China as a ‘net donor’: tracking dollars and sense

Abstract

The article examines China's emergence over the past decade as a net donor, and the implications of this status in global development. The analysis begins by outlining China's rise as a net donor, drawing comparisons in two-way aid flows with the other rising states, specifically Brazil, South Africa and India, and then turns to the implications of China's rise as an aid sender. The central argument is that conceptualizing China's rise as a ‘net donor’ is crucial for understanding the hybrid position that China has come to occupy in the global aid system, and the consequences of this positioning. Although China has achieved remarkable success with its own development, rather than join the Organization for Economic Cooperation and Development's Development Assistance Committee (DAC) regime of traditional donors, the Chinese Communist Party and government leadership has chosen instead to continue to self-identify with the countries of the South, and to construct ties of South–South cooperation outside of DAC arrangements. The Chinese leadership is trying to stake out an unprecedented position in the global aid system, traversing the North–South divide, despite the fact that China has already joined the ranks of world economic powers.

Acknowledgements

An earlier version of this article was presented at the Beijing Forum 2010, hosted at Peking University, 4 November 2010. I thank Professor Wang Yong, and Vice Dean Jia Qingguo of the School of International Studies for the invitation. The field research (2007–2010) was supported by the International Development Research Centre, York University, and the Centre for International Governance Innovation. My thanks to the representatives of China's Ministries of Commerce, Foreign Affairs, Finance, Science and Technology, and National Development and Reform Commission, the Chinese Academy of Sciences, the Chinese Academy of Social Sciences, the Chinese Academy of Engineering, the National Science Committee of China, the Research Centre for Agricultural Policy, the China Institute of Contemporary International Relations and the Graduate Program in Development Management at Tsinghua University for their comments. I thank the Brazilian Minister of International Cooperation Marco Farani, Dr Stephen McGurk and Dr Rohinton Medhora of the International Development Research Centre, Philip Karp of the World Bank Institute, Jeffrey Liang of the Asian Development Bank, Jens Sedemend of the Development Assistance Committee of the Organization of Economic Cooperation and Development, Dr Arjan de Haan of the Department for International Development of the UK, and Xavier Furtado, Kent Smith and especially Karim Morcos of the Canadian International Development Agency for sharing their insight. My thanks to Professors Pieter Bottelier, Ding Dou, B Michael Frolic, Joshua Kurlantzick, Xue Lan, the journal's chief editor Nivi Manchanda and the three anonymous reviewers for their comments, and Li Qingdong for assisting on the research.

Notes

¹ In this article, the term ‘net donor’, like the terms ‘net lender’ and ‘net borrower’, conveys a mathematical calculation, a quantitative indicator of the relative status of a particular country in terms of its sending and receipt of development capital, and is not a judgment on the quality of the aid.

² This interpretation differs from Brautigam's argument for a narrower definition of Chinese aid which would not include export credits, and grants or subsides to support private investment (see Brautigam 2009, 14).

³ The official definition of ‘ODA’, the acronym for ‘official development assistance’, used by the OECD-DAC is: ‘Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions. Lending by export credit agencies—with the pure purpose of export promotion—is excluded’ (International Monetary Fund 2003).

⁴ The above totals are for ‘value of business fulfilled’, rather than ‘contracted value’ (National Bureau of Statistics of China 2011).

⁵ The White Paper reports (up to 2009): economic infrastructure (31 per cent); industry (16 per cent); energy and resources development (8.9 per cent); agriculture (4.3 per cent); public facilities (3.2 per cent); and other (6.5 per cent). Of a total of 2025 completed projects (up to 2009): public facilities (670); industry (635); economic infrastructure (390); agriculture (215); other (115) (Government of China, State Council Information Office 2011).

⁶ China gives aid ‘regularly’ to 123 developing countries: 30 in Asia, 51 in Africa, 18 in Latin America and the Caribbean, 12 in Oceania and 12 in Eastern Europe. Africa and Asia, the regions with the largest populations living in poverty, have received approximately 80 per cent of China's foreign aid. In 2009, Africa received 45.7 per cent, Asia 32.8 per cent, Latin America and the Caribbean 12.7 per cent and Oceania three per cent (Government of China, State Council Information Office 2011).

⁷ Open source reports suggest that Iran, Pakistan and North Korea were the largest single beneficiaries of Chinese external assistance in 2004. Chinese assistance to Pakistan reportedly increased dramatically in 2003–2004, press reports citing more than US$6.8 billion in assistance projects such as a nuclear reactor, power plants, railway improvements and general development assistance. Press reports are cited by Saunders (2006, 21).

⁸ These data, which combine official Chinese statistics and media reports, were reportedly compiled by graduate students at the Wagner School at New York University and fed into a US Congressional Research Service report by Lum and colleagues (2009).

⁹ See the blog by Debra Brautigam, ‘More mistakes by The Economist: charity begins abroad’, 16 August 2011, < http://www.chinaafricarealstory.com/2011/08/more-mistakes-by-economist-charity.html>, accessed 13 January 2012

¹⁰ Source of data is the OECD-DAC, posted on ‘Net official development assistance and official aid received’, World Bank Group, < http://data.worldbank.org/indicator/DT.ODA.ALLD.CD>.

¹¹ China also accorded zero-tariff treatment for a number of products from the 39 least developed countries. See ‘Hu Jintao delivers an important speech at the UN summit’, Ministry of Foreign Affairs, China, 16 September 2005, < http://www.fmprc.gov.cn/eng/wjdt/zyjh/t212614.htm>, accessed 17 August 2012

¹² China has also helped build six overseas ‘special economic zones’ in Africa. Source: ‘China has pledged to double its aid to Africa and provide $5 bn in loans and credits over the next three years’, BBC News, 4 November 2006.

¹³ Wen also announced that China would cancel the debts associated with interest-free government loans due to mature in 2009 for the most heavily indebted and least developed African countries; phase in zero-tariff treatment to 95 per cent of products from the least developed African countries; build 100 clean energy projects in Africa covering solar power, bio-gas and small hydro-power; carry out 100 joint demonstration projects with Africa on scientific and technological research, and receive 100 African postdoctoral fellows in China; provide medical equipment and anti-malaria materials worth 500 million yuan (US$73.2 million) to 30 hospitals and 30 malaria prevention and treatment centres built by China, and train 3000 doctors and nurses; build 50 schools and train 1500 school principals and teachers; increase the number of Chinese government scholarships to Africa to 5500; train 20,000 professionals; expand people-to-people and cultural exchanges. Source: ‘Eight measures to enhance coop with Africa’, China Daily, 8 November 2009, < http://www.chinadaily.com.cn/china/2009-11/08/content_8929420.htm>, accessed 23 October 2010.

¹⁴ Event transcript for ‘China: developing giant and development actor’, featuring David Dollar, World Bank Country Director for China and Mongolia, Center for Global Development, 21 June 2007, Washington, < http://www.cgdev.org/doc/events/6.21.07/Transcript_China_Event_6.21.07.pdf>, accessed 25 October 2010.

¹⁵ According to a Deloitte & Touche report, Chinese investment rose from US$4 billion in May 2009 to June 2010 to US$15.6 billion in May 2010 to June 2011. The report is cited in Webber (2011).

¹⁶ This point was highlighted by a researcher at the think-tank China Institutes of Contemporary International Relations, Beijing, April 2007.

¹⁷ The World Bank's IDA refers to the lowest interest loan category that the World Bank offers to the least developed countries. See < http://www.worldbank.org/ida/>.

¹⁸ This figure was provided by ABC Minister Marco Farani. Interview with author, Brasilia, May 2012.

¹⁹ Source: World Bank data, < http://data.worldbank.org/indicator/DT.ODA.ALLD.CD>.

²⁰ Author's discussion with a senior Brazilian foreign policy adviser, Brasilia, May 2012.

²¹ For estimates of South African aid to Africa see Alden and le Pere (2010).

²² ‘New sources of aid, charities begin abroad’, The Economist, 13 August 2011, < http://www.economist.com/node/21525836>, accessed 18 August 2012.

²³ On the views of African leaders see Brautigam (2009).

²⁴ Since assuming office, the populist politician has changed his views. Sata recently said that Chinese businesses are welcome, but need to abide by local laws. This turn is not surprising given that Chinese businesses have invested more than US$1 billion in Zambia (England 2012).

²⁵ I thank Philip Alves for bringing Thabo Mbkei's comments to my attention. See ‘Mbeki warns on China–Africa ties’, BBC News, 14 December 2006, < http://news.bbc.co.uk/2/hi/business/6178897.stm>, accessed 28 July 2012.

²⁶ ‘Remarks by president Jacob Zuma at the opening session of the 5^th Forum on China-Africa Cooperation, Beijing, China’, The Presidency, Republic of South Africa, 19 July 2012, < http://www.thepresidency.gov.za/pebble.asp?relid = 6486&t = 79>, accessed 20 August 2012.

²⁷ Nui Jun's views are cited in Moxley (2010).

²⁸ Wang Yaohui's views are cited in Moxley (2010).

²⁹ Author's interview with officials from the Department of Assistance to Foreign Countries, Ministry of Commerce, Beijing, April 2007.

³⁰ Author's interview with official of the Department of Cooperation with Foreign Countries, Ministry of Commerce, Beijing, April 2007.

³¹ Source: Ministry of Foreign Affairs, < http://www.fmprc.gov.cn/eng/wjb/zzjg/zcyjs/xgxw/t24932.htm>, accessed 17 June 2007.

³² Source: Ministry of Foreign Affairs, < http://www.fmprc.gov.cn/eng/wjdt/zyjh/t24974.htm>, accessed 18 June 2007.

³³ Source: Ministry of Commerce, < http://yixiaozhun2.mofcom.gov.cn/aarticle/activity/200601/20060101330612.html>, accessed 20 June 2007.

³⁴ Source: Dr Yu Ying, ‘International cooperation’, Ministry of Science and Technology, < http://www.most.gov.cn/eng/cooperation/>, accessed 25 September 2012.

³⁵ Jia Qinglin's statements are cited in Rao (2012).

³⁶ ‘Chinese premier urges joint efforts to promote sustainable development’, Xinhua News Agency, 21 June 2012, < http://news.xinhuanet.com/english/china/2012-06/21/c_131666714.htm>, accessed 12 August 2012.

³⁷ The International Department (ID) is an important but under-studied agency in China's external assistance operations. It is a relatively large and active organ that now has relations worldwide with approximately 400 political parties and organizations in over 140 countries. See Shambaugh (2007).

³⁸ Author's notes from meeting with the Director General of the ID of the CCP, Beijing, January 2005.

³⁹ Interview with officials of China's National Development and Reform Commission, March 2007.

⁴⁰ Author's discussion with ADB official, Beijing, February 2005.

⁴¹ Author's discussion with World Bank officials, Beijing, 2002–2005.

⁴² ‘Statement by World Bank President Paul Wolfowitz on arrival in China’, World Bank, 12 October 2005, < http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,contentMDK:20679041∼pagePK:34370∼piPK:34424∼theSitePK:4607,00.html>, accessed 12 October 2012.

⁴³ ‘Press Conference with Mr Paul Wolfowitz President of the World Bank’, World Bank, 18 October 2005, < http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/CHINAEXTN/0,contentMDK:20687377∼menuPK:318956∼pagePK:141137∼piPK:141127∼theSitePK:318950,00.html>, accessed 25 August 2012

⁴⁴ For a detailed discussion of the Memorandum of Cooperation between the World Bank and China Eximbank see Chin (2010b).

⁴⁵ Germany and France have also continued to provide soft loans to China, through Kreditanstalt für Wiederaufbau (KfW) and Agence Francaise de Developpement. Japan stopped its development lending to China in 2007.

⁴⁶ Andris Pieblags, EU Development Commissioner, has issued a new Policy Paper, ‘Agenda for change’, which lists China among 19 countries that will be excluded from EU aid programmes for 2014–2020, though they may continue to receive aid from the Development Cooperation Instrument (DCI, the EU's development financing instrument) for regional or thematic issues. See Andris Pieblags, ‘Agenda for change’, EU Development Commission, Policy Paper, < http://ec.europa.eu/europeaid/what/development-policies/documents/agenda_for_change_en.pdf>, accessed 25 August 2012.

⁴⁸ UK Parliament, Witness Statements for 22 January 2009, in House of Commons, International Development Committee, ‘DFID and China: third report of session 2008–09, Volume II’, Oral and Written Evidence, HC 180-II, published 12 March 2009, Ev.51.

⁴⁷ Author's discussion with UK DfID officials, Beijing, 2006, 2007.

⁴⁹ ‘Australia to phase out aid to China, India and boost spending in other regions’, News.com ,au, 6 July 2011, < http://www.news.com.au/breaking-news/national/australia-to-phase-out-aid-to-china-india-and-boost-spending-in-other-regions/story-e6frfku9-1226088763954#ixzz1yRY31Fl6>, accessed 15 August 2012.

⁵⁰ ‘Critics question US aid to China amid debt woes’, FoxNews.com , 9 August 2011, < http://www.foxnews.com/politics/2011/08/09/critics-question-us-aid-to-china-amid-debt-woes/>, accessed 16 August 2012.

⁵¹ Author's notes from the meeting of then MOFCOM Assistant Minister Yi Xiaozhun with counterpart Canadian aid officials, Beijing, November 2005.

⁵² Author's discussion with a Chinese Foreign Ministry official, Beijing, 2006.

⁵³ Author's discussion with the responsible MOFCOM official, Toronto, March 2010.