CHINA: Second Richest Plays Poor

By Antoaneta Becker Reprint | | Print |

Analysis by Antoaneta Becker

LONDON, Sep 20 2010 (IPS) - As China basks in international praise for its spectacular economic transformation over the last 30 years, some shadow sides of this story of triumph have begun to emerge.

The world’s second economic powerhouse has been accused of exploiting its status of a populous developing country to claim grants and aid that would have served Africa’s poorest countries better. And as it continues to receive millions of euros in aid from the European Union, China has stepped up its own foreign aid activities in African and Latin American countries in order to bolster its long-term economic interests and secure energy and mineral resources.

China surpassed Japan as the world’s second-largest economy last quarter, crowning the nation’s three-decade rise from Communist isolation to emerging superpower. The country led the world out of the 2008 global recession with an economy last year that is more than 90 times bigger than when market reform architect Deng Xiaoping abandoned Communist policies in 1978. Experts predict that after unseating Japan and passing Germany, France and Britain in recent years China will overtake the United States as the world’s largest economy as early as 2030.

World Bank Group President Robert Zoellick praised China’s 30-year-long journey as a worthy lesson in helping the world overcome poverty. Speaking in Beijing Sep.15 to mark the 30th anniversary of the China-World Bank relationship, Zoellick said that between 1981 and 2004, China succeeded in lifting more than half a billion people out of extreme poverty. “This is certainly the greatest leap to overcome poverty in history…We and the world have much to learn from this,” he said.

But China’s spectacular transformation has been drawing ever more scrutiny. The country has been accused of aggressively pursuing grants to fight AIDS, malaria and tuberculosis, and receiving more money than severely deprived African nations.

A former official at the Global Fund to Fight Aids, Tuberculosis and Malaria has disclosed that China was given three times as much to fight Aids and malaria than South Africa, one of the worst affected countries. Despite reporting only 38 deaths from malaria last year, China has won malaria grants totalling 149 million dollars or more than the Democratic Republic of Congo, which reported nearly 25,000 malaria deaths in the same period.

“We imagined the bulk of the money ending up in places like Lesotho, Haiti, and Uganda, where these three diseases have reached crisis levels,” Jack Chow, the lead U.S. negotiator in the founding of the Global Fund wrote in the Foreign Policy Magazine. “So it might surprise and concern you — as much as it still does me — to learn that one of the top grant recipients isn’t in sub-Saharan Africa, Latin America, or impoverished Central Asia. It’s a country with 2.5 trillion dollars in foreign currency reserves: China.”

China’s huge population means that its per capita income held as the key criteria in assessing grants places the country on the level of impoverished nations like Cameroon and Bolivia. According to Chow, China had “exploited” the Fund’s set-up to win more aid grants than 29 African countries.

China’s leap into becoming a global economic powerhouse has not translated yet into significantly increased contributions to the Fund. Over the eight years since the Fund was launched China has made contributions of 16 million dollars but has been awarded 1 billion dollars in grants. By comparison, the United States has committed 6.5 billion dollars and France has offered 2.5 billion dollars over the same period.

European countries are now increasingly calling on China to play its part in addressing international challenges. The UK government has halted aid to China and has urged the European Union to reconsider sending hundreds of millions of euros in aid to the world’s largest exporter.

“UK money should be spent helping the poorest people in the poorest countries,” Andrew Mitchell, the International Development Secretary said in June when he announced Britain was going to stop giving aid to China.

“I understand these new concerns very well,” says Ding Xueliang, political scientist at the Hong Kong University of Science and Technology. “In the past few years China has shown to the world how much money its government has: by staging the Beijing Olympics and the Shanghai Expo one after the other. My prediction is that many foreign donors will go in the direction of the UK government.”

EU-funded projects in China include natural forest and river basin management, clean energy research, and environmental governance training programmes. Brussels has earmarked 224 million euros in public funds for Beijing between 2007 and 2013.

The European Union has been criticised for spending millions in emerging economies that now compete with the EU and individual member states in many areas instead of directing its efforts to impoverished countries in real need.

China has stunned Western powers with its aid largesse and aggressive infrastructure investment in Africa, Asia and Latin America where it vies for influence and resources.

In Africa alone, China’s commitments for infrastructure rose to 7 billion dollars in 2007 from less than 1 billion dollars per year before 2003, according to the World Bank. By the end of 2009, the volume of China’s accumulative non-financial investment in African countries had surpassed 8 billion dollars (Chinese government figures) and it had become the largest investor in the continent among developing nations.

Professor Ding has a word of caution. “In China there is a very popular saying these days: Guofu Minqiong, which means ‘Rich government, Poor people’. One should remember that even in the height of the Great Leap Forward in the 1960s when millions of Chinese people were dying of hunger Mao Zedong sent enormous amounts of military and economic aid to many countries around the world.”