foreign assistance

Aid gets smarter

China’s foreign assistance has been expanding in scope, focused on building capacity and improving livelihoods

cover P1 aid

August 14-20, 2017
in Hong Kong
For China Daily Asia Weekly

As it grows wealthier, China is stepping up its efforts to support development around the world, taking a new and often more effective approach to foreign assistance, rather than just providing overseas aid.

“China must improve management over foreign aid funds and projects, reform the foreign aid administration system and improve the overall results of foreign aid,” said President Xi Jinping during a Beijing meeting on deepening reform in February.

Since China adopted opening-up reforms in the late 1970s, it has experienced phenomenal economic growth that has allowed it to expand the scope of its foreign assistance and play a bigger role in improving livelihoods worldwide.

In 2016, China provided about 35 billion yuan ($5.2 billion) in foreign assistance, up from around 30 billion yuan in 2011. That is growth of more than 3 percent per year, according to Neil Wang, Greater China president with consulting firm Frost & Sullivan.

“Complete projects and goods and material, technical cooperation and human resources development cooperation were the main forms of China’s foreign assistance,” Wang told China Daily Asia Weekly.

The difference between “aid” and “assistance” can be subtle but is profound. Criticism of the traditional, Western-led approach to aid is common. Aid often comes with philosophical or political strings or creates dependency among developing nations that come to rely on it as part of their national economy.

China’s approach has been different. The country’s goal is not to give developing countries metaphorical fish, but to provide the financial and technical assistance so that countries can learn to fish and, in turn, build stronger flourishing economies.

A 2014 white paper published by the State Council, China’s cabinet, said that “teaching one to fish rather than giving one fish” is important to build capacity in developing economies.

The result is a focus on foreign assistance that prioritizes agricultural development, education, health services, manufacturing and infrastructure, trade, public welfare, environmental protection and humanitarian aid when needed.

Since 1949, China has provided around 600 billion yuan in foreign aid and has regularly expanded the scope of its efforts.

In January 2016, the official launch of the China-led Asian Infrastructure Investment Bank (AIIB) was another big step that highlighted China’s approach to shoring up international development. The development bank offers finance to projects as part of China’s Belt and Road Initiative, a plan to improve connectivity in countries along the historical Silk Road.

The AIIB is expected to lend between $10 billion and $15 billion a year for the first five years, according to its president, Jin Liqun.

In its first year, the bank approved $1.7 billion in loans, exceeding its target by $500 million. These included $165 million for power distribution in Bangladesh, $216.5 million to improve a slum in Indonesia and $300 million for a hydropower project in Pakistan.

Out of a total of $100 billion in capital, China had an initial subscription of almost $30 billion and later invested another $50 million.

China’s push to lead the AIIB is part of a multi-pronged approach to foreign assistance that is defying long-held conventions and focusing on directly funding projects.

China is now taking steps to optimize its strategy on foreign aid, particularly as the country’s global influence and role in helping shore up struggling economies grow.

Evacuees spent the night in tents donated by the Chinese government on Dec 20 last year after a series of earthquakes hit the South American nation of Ecuador. Credit: Daniel Macias / Nurphoto

Rapid economic growth has substantially increased the amount of resources China can devote to foreign aid. And since China deepened its financial engagement with the world through its Go Global strategy, launched in 2005, its foreign assistance has grown at an average rate of almost 22 percent annually.

In 2013, Chinese foreign assistance accounted for about 3.9 percent of development assistance globally and was equivalent to more than a quarter of total US foreign aid. Much of China’s foreign assistance goes to Africa, about half of the total between 2010 and 2012, according to the 2014 white paper.

According to the Export-Import Bank of China, by 2025, China will have provided Africa with $1 trillion in direct investment, soft loans and commercial loans, all of which contribute to the country’s efforts to provide development assistance.

In 2015, President Xi Jinping upped the ante, announcing that over the next three years China would send $60 billion to Africa in assistance and loans to help with the continent’s development. The financial aid includes interest-free loans and focuses on 10 areas including industrialization, agriculture, financial services, green development and security.

In addition to ongoing measures to strengthen the economy, trade and infrastructure of developing countries, China has also increased efforts to help in the aftermath of natural and humanitarian disasters.

“China’s aid has been important for emergency humanitarian relief. For example, in May, China provided $5 million to support the relief efforts by the United Nations World Food Program in northeast Nigeria,” Chen Qi, a foreign policy researcher at Tsinghua University, told China Daily Asia Weekly.

The contribution from China is to help purchase 4,305 metric tons of rice to support 410,000 internally displaced persons — people who were forced to leave their homes but who remain in Nigeria. According to official data, as of May, a total of 184,500 men and 225,500 women had been affected by the food shortage in the northeastern states of Borno and Yobe.

During a meeting with China’s Ambassador to Nigeria Zhou Pingjian, the Governor of Borno State Kashim Shettima praised the Chinese government for the assistance and called it “invaluable support”.

“Sometimes China provides cash or materials for emergency relief or sends people to help in countries that are affected by disasters,” said Chen from Tsinghua University. “These operations are crucial in saving lives and China is taking an increasingly active role in such efforts.”

China has also deployed hundreds of thousands of aid workers overseas.

In December 2004, China launched its largest-ever emergency relief operation, providing 700 million yuan in aid to countries hit by the Indian Ocean tsunami. Indonesia, the most seriously affected country, received the first batch of relief materials. China also dispatched medical teams, international rescue teams, DNA testing groups and divers to seriously affected countries.

In 2006, China advocated for a multilateral aid fund that follows the World Health Organization’s (WTO’s) framework for the control and prevention of bird flu, and donated $10 million to the fund, according to China’s Foreign Aid: 60 Years in Retrospect, a book by researchers Zhou Hong and Xiong Hou.

Last year, China sent four planeloads of aid worth more than $9 million to help Ecuador after a catastrophic earthquake left tens of thousands homeless. The aid included 10,000 foldable beds, 5,400 tents and other supplies.

“Some people are skeptical about the intentions behind China’s foreign aid, but when you really see the necessity of the aid and how it has directly improved people’s lives, I think you would find most criticisms unjustified,” said Chen.

“Of course, when you are kind and generous to those who need help, they will be grateful and you will develop good relations with them. Some people criticize China for gaining such advantages, but it’s just a natural result of giving foreign aid.”

And then there is debt relief, another form of foreign assistance. China has written off government debts of struggling countries several times, helping to shore up their finances.

According to Chen, the Chinese government hardly ever chases struggling countries to pay back their debt. When indebted countries have difficulties in repaying interest-free loans, China usually adopts flexible repayment methods and extends the repayment period.

By the end of 2009, China had signed debt relief measures with 50 countries from Africa, Asia, Latin America, the Caribbean and Oceania and canceled 380 mature debts worth 25.58 billion yuan.

Last year, China canceled about $60 million in debt from African countries, a move Xi announced during the Forum on China-Africa Cooperation in 2015.

China has also emerged as an active participant in aid programs initiated by multilateral organizations. For example, to strengthen communication with other aid providers, Chinese delegations have participated in conferences on international development and cooperation, such as United Nations high-level meetings and the WTO Global Review of Aid for Trade.

“These efforts have helped China to establish good relations with other developing countries, improving trade and the economy. Foreign aid has positive effects that extend beyond immediate relief — it promotes common development, cooperation and improvement across the world,” said Chen.

Devising a win-win aid model China’s approach to foreign development assistance benefits both the recipient country and funding provider

August 14-20, 2017
 in Hong Kong
For China Daily Asia Weekly

Amid ongoing controversy on the ultimate effectiveness of the Western approach to foreign aid, China’s markedly different aid model might have some lessons for the world on how to develop a win-win situation for both aid recipients and benefactors.

Foreign aid, at least on the surface, has provided crucial resources to support the growth of poor and developing countries, as well as to enable the recovery of communities after natural and humanitarian disasters.

Angus Deaton, who won the 2015 Nobel Prize in economics, has said that “most overseas development aid is a waste and even destructive use of money”. His argument is that foreign aid given through conventional means undermines the development of struggling economies’ capacity to be self-sustaining.

Deaton’s standpoint is not new — critics of Western foreign aid often say that any assistance in the development of poor countries must promote self-sustainability through policies that boost economic growth and improve education, healthcare access, infrastructure and trade.

“Evidence shows that the Western practice of dispersing aid through multilateral organizations is often ineffective. The money often misses the target,” Chen Qi, a foreign policy researcher at Tsinghua University, told China Daily Asia Weekly.

UNESCO, for example, has been criticized for spending 50 percent of its annual budget of around $735 million on staff salaries.

A 2015 study by the European Parliament’s committee on budget control found that each year, more than 900 aid projects worth more than $15 billion failed to achieve their objectives or were severely delayed. Half of the European Union’s annual $30 billion development aid budget seemed to have missed the target. And the chairwoman of the report described such aid as money “thrown down the toilet”.

By contrast, China’s apolitical, ‘no strings attached’ aid model — which is conspicuously different from the Western approach — adopts a framework that promotes the development of struggling countries while contributing to China’s trade and economic growth.

“The result is that money doesn’t end up in nondevelopment activities as much. The strategy is much more direct in targeting poverty reduction and other developmental difficulties,” said Chen.

China mainly distributes its foreign aid as grants, interest-free loans and concessional loans. Grants and interest-free loans come from China’s State finances. Interest-free loans usually have a tenor of 20 years, including five years of use, five years of grace and 10 years of repayment. Concessional loans are provided by the Export-Import Bank of China, and the interest on the loan is lower than the benchmark rate of the People’s Bank of China.

A welder works at a bridge expansion project supported by China in Kathmandu, Nepal on May 18 last year. China’s development aid model creates synergy and mutual benefit with the recipient nations. Credit: Narayan Maharjan / Nurphoto

According to a 2014 government white paper, the most recent outline of China’s efforts on foreign assistance, China provided $14.4 billion in grants, interest-free loans and concessional loans between 2010 and 2012. A little more than a third of that total was given out in grants, 8 percent was in interest-free loans and almost 56 percent were concessional loans.

“Grants are mainly offered to help build small or medium-sized social welfare projects and to fund human resources development cooperation, technical cooperation, material assistance and emergency humanitarian aid,” Neil Wang, Greater China president at consultancy Frost & Sullivan, told China Daily Asia Weekly.

“Interest-free loans are mainly used to help construct public facilities and launch projects to improve people’s livelihood,” he added.

“Concessional loans are mainly used to help undertake manufacturing projects and large and medium-sized infrastructure projects with economic and social benefits, or the supply of complete plants, machinery and electronic products.”

Of the concessional loans, about two-thirds have traditionally been used to assist in the construction of transportation, communications and electricity infrastructure in developing countries, and 8.9 percent are used to support the development of energy and resources such as oil, according to the white paper.

Through these three methods of grants and loans, China’s foreign aid expenditure aims to improve agriculture, education, healthcare, infrastructure and welfare facilities, thereby boosting job creation and reducing poverty.

And the management of this expenditure is mature. China’s foreign aid is managed by the Ministry of Finance under its budgets and final accounts system. It is also handled by the Ministry of Commerce and other departments under the State Council, China’s cabinet.

Every year, each of these departments presents a budget for foreign aid projects, which is then examined by the Ministry of Finance and approved by the State Council and the National People’s Congress. The departments control their own funds for foreign aid, while the Ministry of Finance and the National Audit Office supervise and audit the implementation of the projects.

“China’s foreign aid model has several unique attributes,” said Chen from Tsinghua University. “The way China allocates aid has a strong philanthropic element, which can be seen from the country’s Five Principles of Peaceful Coexistence.”

The Five Principles of Peaceful Coexistence —initially drawn up to define relations between India and China — include a noninterventionist foreign policy, which is a foundation of China’s approach to foreign aid.

In other words, China’s approach respects the political landscape of other nations. This is in stark contrast to the Western approach to foreign aid, which takes into consideration the recipient countries’ adherence to free market principles, governance and democratic values and human rights.

Another attribute is the emphasis on common development — the vision for win-win outcomes for both China and its aid recipients. Through deals that involve aid, trade and investment, China’s development aid model creates synergy and mutual benefit with the recipient nations.

In this way, not only does Chinese aid foster self-sustainability in struggling economies, it also ensures there is no unfair burden placed on Chinese citizens.

In addition, China has strong control over how its aid money is spent because the model is almost entirely bilateral. There is an emphasis on using the aid through Chinese companies and supply chains that are operating in the recipient nations.

However, this national interest is counterbalanced by an insistence that the aid directly contributes to the development of the recipient nations through improvements in agriculture, mineral extraction, transport infrastructure and manufacturing.

The government white paper refers to these operations as “complete projects”, which are “constructed in recipient countries with the help of financial resources provided by China as grants or interest-free loans”.

“The Chinese side is responsible for the whole or part of the process, from study, survey, to design and construction, provides all or part of the equipment and building materials, and sends engineers and technical personnel to organize and guide the construction, installation and trial production of these projects. After a project is completed, China hands it over to the recipient country,” the white paper explained.

Aside from grants, interest-free loans and concessional loans, other official funding under economic development initiatives is also provided by various government departments.

For example, in 2010-12, China provided technical training to almost 50,000 people from poorer countries and around 300 training programs for around 7,000 agricultural officials. Currently, about 10,000 people from developing countries receive training in China each year.

“Technical cooperation is an important means by which China helps recipient countries to strengthen their self-development capacity,” the white paper said. “Technical cooperation projects usually last one to two years, and can be extended at the recipient country’s request.”

Such training covers a wide range of fields, including industrial production and management, farming and agricultural technology, handicrafts (such as weaving), sports and physical training, healthcare, education, clean energy development and economic planning.

According to the white paper on foreign aid, China dispatched more than 3,600 medical professionals to 54 countries from 2010 to 2012. Also, as part of its efforts in international disaster prevention and relief, China has sent more than 30,000 peacekeepers and rescue teams to such countries as Nepal, Afghanistan, Haiti and South Sudan.

Building a better Africa Chinese aid helping drive development on the continent by constructing roads, factories and healthcare facilities

August 14-20, 2017
 in Hong Kong
For China Daily Asia Weekly

China’s foreign aid to low-income developing countries has, over the years, significantly boosted economic development and improved living conditions in the recipient nations.

According to various government white papers, China has given aid to more than 160 countries, including at least 123 developing countries that regularly receive assistance. Of them, 30 are in Asia, 51 in Africa, 18 in Latin America and the Caribbean, 12 in Oceania and 12 in Eastern Europe.

China emerged as the largest provider of financing for infrastructure in Africa in the years between 2009 and 2012. In 2015, during a high-profile Forum on China-Africa Cooperation, President Xi Jinping committed to providing another $60 billion in assistance to the continent. Between 2000 and 2012, China launched almost 3,100 projects in Africa, according to AidData, a research laboratory that tracks global aid efforts. As of 2015, AidData was tracking some 2,650 China-funded projects, worth around $94 billion, in 51 countries in Africa.

“China is without a doubt a major donor for Africa,” Liu Wen, a spokesman at the China-Africa Business Council, told China Daily Asia Weekly. “China and Africa have been working very closely together for a long time. The cooperation has helped speed up development in Africa.”

Since 2000, China has further solidified its role as a major donor for the continent. China established the China-Africa Business Council and the Forum on China-Africa Cooperation, the latter of which includes 44 African countries. China also provides debt relief, training programs and investments for Africa.

In 2006, China canceled Africa’s debt of $1.4 billion, set up a $5 billion fund through soft and commercial loans, and agreed to build 30 hospitals and provide training for 15,000 people in the continent.

Between 2000 and 2012, China took on more than 1,700 African projects, spanning more than 50 countries at a total cost of more than $75 billion.

“Most of China’s aid in Africa goes to the transport, energy and communications sectors. About 70 percent goes to infrastructure development,” said Liu. “Other sectors like education and health also benefit a lot from China’s aid, but not as much as infrastructure-related sectors.”

According to Liu, China’s aid in infrastructure accounts for more than 30 percent of the total value of Africa’s infrastructure projects.

Nigeria, Ghana and Sudan are the largest recipients of Chinese aid in sub-Saharan Africa. Combined, these three countries have received about $250 million in aid, with most of it going to energy infrastructure, such as oil pipelines.

This is in line with China’s overall foreign aid strategy.

“China’s foreign aid projects are oriented to agriculture, industry, economic infrastructure, public facilities, education, and medical and healthcare,” said the government white paper.

Farmers at work in a Madagascar rice field. Chinese experts assisted in the plantation of 34 strains of Chinese hybrid paddy rice in the African island nation. Credit: Jean-Luc Allegre / Only World / Only France

It added that China’s focus is on “improving recipient countries’ industrial and agricultural productivity, laying a solid foundation for their economic and social development, and improving basic education and healthcare”.

China has been increasing its aid to the agriculture sector, especially for grain production.

The nation has stepped up measures to address the global issue of food security, such as its pledge to the United Nations in 2010 to establish 30 demonstration centers for agricultural technologies in other developing countries. It also pledged to send 3,000 agricultural experts and technicians to those countries, as well as offer training to 5,000 agricultural personnel there.

The latest government figures show that in Guinea-Bissau, 11 areas for paddy rice, with a total growing area of 2,000 hectares, were built with the help of Chinese agricultural experts. And in Madagascar, Chinese experts assisted in the plantation of 34 strains of Chinese hybrid paddy rice.

In terms of industrial projects, China plays an active role in promoting production and economic development in other developing countries.

The projects involve industries in areas as varied as light, textile, machinery, construction materials, chemical, electronic and energy. Some of the most profitable projects are the Cimerwa Cement Factory in Rwanda and the Loutete Cement Factory in the Republic of Congo. Outside Africa, other successful projects include the Rioja Cement Factory in Peru and the Agriculture Machinery Factory in Myanmar.

Such projects also create jobs for a large number of local people.

Neil Wang, Greater China president with consulting firm Frost & Sullivan, pointed to a measure for the management of China’s aid-funded projects, issued by the Ministry of Commerce in December 2015.

“The measure regulates the procedure of procurement, construction and assessment of the projects, and ensures the quality of foreign assistance projects,” Wang said.

“The majority of foreign assistance of developed countries goes to raw-material production and humanitarian assistance,” he said. However, he added that the majority of China’s foreign assistance goes to public social facilities and economic infrastructure, “such as construction and improvement of hospitals, schools, construction of electric transmission (and) roads”.

Chinese aid has enabled the establishment of municipal utilities, wells for water supply, conference centers, cultural centers, sports venues and facilities for scientific, educational and healthcare purposes.

Major public facilities built with Chinese aid include the Moi International Sports Center in Nairobi, Kenya; the Friendship Hall in Khartoum, Sudan; and the Cairo International Convention and Exhibition Center in Egypt.

Public welfare facilities include a capital water supply project in Nouakchott, Mauritania; water supply projects in Chalinze, Tanzania and Zinder, Niger; and low-cost housing projects in Angola and Suriname.

China has also aided countries to build hospitals in the Central African Republic, Guinea-Bissau, Zimbabwe and Chad.

According to the white paper, China has built more than 30 malaria prevention and treatment centers in Africa, and provided anti-malaria medicines worth 190 million yuan ($28.3 million). China has also provided the hospitals with medical equipment and has trained many medical workers for other developing countries.

In addition, the nation has played key roles in economic infrastructure projects. These include the Belet Uen to Burao highway in Somalia, the Tanzania-Zambia railway and the Sana’a to Hodeida highway in Yemen.

“China’s infrastructure projects in other developing countries help to improve the livelihood of the local people,” said Chen Qi, foreign policy researcher at Tsinghua University in Beijing.

“Because China has the resources, technologies and expertise that those countries lack, China’s role is key to creating better conditions for the economic development and quality of life in poorer nations.”

In recent years, coping with climate change has also become a key area for the nation’s foreign aid.

China has helped developing countries in Asia and Africa to build small and medium-sized hydropower stations to meet local electricity demand, as well as for agricultural and industrial production.

China has passed on biogas technologies to Guyana and Uganda, helping them to reduce their dependence on imported fuels.

To address the problem of global warming, China has cooperated with Tunisia, Guinea, Vanuatu and Cuba in biogas projects and assisted in the building of hydropower stations in Cameroon, Burundi and Guinea. It has also cooperated with Mongolia, Lebanon, Morocco and Papua New Guinea in exploring solar energy and building wind-power stations.

“Going forward, China will continue to play an important role in the development of poorer countries, especially African countries. A very wide range of sectors benefit from China’s aid,” said Chen.

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