As China becomes a major global aid donor, it offers a new structure and method of aid dispersal different than that of major, Western aid donors. Beijing has attempted to maintain South-South relations with aid-receiving nations, concentrating on specific projects that both countries can benefit from. The difference initially stems from disparate priorities when dispersing aid:
These priorities were decided by Zhou Enlai in 1964 and have continued to be the basis for Chinese aid decisions to the present. Together they form the modern policy of treating aid-receiving nations as business partners rather than aid recipients, staying out of foreign nations’ domestic politics, and using infrastructure as a route to development (while also providing a return for China).
The Organization for Economic Co-operation and Development (OECD) defines aid as:
China however is not a member of OECD and therefore has its own definition including investments that most aid-donor nations do not include. A large portion of Chinese financing is categorized by OECD countries as development finance, but not aid. For example, Chinese banks provide low-interest loans that other nations are not willing to offer. However, they then make a profit off of the interest, and use this money for development projects which employ Chinese workers using Chinese goods.
These differences in aid outlook highlight Beijing’s choice to identify with developing, rather than developed nations in many economic matters. Indeed, “China is a developing country” was the opening line of China’s first (and thus far, only) White Paper on foreign aid, released in 2011. This attitude has in some ways allowed Beijing to more effectively address immediate needs in local communities of aid-receiving nations. Additionally, Beijing does not attempt to affect foreign nations’ political structure and does not try to teach developing nations the “correct” way to run a country as traditional donor nations often have- an attitude which is sometimes unhappily received.
However, Chinese projects have also been met with criticism. Quality has been a problematic issue in some overseas Chinese projects, as well as the ratio of return for the local community. Because China often uses its own workers, the local community may end up with a new piece of important infrastructure, but this investment has done little for local unemployment or technological skill and these communities are now in debt. OECD countries, when loaning money to aid-recipients, must make at least 25% of the money a grant, thereby reducing the debt burden on a developing nation. Beijing, however, does not follow this rule. There is some concern among long-term donor countries that heavy investments allowed by Beijing will undo relief programs that have attempted to remove this burden from developing nations drowning in debt. Lastly, it is hard to say whether the long-term affects of China’s reluctance to tie political conditions to aid will be beneficial or harmful to developing countries’ overall advancement.
China’s aid is mainly provided by large loans from China’s Export-Import Bank, the China Development Bank (CDB), and the China Africa Development Fund (within the CDB). Other major aid contributors include several state-owned enterprises, including China’s National Overseas Oil Company, the China National Petroleum Corporation, and the China Petrochemical Company, which provide technical and financial support. The structure is overseen by the Ministry of Commerce, with consultation with the Ministries of Foreign Affairs and Finance, and ultimately reports to the Standing Committee of the Communist Party’s Political Bureau.
These are the eight types of aid that Chines provides, funded in three ways: grants and interest free loans are provided through state finances while concessional loans are administered through China Export-Import (EXIM) Bank.
Because of the vast differences in calculations and Beijing’s lack of transparency regarding aid figures, it is very difficult to say how much foreign aid China provides. Following the release of the 2011 White Paper on Chinese Aid, the RAND corporation estimated it at nearly $190 billion for 2011, while other experts have said according to Western models of aid, it would only come to about $10 billion- obviously a huge discrepency, indicating that a large portion of China’s “aid” is in projects that other nations would classify otherwise due to their low ratio of grants to loans.
According to Beijing’s own reporting, about 80% of China’s foreign aid goes to Asian and African countries. It is unsurprising that China would invest heavily in its own region, and there are plenty of Asian nations that can use the aid for their economic development. Recent aid package offers to Pacific island nations have caused some concern to Australia, historically the major donor to these nations, highlighting the potential for aid to lead to political influence. As for its rapidly expanding investment and impact in Africa, (a phenomenon widely written about, and therefore not covered in-depth here) it’s clearly beneficial for China to have a significant stake in a region which can provide a huge number of development projects and potential profits as well as a large amount of the natural resources that China needs to continue to fuel its own growth.
Chinese foreign aid certainly presents a model significantly different from that of traditional aid-donor countries. As its economy continues to grow and requires new areas for investment, both China and aid-receiving countries can benefit from new projects. Chinese aid, particularly in Africa, is being viewed by many as a welcome supplement to Western models. However, there are few who would dispute that Chinese “aid” projects are intended largely to benefit China. It remains to be seen whether China has begun a new model for effective, practical development or is simply becoming the new leader in a long history of exploiters in Africa and the developing world.