After years of accusations that Beijing spends more of its secretive foreign aid budget on buying access to raw materials than on helping poor people, the Chinese government appears to be edging towards a new approach that's more in line with other wealthy nations.
Chinese President Xi Jinping made a splash at the United Nations two weeks ago when he announced a $2 billion fund to help the world’s poorest countries that could grow to $12 billion dollars by 2030.
That pledge “marks a very significant departure from what China used to do,” says Steve Tsang, head of the School of Contemporary Chinese Studies at Nottingham University in Britain, because Beijing will give the UN a say in how this money is spent.
World leaders have long urged China to shoulder more of the costs of development aid, given that its firms are spending so freely abroad. In 2014, Chinese companies invested nearly $12 billion in the US alone according to the Rhodium Group, and nearly $1 trillion worldwide.
At a joint White House press conference Sept. 25 between Mr. Xi and President Obama, the US leader argued that China can no longer be treated as a "very poor, developing country, as it might have been 50 years ago. It is now a powerhouse. And that means it’s got responsibilities and expectations ..."
China is now the sixth largest foreign aid donor in the world, according to an authoritative study last year by the Japan International Cooperation Agency, which administers Tokyo’s aid budget. Official Chinese figures are thin on the ground, but the JICA report estimated that China spent $7.1 billion dollars on development aid in 2013.
Only 15 percent of that money went to multilateral institutions such as the UN, the report found. Beijing disbursed the rest directly to governments bilaterally, mostly in Africa where China has been on a decade-long drive to secure supplies of oil, minerals, and other natural resources to fuel its economic growth.
Using money from the South-South Cooperation Assistance Fund that Xi unveiled in New York, China and the UN will “cooperate in providing capacity building training” to the poorest countries in the world, according to a statement by the Chinese Ministry of Commerce.
There have been other signs that Beijing’s aid agencies are moving towards the international mainstream. At Xi’s summit with Mr. Obama during his state visit, China announced that it would work with the US Agency for International Development towards the UN poverty reduction goals, though no details of the planned cooperation have been revealed.
“China is moving towards the standards of the OECD,” says Sun Yun, an expert on Chinese aid policy at the Stimson Institute in Washington, referring to the Organization for Economic Cooperation and Development that groups the world’s richest nations. “We are seeing more cooperation between China and OECD countries in development projects in Africa and the Pacific,” Ms. Sun adds.
At the same time, Sun says, the Chinese government is disentangling the administration of bona fide development projects from “deals designed to get resources.”
Not that she expects such deals to stop. “I see no intention in the Chinese government to give up that policy instrument,” Sun says. “For Beijing, foreign aid is for the advancement of the national agenda.”
Xi’s announcement of a new fund, however, suggests that he has a broader foreign aid agenda than resource extraction. It followed a $3.1 billion pledge from China to help developing countries cope with climate change and a $1 billion contribution to UN peacekeeping forces.
“Xi’s intention is to seize the moral high ground and make China accepted as a responsible player in global affairs,” says Prof. Tsang. “Putting money into the United Nations helps.”
“China is engaged in leadership competition with the United States,” says Sun. “It can safely pursue that competition in the United Nations without fear of political backfiring. These generous pledges … are good for the UN, good for the least developed countries, and good for China’s ambition for global leadership.”