Christopher Herwig / Courtesy Reuters Liberian children hold Chinese flags before the arrival of China's President Hu Jintao in Monrovia February 1, 2007. Thousands of cheering Liberians lined the streets of the capital Monrovia to greet Hu, hoping for desperately needed investment for their war-scarred nation.

Charity Begins at Home

Why China's Foreign Aid Won't Replace the West's

A few years ago, I came across a story about a dispute over a courthouse that China had built as an aid project in the Cook Islands. Apparently, the bathrooms in the structure did not account for the significant differences in body shape between the average Chinese and the average Cook Islander. And although that issue was rectified and the courthouse still stands, the building is rusting and the judges perspire working with broken air-conditioning in the tropical heat.

Stories like this have provided ammunition to critics of Chinese aid who insist that Beijing must adopt international standards and policies for overseas development assistance. Their insistence usually stems from two main motives. First, aid professionals worry about the impact of Chinese aid on development outcomes. Second, Western officials seem more concerned about China’s influence in the developing world. But given the complex mix of factors that shape Chinese aid policy, do not expect the country to play by international rules anytime soon.

The dominant -- and largely Western-built -- system of international aid practices has evolved over time, reflecting changing priorities and pressure to improve development outcomes. Recently, Western governments and aid agencies have emphasized transparency and accountability to help partner countries better plan and manage resources effectively. Other best practices include working with a country’s civil society groups to ensure that development is inclusive and using the contractors and suppliers in aid projects,that will give developing countries the best value for their money. Not all Western donors live up to these principles, but they at least aspire to them.

There are many reasons why China does not follow these Western aid practices. Some are well known and have to do with the way in which China wants to position itself globally. For example, China tends to classify its aid as South-South cooperation as a way to distinguish itself from Western donors with colonial histories. But often missed in discussions of Chinese aid are the domestic reasons that limit China from being more like a Western donor.

In China, many players, often with competing interests, are involved in shaping and implementing aid programs. And that makes it difficult for aid officials to impose any coherent rules -- let alone Western ones.

Technically, aid policy is set by political leaders in the State Council, the highest executive body, which consists of the premier, vice premiers, state councillors, and other ministers. Their decisions are passed on to the Commerce Ministry’s Department of Foreign Aid (DFA), which has a staff of less than 100 to manage a bilateral aid budget worth more than $5 billion a year. In partner countries, a single official in the Chinese embassy usually has responsibility for the aid program. That official is rarely able to give aid much priority, though, since he or she is also responsible for economic and commercial activities, usually a much larger portfolio.

In practice, China’s foreign aid is also heavily influenced by big banks and powerful state-owned enterprises that use aid money in support of their commercial ventures overseas. For example, the Export-Import Bank of China offers generous loan financing to partner governments on the condition that Chinese contractors implement most of the projects. The main focus of those companies is on completing those projects as quickly and cheaply as possible. They thus have little interest in applying Western aid norms that would, for example, require community consultation or social and environmental impact assessments.

Other ministries are also involved. The Ministry of Finance is responsible for multilateral aid, including China’s contributions to UN agencies, regional development banks, and its own debt relief program. The Ministry of Foreign Affairs, meanwhile, manages regional initiatives, such as the Forum on China-Africa Cooperation, which has some aid components. Other individual ministries run their own programs: scholarships through the Ministry of Education, medical assistance through the Ministry of Health, and so on. Even some provincial governments have their own aid programs. 

Beyond the ministries and state-owned enterprises, aid policymakers also have to contend with the Chinese public: In a country where more than 500 million people are still classified as poor, China’s foreign aid program is often the subject of domestic criticism. For example, in 2011, China’s donation of 23 school buses to Macedonia, ten days after a horrific school bus crash in Gansu Province killed 19 preschool children, prompted an angry online response. As one commentator observed: “Chinese children don’t have fine buses to deliver them to schools, and the Chinese Government is actually sending buses to other countries. Can’t they pay attention to problems domestically first?” It is hard for the Chinese to be open about foreign aid, especially when they are giving it to countries that may have a GDP per capita higher than China’s own.

Some Chinese officials who work on aid policy on a day-to-day basis do want to ensure that their projects produce good outcomes. And the DFA wants to improve some aid practices and is working with agencies such as the United Nations Development Program to do so. But the DFA simply does not have the power to force much change through the system. Some information about China’s aid program is still classified as state secrets, impeding efforts for transparency, accountability, and efficient and accurate reporting. The DFA has had to fight to change State Council rules about what details can be made publicly available. Moreover, it is often difficult to collate information centrally, especially in a system in which bureaucrats jealously guard information and turf.

So it is nearly impossible for China to change its foreign aid ways. But does it matter? Certainly it would be better if China did eventually follow international rules and norms. Understanding the social and environmental impacts of aid is vital for its long-term sustainability. And aligning aid with partner countries’ processes and priorities will help ensure better programs. Furthermore, local populations in partner countries deserve accurate information about Chinese projects in order to hold their own governments to account.

But the larger concern that some critics of Chinese aid raise -- that China will replace the United States as the international donor of choice -- is almost beside the point. Partner countries are often as skeptical about the motives of the Chinese as they are of Western donors. Many of the developing country leaders who initially fell under the spell of Chinese generosity are increasingly recognizing that no gifts are truly free. For example, a number of South Pacific countries have put a freeze on Chinese loans over concerns that, should they default, the Chinese might seek heavy concessions.

The poor quality of Chinese buildings and infrastructure delivered through aid projects also makes them more of a burden on recipient nations than a boon. A Chinese-built Olympic-standard aquatic complex in Samoa, for example, is rarely used for competitions and is now listed as a financial liability on government balance sheets due to its high maintenance costs. Further, the requirement that Chinese aid projects be contracted to Chinese companies and suppliers has resulted in backlashes among local communities and businesses. As one government official explained: “We are paying the loan, but they benefit. They want everything in one package -- use of companies, laborers, materials.”

Many developing countries, then, have started to regard Chinese assistance as complementary to, not a replacement for, support from traditional donors. In the Cook Islands and Cambodia, for example, governments value Chinese aid for large capital projects but continue to want traditional donor funding for other things such as budget support and renewable energy development, as well as for technical assistance to help them manage the Chinese funds.

For these and other reasons, there is little prospect of a “Beijing consensus” or Chinese aid model displacing Western assistance. Nor will the West be able to make China play by the same rules of international aid. In a sense, that is a good thing: Developing countries get to choose their donors, thus exerting more influence over international aid priorities and practices. There is no question that China will continue to become an even bigger player on the global development scene. But fears that it will come to dominate that scene should be put into perspective. China may not accept aid rules, but it is not going to make new ones either.

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