Chinese official aid - unlike most major nation-state sources of aid - is not regulated and measured under the OECD's protocols for official development assistance (ODA). According to OECD estimates, 2020 official development assistance from China increased to US$4.8 billion.[1] In this respect, the program is similar in monetary size to those of Norway and Canada. China, however, provides a larger amount of development finance in the form of less-concessional loans.[2] The Chinese government represents its aid as characterised by a framework of South-South cooperation and "not interfering in the internal affairs of the recipient countries".[3]
In 2018, China established the China International Development Cooperation Agency (CIDCA) to have the main responsibility for coordinating the country's foreign aid. Other government bodies continue to have roles in administering foreign aid from China.
History
China's approach to foreign aid has changed a number of times since the 1949 establishment of the PRC, often prompted by changing domestic circumstances and domestic politics.[4]:8
During the Mao era, China focused on providing aid to other countries in support of socialist and anti-imperialist causes.[5] An early instance was the donation of CHF 20 million to Egypt 1956 during the Suez Crisis.[5] By the 1960s, China was more broadly providing aid to dozens of Third World countries in Asia and Africa.[4]:8 When China began its foreign aid program, it was the only poor country that was supplying outbound foreign aid, even providing assistance to countries that had a higher GDP per capita than China.[6]:168 Although China also received foreign aid, it was a net donor of foreign aid during this period.[4]:8
During the Cold War, China's foreign aid was often motivated by geopolitics, particularly the issue of international recognition of the PRC (as opposed to the Republic of China government on Taiwan).[7]:105
From 1956 to 1976, China provided $3.665 billion in foreign aid to the third world.[8] China provided ten percent of these aid funds to Middle Eastern countries.[8]
From 1970 and 1975, China helped finance and build the TAZARA Railway in East Africa, which cost about $500m, and as of 2012 was considered to be China's largest-ever single-item aid project.[9] In 1974 (near the end of Mao Zedong's period as China's leader), aid reached the remarkably high proportion of 2% of gross national product. The proportion declined greatly thereafter although the absolute quantity of aid has risen with China's growing prosperity.
During the Reform and Opening Up era, China deemed revolutionary-oriented foreign aid no longer financially feasible.[4]:8 The motivation of aid became more pragmatic and less about promoting ideology.[5] Outgoing aid was decreased and redirected towards smaller projects which were more likely to be sustainable.[4]:8 China also received increased amounts of development finance, including from Japan and the World Bank, and became a net recipient of foreign aid.[4]:8
China again changed its foreign aid approach in the 1990s.[4]:8 Following the Cold War, China's participation in foreign aid was increasingly motivated by economic interests, especially resource security.[7]:105
China again became a net provider of foreign development finance in 2005.[4]:8
The China International Development Cooperation Agency (CIDCA) was created in 2018 to help streamline the process of China's foreign aid, in which the ministries of commerce and foreign affairs and the State Council are also involved.[10] Since 2018, it has had an increasingly significant role in coordinating aid and has done so with a greater focus on foreign policy objectives and opposed to foreign trade objectives.[11]:18
Comparison with ODA
Chinese aid, unlike the aid provided by most developed countries, is not governed by the categories of the OECD's Development Assistance Committee, and is not counted in international statistics as Official Development Assistance (ODA).[10] Because it does not operate within the OECD framework, China does not refer to its foreign aid as ODA, instead describing it as foreign aid/assistance (duiwai yuanzhu).[11]:115 Rather than being a "donor", China sees itself as working within a framework of South-South cooperation:[3]
China adheres to the principles of not imposing any political conditions, not interfering in the internal affairs of the recipient countries and fully respecting their right to independently choosing their own paths and models of development. The basic principles China upholds in providing foreign assistance are mutual respect, equality, keeping promise, mutual benefits and win-win.
—White Paper: China's Foreign Aid (2014)
The founding declaration of the Forum on China-Africa Cooperation (FOCAC) makes explicit China's critique of the dominant global mode of foreign aid, which in the Chinese view results in the mistreatment of developing countries:[6]:82–83
Each country has the right to choose, in its course of development, its own social system, development model and way of life in light of its national conditions. . . . Moreover, the politicization of human rights conditionalities on economic assistance should be vigorously opposed to as they constitute a violation of human rights.
In contrast to Western models of aid including the OECD model, China does not condition aid on political changes or market liberalization.[7]:98
As Professor Dawn C. Murphy summarizes, “From China’s perspective, it is not merely offering an alternative model of foreign aid; it is directly critiquing the current system and the mistreatment of developing countries in that system.”[6] The only political commitment China requires from aid recipients is that they adhere to the One China principle; China does not otherwise require concessions on issues of governance.[6][12]
China's approach to financial aid has not changed over time, but the scope of its aid has grown as its own economic development needs have increased.[6]
As of 2017, China does not provide comprehensive data on its foreign aid.[13] The OECD has estimated that the quantity of China's ODA-like aid in 2018 was $4.4 billion.[14] If counted as ODA, this would have placed China tenth in the list of donor states that year, between Norway and Canada, and far behind the United States which provided $34 billion. However, China provides a much higher volume of development financing that would not qualify as ODA because it lacks a sufficient concessional element and/or is linked to commercial transactions.[13][2] A 2017 study by AidData, a research lab at the College of William & Mary, found that China's ODA-like aid was effective at producing economic growth in recipient countries.[13]
Administration and budget
The Department of Foreign Aid (established in 1982)[15]:9 of the Ministry of Commerce (MOFCOM) became the primary government body responsible for coordinating and disbursing foreign aid until 2018.[11]:73 That department was incorporated into CIDCA in 2018, and CIDCA now has the primary role in this area.[11]:74 According to the December 2021 Measures for the Administration of Foreign Aid, (1) CIDCA is in charge of drafting aid policies, guidelines, annual plans, and budgets; (2) MOFCOM is in charge of implementing foreign aid projects and selecting the firms to undertake them; and (3) the Ministry of Foreign Affairs makes recommendations based on diplomatic needs and its consulates and embassies supervise overseas projects.[11]:146–147
Due to the secrecy of China's aid programme details (of how much is given, to whom and for what) are difficult to ascertain.[16]
Official discourse and Chinese academic discourse on foreign aid do not typically describe China as a donor country, instead using terminology like mutual assistance, joint development, and South-South cooperation.[7]:97 In China's 2011 foreign aid white paper, foreign aid is characterized as a model which adheres to equality and mutual benefit which avoids attaching political conditions on recipient countries.[7]:97
A RAND published study on "China's Foreign Aid and Government Sponsored Investment" estimates the amount of both traditional aid and much more broadly defined government sponsored investment that was pledged by China in 2011 was 189.3 billion US dollars.[17]
According to a 2017 study, described as “The most detailed study so far of Chinese aid,” by AidData, between 2000 and 2014 China gave about $75 billion, and lent about $275 billion — compared to $424 billion given by America during the same period.[16] A fifth of this Chinese aid, $75 billion, was in the form of grants (about equivalent to Britain's), while the rest was concessional lending at below-market interest rates.[16]
In 2019, China provided approximately $5.9 billion in foreign aid.[18]:256
Forms of aid and recipients
Official sources divide financial aid into three categories: grants, interest free loans, and concessional loans.[7]:97 Concessional loans are subsidized by China's tax revenues and therefore inexpensive for borrowers.[11]:74
Deborah Bräutigam identifies nine types of aid from China including "medical teams, training and scholarships, humanitarian aid, youth volunteers, debt relief, budget support, turn-key or ‘complete plant’ projects [infrastructure, factories], aid-in-kind and technical assistance."[19]
Grants or non-interest loans have funded 2,025 complete infrastructure project, from the start of aid efforts up to 2009, in the categories of farming, water distribution, conference buildings, education facilities, power supply, transport, industrial facilities, and other projects.[20] Perhaps the famous type of project is a football stadium, which has been referred to as stadium diplomacy.[21] A similar type of project that receives attention is the construction of theatres and opera houses.[22]
There is an African focus with about 45% of aid going to African countries in 2009,[23] and a majority going to African countries in 2019.[18]:256 A report by AidData found that as of 2014 the majority of Chinese official development assistance went to Africa.[24] The greatest recipients of Chinese aid in sub-Saharan Africa are, in descending order, Côte d’Ivoire, Ethiopia, Zimbabwe, Cameroon, Tanzania, Ghana, Mozambique, and Republic of Congo.[6]:170
In December 2005, China donated $20 million to the Asian Development Bank for a regional poverty alleviation fund; it was China's first such fund set up at an international institution.[26]
China's financial assistance for infrastructure development has significantly increased supply capacity in south Asia, particularly among the smaller south Asian countries, beginning in the mid-2000s.[27]Nepal benefitted from increased Chinese aid, including Chinese financing for a railway from Kathmandu to Lhasa.[27] China has been an important foreign aid contributor to Sri Lanka since the end of the Sri Lankan Civil War in 2009.[27] In Bangladesh, Chinese foreign aid has also become increasingly important. China has built six major "friendship bridges" in Bangladesh, among other projects.[27] Because China has trade surpluses with these countries, its providing of foreign aid is viewed by the smaller south Asian countries as a means of insuring their respective bilateral relationships with China are mutually beneficial.[27]
From the 1970s up to 2022 China has reportedly implemented more than 100 aid projects in Pacific Island countries.[28]
From 2000 to 2014, Cambodia received 132 projects financed by Chinese aid, a greater number of projects than any other recipient of Chinese aid.[29]:103
China's role in the Armenian economy has been a major force for growth and development. Since the early 2000s, China has become Armenia's largest foreign donor, providing over $2 billion in foreign aid between 2000 and 2017.[30]
Official development assistance (ODA) is a category used by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to measure foreign aid. The DAC first adopted the concept in 1969. It is widely used as an indicator of international aid flow. It refers to material resources given by the governments of richer countries to promote the economic development of poorer countries and the welfare of their people. The donor government agency may disburse such resources to the government of the recipient country or through other organizations. Most ODA is in the form of grants, but some is measured as the concessional value in soft (low-interest) loans.
Development aid is a type of aid given by governments and other agencies to support the economic, environmental, social, and political development of developing countries. It is distinguished from humanitarian aid by aiming at a sustained improvement in the conditions in a developing country, rather than short-term relief. The overarching term is foreign aid. The amount of foreign aid is measured though official development assistance (ODA). This is a category used by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to measure foreign aid.
Aid effectiveness is the degree of success or failure of international aid. Concern with aid effectiveness might be at a high level of generality, or it might be more detailed.
In international relations, aid is – from the perspective of governments – a voluntary transfer of resources from one country to another. The type of aid given may be classified according to various factors, including its intended purpose, the terms or conditions under which it is given, its source, and its level of urgency. For example, aid may be classified based on urgency into emergency aid and development aid.
Danish International Development Agency (DANIDA) is the brand used by the Ministry of Foreign Affairs of Denmark when it provides humanitarian aid and development assistance to other countries, with focus on developing countries. There is no distinct Danida organisation within the Ministry.
An export credit agency or investment insurance agency is a private or quasi-governmental institution that acts as an intermediary between national governments and exporters to issue export insurance solutions and guarantees for financing. The financing can take the form of credits or credit insurance and guarantees or both, depending on the mandate the ECA has been given by its government. ECAs can also offer credit or cover on their own account. This does not differ from normal banking activities. Some agencies are government-sponsored, others private, and others a combination of the two.
The Japan International Cooperation Agency, also known as JICA, is a governmental agency that delivers the bulk of Official Development Assistance (ODA) for the government of Japan. It is chartered with assisting economic and social growth in developing countries and promoting international cooperation. According to the OECD, Japan's total official development assistance (ODA) increased in 2022 due to an increase in its bilateral lending, which included support to Ukraine. ODA represented 0.39% of gross national income (GNI). The OECD's Development Assistance Committee published a peer review of Japan's development cooperation in October 2020. JICA was led by Shinichi Kitaoka, the former President of the International University of Japan, from 2015 to 2022. On 1 April 2022, Professor Akihiko Tanaka assumed the presidency.
Japan has been establishing its foreign aid contributors since the 1990s. The three government institutions involved in disbursing this are: the Japan International Cooperation Agency (JICA), and the Japanese Bank of International Cooperation (JBIC). This is now the nodal agency for all Japanese concessional loans, and replaced Japan Export-Import Bank (JEXIM) and the Overseas Economic Cooperation Fund (OECF) in 1999.
Japan emerged as one of the largest foreign aid donors in the world during the 1980s.
The Swiss Agency for Development and Cooperation (SDC) is an office-level agency in the federal administration of Switzerland, and a part of the Federal Department of Foreign Affairs. Together with other federal offices, SDC is responsible for overall coordination of Swiss international development activities and cooperation with Eastern Europe, as well as humanitarian aid.
Tied aid is a kind of foreign aid. It must be spent on products and services provided by companies from the country providing the aid or in a group of specified countries.
The World Bank’s assistance program of foreign aid to Vietnam has three objectives: to support Vietnam's transition to a market economy, to enhance equitable and sustainable development, and to promote good governance. From 1993 through 2004, Vietnam received pledges of US$29 billion of Official Development Assistance (ODA), of which about US$14 billion, or 49 percent, has been disbursed. In 2004 international donors pledged ODA of US$2.25 billion, of which US$1.65 billion was disbursed. Three donors accounted for 80 percent of disbursements in 2004: Japan, the World Bank, and the Asian Development Bank. During the period 2006–10, Vietnam hopes to receive US$14 billion–US$15 billion of ODA.
Nepal relies heavily on foreign aid, and donors coordinate development aid policy through the Nepal Development Forum, whose members include donor countries, international financial institutions, and inter-governmental organizations. Japan is Nepal's largest bilateral aid donor, and the World Bank and Asian Development Bank are the largest multilateral donors. Donors have been reported as losing confidence in Nepal as a result of political interference and corruption in poverty relief efforts as well as the country's apparently poor capacity to utilize aid. According to World Bank figures, official development assistance increased from US$8.2 million in 1960 to US$369 million in 2003 and then fell to US$177 million in 2004. According to Nepal's Ministry of Finance, total foreign aid committed in fiscal year (FY) 2003 was US$555 million, with 63.3 percent in grants and 36.7 percent in loans. In FY2004, total foreign aid committed was US$320 million, of which 37.7 percent was grants and 62.3 percent, loans. In June 2004, active World Bank credits totaled US$302 million, with the greatest portions allocated to the financial sector and to energy and mining. By the end of 2012, the outstanding World Bank IDA loan totaled $ 1.48 billionArchived 2015-05-05 at the Wayback Machine.
The Organisation for Economic Co-operation and Development's (OECD) Development Assistance Committee (DAC) is a forum to discuss issues surrounding aid, development and poverty reduction in developing countries. It describes itself as being the "venue and voice" of the world's major donor countries.
The Export–Import Bank of China is a policy bank of China under the State Council. Established in 1994, the bank was chartered to implement the state policies in industry, foreign trade, economy, and foreign aid to other developing countries, and provide policy financial support so as to promote the export of Chinese products and services.
The Korea International Cooperation Agency was established in 1991 by the Ministry of Foreign Affairs of South Korea as a governmental organization for Official Development Assistance (ODA). KOICA's goal is to enhance the effectiveness of South Korea's grant aid programs for developing countries by implementing the government's grant aid and technical cooperation programs. KOICA is led by three-year-term president of the board who is appointed by the President upon the recommendation of Foreign Minister.
AidData is an Aid Transparency, Information Technology, and Geocoding institute formed on March 23, 2009. Its headquarters are in Williamsburg, Virginia. Its website provides access to development finance records from most official aid donors.
Indian foreign aid is the aid given by the Indian government to other governments. India's major quantum of foreign aid is given to neighbouring countries. According to India's budget in 2021–22, its direct overseas aid stood at ₹18,154 crore (US$2.2 billion). That apart, India also extended a direct line of credit worth $30.66 billion to several foreign countries for developmental projects. India has set up 'Indian Agency for Partnership in Development' as a part of Ministry of External Affairs (India) to channelize aid to recipient nations.
The Saudi Fund for Development (SFD) (Arabic: الصندوق السعودي للتنمية) is a Saudi Arabian government agency that provides assistance to developing countries by financing social and infrastructure projects. The funds development programme seeks to support the economies of recipient countries by enhancing economic growth and promoting job opportunities. The SFD was established in 1974 and began operations in 1975. The SFD established government agency has continued to expand through development, finance, trade, and funding. Today, it is involved in 3750 projects in 71 countries. The fund is led by Ahmed bin Aqeel Al-Khateeb, who also serves as the Minister of Tourism for Saudi Arabia.
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