Chinese foreign aid: Funding development or influence?

Over the last decade, whether it is foreign aid, infrastructure projects, or capacity building, China is increasing its soft power throughout the world. Some of this is reflected in a new white paper put out by the State Council Information Office on January 10, 2020, titled, China’s International Development Cooperation in the New Era.

China's white papers are interesting to study because they represent the Chinese government's narratives. Dennis J Blasko points out, "All Chinese white papers are a mix of policy, propaganda, and description... Ultimately, the final result is what the Chinese Communist Party wants the world to know. Many foreign readers will not be convinced by Beijing’s effort." However, the white papers are still fascinating to analyse because of the information that they contain.

The new white paper is no different. It devotes a significant amount of its eight chapters to talk about how China is helping improve people's lives across the Global South. However, it does throw up some interesting work that the Chinese government has done. The paper states that between 2013 and 2018, China allocated a total of RMB270.2 billion for grants (RMB127.8 billion), interest-free loans (RMB11.3 billion), and concessional loans (RMB131.1 billion).

During these five years, China claims to have finished 423 complete projects (including public facilities, economic infrastructure, agricultural infrastructure, climate change projects, etc.), 414 technical cooperation projects, and 7000 training sessions for foreign officials and technical personnel. The paper stresses how China has contributed to the Belt and Road Initiative and the response against the COVID-19 pandemic.

There are several key takeaways from this white paper. This paper is a natural sequel to China’s White Paper on Foreign Aid, released in 2014. However, it does not provide any details about which agencies within the Chinese government are funding development. In 2018, the Chinese government responded to calls for reform of its foreign aid mechanism and set up a new agency called China International Development Cooperation Administration (CIDCA) to streamline foreign aid provision.

A report by the Carnegie Centre points out that, “Naming the new aid agency an international development cooperation agency—and not a foreign aid agency—has to be understood as mirroring a shift in China’s self-perception of its international development role.” We can also apply this same logic to the new White Paper. The Chinese government wants to move away from being seen as a foreign aid provider (like other Western countries). The change also reflects the idea that China prioritises providing public goods over self-interest.

Another issue that China is attempting to reframe is how loans to foreign countries play out. China’s concessional loans continue to be a large part of their foreign aid. These have been criticised for being debt traps for developing countries that have no way to pay China back. The government is keen to dispel this narrative. The White Paper states that “From 2013 to 2018, China canceled RMB4.18 billion of debts involving 98 mature interest-free loans to least developed countries, heavily indebted poor countries, and landlocked and small island developing countries.” However, it is essential to remember that these loans represent barely 1 percent of the loans that have been provided in the period, and there is still little transparency about China’s concessional loans.

A final issue is public health. With its COVID-19 response, the Chinese government is keen to prove that its governance model effectively tackles development challenges that liberal democracies cannot. As the United States and the European Union struggle with their domestic response, China’s aid will be welcomed by other countries that desperately need it.

There is no doubt that China is bridging a gap in international development cooperation. It is providing much-needed investment into poor countries that have hankered after such capital for the last century. However, its image of being a benevolent power will need to be backed up by on-ground realities.

—Hamsini Hariharan is the host of the States of Anarchy podcast. She researches Chinese politics and policy. The views expressed are personal