US/UK Aid Changes Create a Funding Gap – Will China Fill the Void?
With USAID’s funding on hold and the UK foreign aid reduction to boost military spending, speculation is growing that China could expand its overseas development assistance. What are the implications
China's role in foreign aid has undergone a series of transformations shaped by domestic and international dynamics. While frequently compared to Western aid models, China's approach exhibits distinct characteristics and motivations. Here, we examine the evolving nature of Chinese foreign aid, examining its key features, recent trends, and potential implications for global development and international relations.
Historical Context of Chinese Foreign Aid
China's approach to foreign aid has shifted numerous times since the establishment of the People's Republic of China in 1949, often in response to changing domestic circumstances and political priorities. Initially, during the Maoist era, aid was primarily directed towards supporting communist movements and allies. However, with the Reform and Opening Up era, this revolutionary-oriented approach was deemed financially unsustainable, leading to a decrease in aid and a shift towards smaller, more sustainable projects.
The 1990s witnessed another shift in China's foreign aid strategy, driven by economic interests and resource security in the post-Cold War world. By 2005, China had once again become a net provider of foreign development finance, and this trend has continued to evolve in recent years.
A 2017 study by AidData provides valuable insights into the scale of Chinese aid. Between 2000 and 2014, China provided approximately $75 billion in grants and $275 billion in loans, compared to $424 billion in grants from the United States during the same period. This data highlights both countries' significant, albeit different, contributions to international development finance.
Furthermore, a closer look at the types of projects funded by Chinese aid reveals a focus on infrastructure development. Grants or non-interest loans have supported 2,025 infrastructure projects across various sectors, including farming, water distribution, education facilities, power supply, and transportation. This emphasis on infrastructure aligns with China's broader economic and foreign policy objectives, particularly its Belt and Road Initiative.
China's Foreign Aid in the New Era
China has taken significant steps to formalise and enhance its foreign aid mechanisms in recent years. Establishing the China International Development Cooperation Agency (CIDCA) in 2018 marked a crucial development. CIDCA was created to "better align foreign aid with China's overall foreign policy and enhance its management and coordination." This move reflects China's growing assertiveness in utilising foreign aid as a diplomatic tool and its efforts to improve the efficiency and effectiveness of its aid programs.
Different government agencies play distinct roles within China's aid programme. CIDCA is responsible for drafting aid policies, guidelines, annual plans, and budgets. The Ministry of Commerce (MOFCOM) oversees the implementation of foreign aid projects and selects the firms to undertake them. Finally, the Ministry of Foreign Affairs coordinates aid efforts and ensures alignment with broader foreign policy objectives.
China's foreign aid programme has continued to evolve, becoming more assertive in providing aid through bilateral and multilateral channels. The release of the third white paper on foreign aid in 2021, titled "China's International Development Cooperation in the New Era," further underscores this trend. This white paper outlines China's foreign aid policies, progress, and actions since 2013, including international cooperation on the Belt and Road Initiative, the 2030 Agenda for Sustainable Development, and the response to the COVID-19 pandemic.
In 2021, China launched the Global Development Initiative (GDI) at the United Nations General Assembly. The GDI serves as a global platform for accelerating the implementation of the 2030 Agenda and achieving the 17 Sustainable Development Goals (SDGs). The GDI focuses on eight priority areas, including poverty reduction, food security, and pandemic response and vaccines, reflecting China's commitment to addressing global challenges through development cooperation.
Despite these advancements, China's aid programme faces its own set of challenges and limitations. Even if China aimed to fill the aid funding gaps left by a potential US exit, it might not be able to do so given its economic challenges and growing domestic concern about spending abroad. This suggests that internal factors could significantly constrain China's ability to expand its aid activities in the near future.
Distinctive Features of Chinese Aid
China's foreign aid programme has historically differed from Western models, particularly those regulated by the Organisation for Economic Co-operation and Development (OECD). A study highlights that "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)." This distinction underscores a fundamental difference in how China approaches aid, emphasising South-South cooperation and non-interference in recipient countries' internal affairs.
While China has expanded its foreign aid activities, it's essential to understand its unique characteristics. A report emphasises that "China has spent tens of billions of dollars through trade and infrastructure project loans in Africa over the last decade; it spends significantly less on aid." This approach contrasts with traditional Western aid, which often focuses on grants and concessional loans. China's emphasis on infrastructure development and trade-related assistance reflects its focus on economic cooperation and mutual benefit.
Another critical aspect of China's aid programme is its focus on non-interference in recipient countries' internal affairs. This principle, deeply rooted in China's foreign policy, distinguishes its approach from Western aid, which often includes conditions related to governance, human rights, or economic reforms. As stated in a study, "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 paths and models of development.” This non-conditional approach has attracted both praise and criticism.
Geopolitical Implications of Chinese Aid
China's increasing presence in the aid landscape has significant geopolitical implications. In recent years, USAID has increasingly framed its funding for China-related programmes as a strategy to contain China's global expansion through aid and investments. USAID even established a "Countering Chinese Influence Fund" to "advance national-security goals" and "build more resilient partners that are more able to withstand pressure" from China. This highlights the contrasting motivations behind Chinese and US aid programmes.
The US aid freeze has had real-world consequences, affecting projects like the Mekong Dam Monitor, which studies the impact of Chinese-built dams in Southeast Asia. The project's co-lead, Brian Eyler, expressed concerns about the programme's financial jeopardy due to the funding freeze, stating that "our Southeast Asia program might not be able to keep the lights on.”
China's aid activities are often perceived as a way to expand its global influence and challenge US dominance in certain regions, particularly in Africa, where about 45% of China's aid was directed in 2009. The US suspension of foreign assistance allows China to strengthen its African presence and position itself as a reliable partner. However, China's overall approach is unlikely to change significantly in the short to medium term.
China's response to the US aid freeze has included initiatives like partnering with South Korea to send $4 million to the Africa Centres for Disease Control to help address immediate health funding gaps. While this contribution is significantly smaller than the cuts made by the US, it demonstrates China's willingness to capitalise on the opportunity to present itself as a reliable partner.
China has also engaged in "soft power" initiatives, such as deploying the "Peace Ark" hospital ship to provide medical assistance in various countries, including South Africa. These efforts further contribute to China's growing influence and its image as a provider of global public goods.
Synthesis and Concluding Observations
China's approach to foreign aid contrasts with Western models, emphasising South-South cooperation and non-interference in recipient countries' internal affairs. This approach has evolved and has been influenced by domestic and international factors. While China has increased its foreign aid activities and formalised its approach to establishing CIDCA, it is not poised to replace traditional donors like USAID. China's focus on infrastructure development and trade-related assistance reflects its own economic interests and development priorities.
Several factors may limit the future growth of China's aid programme, including domestic economic challenges and growing concerns about spending abroad. Additionally, while offering recipient countries greater autonomy, China's non-conditional approach to aid raises questions about potential oversight and accountability.
The shift in USAID's funding strategy towards countering Chinese influence raises concerns about the potential politicisation of aid and its impact on development effectiveness. The US aid freeze has already had negative consequences, affecting essential development projects and creating opportunities for China to expand its influence.
Overall, China's evolving role in foreign aid presents opportunities and challenges for the international community. Understanding the nuances of China's approach is crucial for navigating the changing landscape of development cooperation and fostering effective partnerships to address global challenges. Further research is needed to assess the long-term impacts of China's aid activities and their implications for global development and international relations.