Cracking the China Conundrum by Yukon Huang

Author:Yukon Huang
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2017-03-13T04:00:00+00:00

FOREIGN AID

Like China’s ODI, its foreign grants and concessional loans have increased dramatically in recent years. A 2013 Rand study looking into China’s foreign aid and government investment activities found that China’s total aid and related financing commitments went from $1.7 billion in 2001 to $124 billion in 2009 and $189.3 billion in 2011.21

Over the past decade and a half, China has become a major source of financing for developing countries globally. This has generated concerns about whether China’s lending policies are undercutting the practices of traditional Western donors and their respective export credit agencies and not just multilateral development banks. Geostrategic implications have also heightened sensitivities.

At first glance, the notion of China as a major source of financial assistance defies logic. The world has never seen a case where a developing country was providing so much concessional financing, sometimes to countries whose citizens are richer than its own. No wonder that Beijing has been reluctant to broadcast the details of its assistance programs for fear that its citizens would question why they are being asked to give to others when there are still so many unmet social needs at home.

China’s aid began in the 1960s when the country was much poorer, but back then the motivation was to gain support for its claim as the sole representative of the Chinese nation. Relatively less well-off and small African and Latin American nations with votes in the United Nations were the targeted recipients. Today, as a rapidly growing middle-income country with outsized amounts of foreign reserves, the objective has evolved to securing resources, accessing technology, and building goodwill as a rising great power. Particularly noteworthy have been China’s infrastructure projects, which draw on its experienced and vast labor force.

The amounts that have been offered have been the subject of much speculation, since hard numbers are difficult to come by and definitions vary. Reports that China’s aid flows exceed the total provided by everybody else often mix concessional with commercial lending and even FDI. Announced amounts often reflect vague intentions and bear little resemblance to actual utilization.22 Aid levels began to surge about a decade ago when China’s trade surpluses became significant. While natural resources were the main draw for Chinese aid to Latin America and Africa, strategic objectives have driven aid to Southeast Asia and more recently to Central Asia.

A Rand study using a broad concept of China’s “foreign aid and government invested activities” found that over 80 percent of the investment projects from 2001 to 2011 were in natural resources and infrastructure.23 Ninety-five percent of China’s aid to Latin America during this period was pledged after 2008, growing to approximately $80 billion. According to a study by the Inter-American Dialogue, China’s $37 billion in commitments in 2010 alone already exceeded lending by the World Bank, the Inter-American Development Bank, and the US Export-Import Bank combined for that year.24 China’s loans to Latin America are larger and growing faster than their counterparts, with most of the money (largely from CDB) flowing to Venezuela, Brazil, Argentina, and Ecuador.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.