China and the New International Aid Architecture

Not long ago, China was a recipient of foreign aid. Today, China rivals the United States as one of the world’s largest donors. In the traditional international aid architecture, countries that were members of the Organization for Economic Cooperation and Development’s Development Assistance Committee (DAC), consisting of 30 developed countries, donated the most aid. China leads the rising narrative of ‘south-south’ cooperation and the changing landscape of international aid architecture, including an increase in non-DAC bilateral aid donors. China’s role in international development is likely to continue to grow along with the state’s rapidly expanding economy. However, many states question China’s motives for providing aid and the implications of their involvement-- especially their increasingly large presence in Africa.

The Chinese government considers details of its international development finance program to be a state secret. Until recently, the global community knew very little about how much money China spent on foreign aid and what countries received China’s funds. In efforts to keep its funding a secret, China has refused to work with international bodies to coordinate and quantify its aid projects, contributing to further controversy surrounding its aid.   

In 2017, a report from AidData, the College of William and Mary’s research lab, helped shed light on the details of China’s international development program. The report tracked the country’s aid from 2000 to 2014 and looked at 4,400 projects to which China has either committed, is building, or has finished. Over that 14-year time period, China lent about $350 billion USD. That figure is not much less than American aid over that same time period, which totaled to $424 billion USD.

However, Chinese and American aid came in different forms. Almost all aid from the U.S. came in the form of grants, while grants only accounted for a fifth of Chinese aid. The majority of Chinese aid consisted of concessional lending at below-market interest rates, most of which went to Chinese companies working abroad. DAC countries are reluctant to support China’s practice of concessional lending at below-market interest rates because of its failure in the 1990s -- historically, it was unsuccessful because it overburdened its recipients with debt.

China primarily gives official development assistance (ODA) to Africa, but has commercial interests all over the world, including Russia, Eastern Europe, Southeast Asia, and Latin America. The Organization of Economic Cooperation and Development (OECD) defines ODA as finance for economic development that does not profit the donor country. Cote d’Ivoire, Ethiopia, Zimbabwe, Cameroon, Nigeria and Tanzania have all received over $3 billion USD in aid from China. However, when looking at Chinese projects from 2000 to 2014, Southeast Asia, the former Soviet Union and Latin America are home to more projects by value than Africa. Not all of the China’s projects qualify as ODA. Many of them reflect China’s commercial interests because China profits off of interest from the loans. Only 22% of China’s development spending from 2000 to 2014 qualifies as ODA.

Controversy over China’s involvement in Africa centers around Western critics’ idea that China’s presence is not always in Africa’s best interest. Based on AidData’s findings, it appears that China’s aid is generally motivated by two interests- the level of need of the recipient country and the foreign policy aims of China.

Africa has become an increasingly important economic partner for China because of its natural resource wealth and need for infrastructure. Overall, the relationship between China and Africa may be viewed as mutually beneficial. In return for pumping billions of dollars into African government and infrastructure, China reaps the benefits of African commodities. Chinese ODA in Africa is not purely altruistic and would be more effective if more of it came in the form of grants rather than cheap loans, but despite its flaws, it has proven to be quite effective in promoting African development.

From the perspective of developing countries in Africa, Chinese aid often seems more appealing than aid from multilateral organizations such as the World Bank because Chinese aid comes with fewer conditions. Additionally, because of historical distrust of institutions like the IMF, countries may be more likely to go to China if they need a loan.

Regardless of  its motives, it is clear that China is challenging Western norms and dominance in the international aid architecture. Under the Trump administration, the U.S. plans to scale back on its role in international development. If this is the case, China is poised to become the top lender to the developing world. Only time will tell how a growing Chinese/African partnership will affect U.S. foreign policy and African development, but it seems that China’s growing role in international development is rapidly increasing their economic power.