While China continues to be treated as a developing country by multilateral development agencies such as the World Bank and the Asian Infrastructure Investment Bank, the country has itself become a leading provider of foreign aid.
Yet it continues to view development assistance through a very different lens than that of established donor countries. In fact, China does not consider itself a donor at all, but rather a South-South cooperation development partner.
In practice, China’s development assistance is heavily intertwined with commercial and political aims, arguably more than in countries like Australia, Canada and Norway which have integrated their aid agencies with their foreign ministries. Witness the vaccine diplomacy practiced by Chinese Foreign Minister Wang Yi during a visit to Southeast Asia in mid-January. While in Indonesia and the Philippines, Wang reiterated his country’s offer to supply the Chinese-made Sinovac vaccine to the two archipelagic nations, which have struggled to contain the pandemic. Beijing hopes that acting the good neighbour will soften those countries’ opposition to its assertive maritime claims in the South China Sea.
The Commitment to Development Index
China’s idiosyncratic vision of what constitutes development cooperation, and how to go about it, makes comparisons with the practices of established donor nations somewhat imperfect. That hasn’t stopped analysts from trying to make such comparisons, using criteria that China has neither selected nor fully embraced. The Center for Global Development (CGD) now includes China in the 2020 edition of its Commitment to Development Index .
The index assesses 40 countries on their support to mostly low- and middle-income countries on performance in seven distinct policy areas: development finance, investment, environment, migration, security, technology and trade. The index thus takes a comprehensive view that encompasses much more than the work of a country’s primary foreign aid agency. Countries score well for generous and high-quality finance for development, transparency in investment, policies that enhance global public goods, low barriers to trade for developing countries, and migration policies that promote integration.
In its first effort at assessing the Asian power’s commitment to development, the CGD ranks China a 35th out of 40 countries. Among the policy areas measured, China scores well on technology; below the average on environment, migration, and trade; and poorly on investment and security. When it comes to development finance, China is ranked at the bottom. This is despite significant financing – because Chinese lending remains opaque, and because it requires that the projects it finances be carried out by Chinese firms.
Two years ago, China restructured the way that it manages development assistance by creating a new aid agency, the China International Development Cooperation Agency (CIDCA). The aim was to improve planning and overall coordination of foreign assistance, consolidate the management of aid, and enhance China’s overall diplomacy. The agency reports directly to the State Council, the country’s chief administrative authority.
CIDCA is responsible for strategy, policy and approval of development cooperation projects. Other agencies and ministries handle project administration and disbursement of funds. And the Ministry of Commerce is responsible for detailed technical planning and supervision of projects as they are implemented.
2021 white paper on China’s international development cooperation
Early this year, Beijing released a white paper on international development assistance, providing a glimpse into China’s current thinking and its approach to development assistance – or perhaps what China would like the international community to think about its approach to development assistance. It is China’s third white paper on foreign aid, and longer than the previous two, combined. The last paper was issued in 2014.
The latest white paper arrives in the wake of years of criticism of Chinese aid practices, such as a lack of transparency and community consultation, corruption, inattention to negative environmental and social impacts, and unsustainable lending. Yet China has been listening, learning and responding to negative feedback, which has been delivered not only by established donor organisations, but also NGOs, researchers, the free media and project-affected communities in countries receiving aid. The white paper has surely been released, at least in part, to allay these concerns.
With respect to future prospects for international development cooperation, the white paper notes that China will help developing countries fight the pandemic, promote the implementation of the UN’s 2030 agenda, and improve its capacity for development cooperation.
The document states that China’s development cooperation is based on the country’s ideal of universal harmony (“all countries are members of a global village with shared future”); idea of repaying kindness with kindness (China remembers support that it has received from others); tradition of internationalism (“the Chinese people hope that other peoples will also lead a good life”); and sense of responsibility as a major country (“China considers it a mission to contribute more to humanity”).
Five distinctive approaches are identified:
- Promoting a global community of shared future
- Pursuing the greater good and shared interests, with higher priority accorded to the greater good
- Focusing on South-South cooperation
- Using Belt and Road cooperation as a major platform
- Helping other developing countries pursue the SDGs
Further, the white paper identifies eight principles for international development cooperation: (i) respecting each other as equals; (ii) doing the best we can (for example, determining cooperation projects through friendly consultation; (iii) focusing on development and improving people’s lives; (iv) providing the means for independent development; (v) conducting effective cooperation in diverse forms (more on this below); (vi) ensuring delivery and sustainability; (vii) being open and inclusive to promote exchanges and mutual learning; and (viii) advancing with the times and breaking new ground (that is, adapting to changes in the domestic and international situation).
A variety of delivery mechanisms are listed in the document, including completed projects, goods and materials, technical cooperation, human resources development, and the South-South Cooperation Assistance Fund, which China set up in 2015 to support developing countries in carrying out the UN 2030 Agenda for Sustainable Development. Other means of aid delivery include medical teams, outbound volunteers, emergency humanitarian aid and debt relief.
Financing provided through both grants and loans?
Much of the document is dedicated to examples of China’s support to other countries, giving it the feel of a promotional brochure. Amounts are provided for aid given in a wide range of sectors and thematic areas, humanitarian relief, and activities connected with the Belt and Road Initiative.
Between 2013 and 2018, China spent 270.2 billion renminbi ($41.8 billion at the current exchange rate) on development assistance, or an average of $7 billion annually. This is about the same amount that Turkey spent on overseas development assistance in 2017 (before substantially increasing its aid spending to more than $8.6 billion in each of the subsequent pre-pandemic years).
Some 47.3% of Chinese development assistance over the six-year period was provided as grants, 4.2% in interest-free loans, and 48.2% in concessional loans. The white paper provides no details on the terms of those loans. Four-fifths of the total amount was provided to low-income and lower-income countries (with the rest directed to high-income countries, 20 regional and international multilateral organisations, and others). A total of 122 countries received aid from Beijing during the period.
Exhibit: Distribution of China’s foreign aid, by region (2013-2018)
The white paper notes that between 2013 and 2018, China financed 423 complete projects, as well as 7,000 training sessions reaching 200,000 participants and covering more than 100 subjects in 17 fields. The country has also committed $3 billion to the South-South Cooperation Fund since 2015, and cancelled 4.18 billion renminbi ($645 million) in debts on 98 mature interest-free loans.
China continues to view development assistance through a very different lens than that of established donor countries. In fact, China does not consider itself a donor at all, but rather a South-South cooperation development partner.
It should be noted, though, that this debt relief is a very tiny fraction of the country’s total lending for projects in other countries, including some countries that are shouldering high debt burdens.
What next for Chinese development assistance?
With respect to future prospects for international development cooperation, the white paper notes that China will help developing countries fight the pandemic, promote the implementation of the UN’s 2030 agenda, and improve its capacity for development cooperation. This includes devising medium- and long-term foreign aid plans and targeted plans; strengthening the whole process of managing aid projects, and improving project efficiency, supervision and evaluation, including through the development of independent project evaluation systems.
China also intends to improve its statistical indicators for foreign aid, drawing on its national conditions as well as international practice. The extent to which China pursues work in these areas and engages with other donors is something that bears watching.
The white paper concludes with the high-minded observation that “confronted by acute global challenges, no country can achieve lasting stability and development without solidarity, cooperation, and a partnership featuring peaceful and mutually beneficial cooperation, equality, openness, inclusiveness and shared growth.”
Such prose seems particularly well timed in a world still struggling with COVID-19 and its disastrous human impacts.