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’.

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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.

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