) in aid, with approximately 41% grants, 30% interest-free loans and 29% in the form of concessional loans.  These are the most authoritative figures available to date.

In what seems to be an attempt to help dispel the accusation that it is providing aid primarily for access to energy resources, the White Paper clearly states that: “Of China’s concessional loans, 61% are used to help developing countries to construct transportation, communications and electricity infrastructure, and 8.9% are used to support the development of energy and resources such as oil and minerals.”

In terms of the forms of aid, China classifies activities into eight categories: complete projects; goods and materials; technical cooperation; human resource development cooperation; medical teams sent abroad; emergency humanitarian aid; volunteer programs in foreign countries; and debt relief. At present, 40% of China’s foreign aid expenditure is in the form of ‘complete projects’.

China has been accused of lacking transparency in the details of its aid program. Whilst still sparse in detail, the White Paper does provide a breakdown of Chinese aid resources according to the geographical distribution (Figure 1), and distribution according to income-level (Figure 2) for the year 2009. Interestingly, the latter figures differ somewhat from the figures provided at the official exhibition of 60 Years of China’s Overseas Aid.

Figure 1: Geographical distribution of China’s foreign aid funds in 2009

Figure 2: Distribution of China’s foreign aid according to income level of recipient countries in 2009

 

 

The major areas that Chinese aid is directed towards include agriculture, industry, economic infrastructure, public facilities, education, and medical and health care. The White Paper also notes that climate change has become a new area of Chinese aid in recent years. Each of these sectors is expanded in further detail, with agriculture (including food security), rural development and poverty reduction afforded high priority.

It is often pointed out that China does not have an aid agency per se, and that whilst the Ministry of Commerce is the main overseer, other ministries and government bodies are also involved in providing aid. The White Paper makes clear that this is still the case, although highlights improvements in coordination.

“In order to strengthen the coordination of the departments concerned, the ministries of commerce, foreign affairs and finance officially established the country’s foreign aid inter-agency liaison mechanism in 2008. In February 2011, this liaison mechanism was upgraded into an inter-agency coordination mechanism.”

This is again another important step in strengthening China’s aid management.

Of particular interest to other aid agencies and organisations, the Chinese Government has devoted the final section of the White Paper to articulating China’s ‘International Cooperation in Foreign Aid’. This highlights examples of assistance to multilateral institutions, as well as trilateral and regional cooperation. Indications are that this will continue to be expanded “under the framework of South-South Cooperation”.

Part of the conclusion is also worth quoting:

“China has a long way to go in providing foreign aid. The Chinese government will make efforts to optimize the country’s foreign aid structure, improve the quality of foreign aid, further increase recipient countries’ capacity in independent development, and improve the pertinence and effectiveness of foreign aid.”

The White Paper is significant in and of itself as the first ever published on foreign aid. It interestingly makes reference to some parts of the international development discourse, including priorities such as clean energy/climate change and food security. There is some allusion to country ‘programs’ and ‘plans’, although whether they constitute a ‘country strategy’ as such is difficult to determine. Developing a predetermined country strategy would perhaps seem to be at odds with China’s principle of ‘recipient-led’ assistance. Aside from the conclusion, however, there is no mention of aid effectiveness, monitoring and evaluation strategies or result-based management. There is also no clear statement defining what China considers and calculates as ‘aid’. Although, on initial reading the terminology and details seem comparable to the OECD/DAC definitions that are used for aid from ‘traditional donors’.

This White Paper is also a clear indication of the trend that China is now comfortable with being a ‘provider of foreign aid’, rather than a country engaging in ‘development assistance’ and ‘economic cooperation’. This fits with the notable articulation in the 60th anniversary exhibition in 2010 where the Chinese Government – like any good donor – proudly displayed the ‘China Aid’ logo.

The release of this White Paper provides an important explanation of China’s official aid policies, principles and practices, and although it is light on some details, it does offer some specific examples and indications of future intentions. It is also arguably significant in its symbolism of the Chinese Government’s increased desire to be regarded as an important and responsible member of the international community.

This is a cross-posting with the Lowy Institute’s ‘Interpreting the Aid Review’.