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DEVELOPMENT: China Moves from Aid Recipient to Aid Donor

Mitch Moxley

BEIJING, Jul 8 2010 (IPS) - When Britain announced it would stop giving public money to China as part of a plan to direct financial aid to countries in greater need, it was symbolic of China’s shift from aid receiver to aid giver.

Following the lead of other Western nations, Britain’s Development Secretary Andrew Mitchell said in June that the 40 million pounds (60.6 million U.S. dollars) that his government sends annually in China – home to the world’s fastest growing, and soon to be second largest, economy – would be better spent elsewhere.

“UK money should be spent helping the poorest people in the poorest countries, with every penny making a real difference by giving families the chance of a better future,” Mitchell said.

Indeed, China, whose own poverty rate has plummeted over the last two and a half decades, has in recent years become a formidable aid donor and investor in developing countries.

According to a report released in 2009 by the U.S. Congressional Research Service, China’s aid to Africa, Latin America and South-east Asia increased from less than one billion dollars in 2002 to an estimated 25 billion dollars in 2007.

“In the past several years, the People’s Republic of China (PRC) has bolstered its diplomatic presence and garnered international goodwill through its financing of infrastructure and natural resource development projects, assistance in the carrying out of such projects, and large economic investments in many developing countries,” the report said.

The study found that China’s foreign aid activities in African and Latin American countries serve its long-term economic interests – via infrastructure and public works projects and natural resource development – whereas those in South-east Asia reflect longer-term diplomatic and strategic objectives.

However, the report noted that while China’s aid projects “are a highly visible reminder of China’s growing ‘soft power,’ other countries and regions, such as the European Union, the United States and Japan, continue to dominate foreign direct investment in Africa, Latin America and South-east Asia.”

Still, China’s growing aid and foreign direct investment projects do reflect the country’s growing acceptance of its role as a leader of the developing world.

“As it becomes richer, it’s China’s responsibility to help other poor countries,” said Wang Yaohui, director general at the Centre for China & Globalisation (CCG), an independent, non-profit think tank in Beijing that conducts research on a range of social science issues. “It’s a natural transition.”

China does not have a central aid agency. Its development assistance is primarily administered by the Ministry of Commerce as well as the Export- Import Bank of China, the Ministry of Finance and the Ministry of Foreign Affairs.

In Cambodia alone, China’s foreign direct investment hit a total of eight billion dollars this June, making China the largest investor in the poor South- east Asian nation. China’s investments target the agriculture, tourism, infrastructure and hydropower and garment industries, Kong Vibol, secretary of state for the Ministry of Economy and Finance, said recently.

African countries have been major beneficiaries of Chinese aid: By the end of September 2009, China’s total aid to Africa hit 11.15 billion dollars. More than half of China’s 900 ongoing projects in Africa are aimed at improving the livelihood of local citizens, through infrastructure projects like railways and power plants, Wang Wei, a researcher of China Institute of International Studies, wrote recently on

Donating aid to Africa has strategic advantages. China has its eyes on Africa’s vast resource and energy riches, and it has made no secret of its desire to be a major influence in the region.

China has become Africa’s second-largest trading partner. From 2000 to 2009, bilateral trade grew from 10.6 billion to 91.1 billion dollars, an annual increase of 27 percent. Sino-African trade now makes up 10 percent of Africa’s total foreign trade.

In addition to enhancing aid to Africa, China has started to cancel African debt and has dispatched volunteers to the continent. The Chinese government also recently set up a human resource development fund for African countries, which will offer scholarships to African students, help African countries set up laboratories, fund school construction and dispatch teachers and young volunteers.

“The close relations between China and African countries have exerted a positive effect on African economic development,” Wang wrote. “Infrastructure construction in transportation, hydropower and telecommunications has enhanced African economic development.”

The CCG’s Wang said it is likely that the growing superpower is not motivated by altruism alone. “It’s true that China may have a bigger say in front of these countries. I don’t think that China’s specific purpose is to help these countries alone,” Wang said.

But Niu Jun, a professor in the School of International Relations at Peking University, said China also gives aid in situations where it does not expect anything in return, such as disaster relief.

“As China becomes richer and more developed, it will give aid to more and more countries. We will encourage their development,” Niu said.

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