The Development and Transformation of China’s Foreign Aid

Part of Chapter 8 | Sustainable Development

By Zhang Haibing
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China’s foreign aid has gradually changed itself from a backstage to a frontstage presence, from more simplified forms of capital, personnel, and material support to pluralized forms of assistance, from a bilateral aid-centric approach to more trilateral and multilateral development cooperation, and from an aid recipient rather than aid donor to an emerging major donor with much more influence.

The Development of China’s Foreign Aid

Four Stages

There have been roughly four stages of development for China’s foreign aid. The first phase covers the period from the early years after 1949 to the time of adoption of the Reform and Opening-up Policy. It had the obvious feature of ideologically colored foreign aid, mainly arising from the strategic need of vindicating national independence. The second phase corresponds to the launch of the Reform and Opening-up Policy, which used the aid as a complementary means to enhance the effect of the “blood-transmitting” approach used in cooperation with the recipient countries. It also led to a more comprehensive aid strategy with the combination of aid and investment followed by more trade and contracting projects. The third phase is the period of institutional building. Since the coming of the twenty-first century, China has paid more attention to the integrity and synergy in the aid cooperation with traditional recipient countries in the Asia, Africa, and Latin America regions. A series of forums were established and gradually developed, such as the Forum on China-Africa Cooperation, China-CELAC Forum, China-ASEAN Forum on Social Development and Poverty Reduction, etc. Since 2013, China’s foreign aid has come into the important fourth phase of development, with China gradually growing into a major donor country, focusing more on the sharing of development ideas, experiences, and values rather than purely pecuniary and material aid. With the promotion of the Belt and Road Initiative, as well as the establishment of the Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB), China’s foreign aid has got more and more institutional and material support.

Motivations

There are mainly two factors arising from both home and abroad that have motivated the transformation of China’s foreign aid. Domestically speaking, with the Chinese economy entering a “new normal,” a new development concept has been laid out in the 13th Five Year Plan with the core principles of “innovative, coordinative, sustainable, open, and inclusive.”1 Compared with the past model of development mainly focusing on quantitative expansion, China now attaches greater importance to an innovation-driven sustainable development model, which gives more weight to the environmental impact of economic development in its consideration. Internationally speaking, the United Nations adopted the 2030 Sustainable Development Agenda, Paris Climate Agreement, and Addis Ababa Action Agenda in 2015. And the G20 Hangzhou Summit made great achievements in mainstreaming the development issue on its agenda. All the above-mentioned developments have brought new elements into China’s foreign aid. China now has got ever more political willingness to play a certain kind of influential leadership role in global sustainable development.

Unique Feature

China’s foreign aid has the unique feature of co-progressiveness characterized by its simultaneously learning, practicing, and sharing, which has close connection to the development road chosen by China. In the more than 30 years since the beginning of the Reform and Opening-up Policy, the approach of “crossing the river by feeling the stones” has always been one of the major means for China to explore its own development road. There is no existing model of development in the world for a country like China to learn and copy. China’s development has been achieved through a cumulative process with constant learning, exploration, and experimenting. It has been a core feature in China’s foreign aid to sum up its own development experiences and then share with other developing countries. Prof. Li Xiaoyun characterize such a process as parallel experiences transfer: “the so-called parallel experiences transfer means that, China transfers the development experiences experimented and verified in the previous development stages to African countries, and then continues with further experiments and promotion to make them adaptable to the local system in the recipient countries.”2 In practice, the Western approach of focusing on institution-building and change has not had the expected outcomes due to the mismatch between its long-term-oriented solutions and the urgent needs of near-term challenges. In contrast, China’s partial and incremental development practices fit in well with local conditions for development. Therefore, despite its partialness, it’s more effective and time-efficient, thus more conducive to poverty reduction and development.

Limitedness

The current level of China’s foreign aid still mainly covers the partial sharing of development experiences and resources, with a lack of capabilities in sharing of China’s own development theories and models. It’s also been beyond China’s economic capacity and social mobilization capabilities to provide a large scale of foreign aid. It will be difficult to remove the limits and restraints on China’s international development aid. Prof. Justin Yifu Lin has made succinct observation on this: “China is unable to help other countries to achieve drastic development. On one hand, it’s due to China’s domestic reform has been incremental partial reform, which makes it capable of helping other countries in terms of partial reform of special economic and experimental zones. {AU: Please check flow of the preceding sentence and make any necessary changes, as I wasn’t sure how to read this translated version.} On the other hand, China is still not a knowledge economy, which makes it impossible for it to help other countries transform into knowledge economies.”3

Transformation of China’s Foreign Aid

China’s foreign aid has entered into a critical transformation era. The main driver of this transformation process lies in China’s domestic development practices and a more comprehensive perception of development.

Conceptual Transformation

The conceptual transformation of development aid was a result of changes in China’s own development concepts and international development environment. The process of China developing from a poor and weak country at the beginning into the second-largest economy in the world has shown clearly the guiding principle of putting economic development as the key part of development. However, with increasing environmental and social challenges caused by economic development, China’s development concept has had to cover more comprehensive dimensions, which later led to the adoption of the concept of inclusive development with more focus on environmental protection and widespread social benefit.

What kind of development is good and sustainable development? The realization of equitable, inclusive, environmentally friendly sustainable development has become the primary concern in China’s domestic development and overseas development aid. China’s development aid concept has been supplemented with more ideas of sustainable development. The UN 2030 Sustainable Development Agenda just came in time, with China’s National Implementation Plan fully affirming such transformation in development concept. In March 2016, the Fourth Assembly Meeting of the Twelfth National People’s Congress adopted the Thirteenth Five Year Plan, integrating the sustainable agenda into the national mid- to long-term development plan and introducing the concepts of innovative, coordinative, sustainable, open, and inclusive development. These development concepts fit in well with the focus of the 2030 Sustainable Development Agenda on people, planet, prosperity, peace, and partnership.

Strategic Transformation

The Belt and Road Initiative has provided China’s overseas development aid with new conditions for its transformation. The long-term strategic goal of China’s foreign aid has not been limited to serving China’s foreign relations alone, with the much broader goal of building the Community of Common Future for Humankind being added. In his opening statement to the Leaders’ Roundtable of the Belt and Road Forum for International Cooperation, President Xi Jinping made an explicit elaboration of the goals of the Belt and Road Initiative: “We need to make joint efforts in addressing the challenges in world economy, create new opportunities for development, seek new driving forces for development, and explore new space for development, so as to realize mutual complementarity, mutual benefit, and win-win solution. In this way, we can make sure our joint efforts oriented toward the goal of building Community of Common Future for Humankind. This was my original intention in presenting this initiative, and it’s also the ultimate goal this initiative endeavors to reach.”4 The focus of China’s foreign aid will tilt toward the countries and regions along the areas covered by Belt and Road Initiative.

Institutional Transformation

The debates on reforming the administration institutions and mechanism of China’s foreign aid have been continuing for a long time. The current approach of the Department of Development Assistance of the Ministry of Commerce being the major administrator of China’s foreign aid has shown to be more and more inappropriate. There are at least several weaknesses with this approach: first, the major competence of the Ministry of Commerce is mainly concerned with foreign trade and commercial practices. Therefore, locating the Department of Development Assistance under the Ministry of Commerce may show the outsiders an impression of China’s foreign aid caring mainly about business interests. Second, as a unit subordinate to the Ministry of Commerce, the Department of Development Assistance has a relatively lower ranking in the government, which has caused a certain mismatch with real needs of China’s participation in international development cooperation. Third, this approach cannot match the needs of strategic planning and implementation of foreign aid. Although the Regulation on Foreign Aid published by the Ministry of Commerce in 2014 has made certain institutional changes in addressing the problems, it cannot change the fact of relatively weak management of China’s foreign aid. More and more scholars have advocated for improving institutions, laws, and regulations in terms of China’s foreign aid, with a specific proposal on setting up a special foreign aid agency and relevant legislation.

Image Change

Changing the image of China’s foreign aid has been complicated, which may require the involvement of more parties and higher level of information disclosure. To avoid misunderstanding by the international community, China needs to further clarify its political and strategic goals in foreign aid, showcase the international contribution of its aid, and China’s efforts in vindicating international peace and development. The Press Office of the State Council published two white papers on China’s foreign aid in 2011 and 2014 with systematic introduction of basic facts of China’s foreign aid, which have become authoritative reference documents for observing and analyzing China’s foreign aid. However, it’s not enough to match the needs of the international community to understand China’s foreign aid only through white papers and policy documents. To improve the image of China’s foreign aid, it needs the joint efforts of both the government and business community. The government needs to improve its information communication and disclosure mechanism. And the business community needs to set up a channel for regular communication with local community and peoples.

Conclusions

The international community has had more specific observations on China’s foreign aid than before, with some issues such as transparency, environmental impact, communication with local communities, and promotion of employment and growth having been dealt with in wide and detailed discussions. Therefore, to further promote the international influence of its foreign aid, China needs to pay sufficient attention to the above questions.

First of all China needs to improve information disclosure to showcase its development contribution. Taking into consideration China’s per capita income, its contribution of foreign aid has been relatively higher. According to Justin Yifu Lin and Wang Yan, China’s official development assistance (ODA) accounted for 0.09 percent of its GNI in 2014, which was lower than some OECD member countries. Yet compared with its per capita income of $7,400 in 2017, China has made relatively larger ODA contribution as a share of its GNI.5 Alongside the official aid, there is also the aid contribution made by China’s private sector. The donation and charity activities of Chinese enterprises usually have been made on a voluntary basis, which may not have been widely acknowledged in the local community. China’s incomplete information disclosure mechanism on foreign aid contribution has been the key factor in the underestimation of China’s contribution both by the international community and local peoples.

Equitable distribution of discourse influence in global development governance is also needed. China’s foreign aid is part of South-South cooperation that has the advantages of diversity, flexibility, and adaptability. Its weakness lies in the lack of systematic theory, policy, and model building, with the development experiences limited and not integrated. China needs to make good use of the diversified forums of South-South Cooperation and encourage more voices of developing countries in development conceptualization and discoursemaking, which will also be conducive to the strengthening of South-North Cooperation.

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[1] National Development and Reform Commission, People’s Republic of China, An Overview of the 13th Five-Year Plan, December 2016, http://en.ndrc.gov.cn/newsrelease/201612/t20161207_829923.html.

[2] Lu Nanfeng, “China’s aid to Africa is neither ‘colonial’ nor ‘redundant’ in nature,” Pengpai News, March 7, 2017, http://www.cwzg.cn/theory/201703/34680.html.

[3] Justin Yifu Lin and Yan Wang, Going Beyond Aid: Development Cooperation for Structural Transformation , (Cambridge: Cambridge University Press, 2017), http://www.cambridge.org/us/academic/subjects/economics/economic-development-and-growth/going-beyond-aid-development-cooperation-structural-transformation?format=PB#voJgULiY3gVyJah6.97.

[4] Ministry of Foreign Affairs, People’s Republic of China, “New Starting Point for Cooperation and New Driving Force for Development: Opening Statement at the Leaders Roundtable of Belt and Road Forum for International Cooperation,” May 15, 2017, http://www.fmprc.gov.cn/web/zyxw/t1461700.shtml.

[5] Lin and Wang, Going Beyond Aid.