China’s aid to developing countries

Question

Provide a review of the literature on China’s aid (traditional and non-traditional) to developing countries.

Summary

Definitions and types of aid

  • China’s measurement of “foreign aid” differs from “official development assistance”, for example by including military assistance and excluding donor administrative costs.
  • The main forms of Chinese foreign aid are: complete projects; goods and materials; technical cooperation and human resources development cooperation; medical teams and volunteers; emergency humanitarian aid; and debt relief (for interest free loans). China rarely gives cash aid.
  • China makes multilateral contributions to the World Bank, IMF and UN agencies, but most of its aid is bilateral (93 per cent on average over the previous five years). China’s underdeveloped civil society is rarely used, although experts report China has shown increasing interest in channelling international cooperation funds through CSOs.
  • China’s development finance goes beyond its official aid programme, including export buyers’ credits, official loans at market rates and strategic lines of credit provided to Chinese enterprises.
  • The ‘Going out’ (or ‘Going Global’) policy endorsed by the Chinese government in 2000 has led to a series of Chinese initiatives – such as the One Belt, One Road initiative and the Asian Infrastructure Investment Bank.

Volume

  • Tracking China’s aid and other development finance is “a difficult and contested field of research” (Xu and Carey, 2015, p.3), with challenges of classification and a lack of transparency. As a result there are wide-ranging estimates.
  • China’s economic and development cooperation accelerated considerably since the introduction of the ‘Going out’ policy. China is now one of the world’s 10 largest providers of development assistance, but China’s development assistance is dwarfed by the much larger policy bank lending to developing countries.
  • Official Chinese statistics state that between 2010 and 2012 China appropriated in total USD 14.41 billion2 for foreign assistance commitments: 56 per cent in concessional loans, 36 per cent in grants and 8 per cent in interest-free loans (State Council, 2014).
  • The John Hopkins School of Advanced International Studies China Africa Research Initiative finds that from 2000 to 2015, the Chinese government, banks and contractors extended USD 94.4 billion worth of commercial and concessional loans to African governments and state-owned enterprises.

Drivers of aid and effect on China’s aid architecture

  • Various experts find that China’s aid is fundamentally a tool of foreign policy, driven by a mix of political, commercial and moral objectives. A growing literature suggests that the conventional wisdom that China gives aid to access resources is at best a partial and misleading answer.
  • The literature highlights the influence of China’s own past experience as an aid recipient, as well as that of the historical context and geopolitics.
  • Drivers of initiatives inspired by the ‘Going out’ policy include domestic political and economic conditions; frustrations with American-dominated multilateral institutions; and soft power objectives.
  • Other factors that shape Chinese assistance include: competition between the multiple domestic aid institutions; the role of China’s provinces in driving the process of ‘going global’; the informal and decentralised Chinese state-business involvement in African agriculture; and the importance of contractors.

Sector involvement

  • Humanitarian: Since 2000 China has been one of the five largest humanitarian aid providers among non-DAC countries (UNDP, 2005).
  • Health: China has been involved in overseas health assistance for decades and is starting to become a major global player in this sector, although some findings suggest that a lack of a coherent strategy undermines its approach.
  • Economic (including infrastructure financing): Infrastructure assistance is a key priority for China: the largest sector for commercial and concessional loans to Africa during 2000-2014 was transportation loans for construction/renovation of roads, railways, airports and harbours. Agricultural development is another priority.
  • Socio-cultural (soft power): There is talk of China’s “recent push” on soft power, with initiatives such as the One Belt One Road and trilateral assistance explicitly intended to promote China’s image and legitimacy abroad (Shambaugh, 2015; Zhang, 2017). Other socio-cultural elements of Chinese assistance include training (which focuses in part on transferring information about China’s own experience with urbanisation, economic growth, and poverty alleviation); scholarships for university study in China; and the Chinese youth volunteer corps.

Enquirer:

Suggested citation

Carter, B. (2017). Literature review on China’s aid. K4D Helpdesk Report. Brighton, UK: Institute of Development Studies.