China and U.S. 'neck and neck' in foreign assistance spending

China and U.S. 'neck and neck' in foreign assistance spending

On the list of China’s contributions overseas, there is hurricane relief, books, and mosquito nets. But it is the grants and loans for building national roads — even a nuclear power plant — that have put China among the world’s largest foreign assistance donors.

An unprecedented trove of data released today by AidData, a research lab based at William and Mary, a university in Virginia, maps China’s growing reach and influence over 15 years of global assistance spending.

The new data, gathered over five years, will reshape thinking on China’s foreign assistance footprint, an area that China normally considers a state secret.

It has long been clear to China watchers that, with its sizable foreign reserves and appetite for global influence, the country has been eager to open its coffers and extend its hand into Africa, the Middle East, South America and beyond, buying progress and influence.

But the new data on more than 4,300 projects in 150 countries indicate those contributions — if not the means — have in total, almost matched those of the world’s largest foreign aid donor, the United States.

“China is effectively a spending rival of the U.S. around the world … they’re kind of neck-and-neck in terms of their overall spending,” said Brad Parks, executive director of AidData.

China BRICS Summit

South Africa’s Foreign Minister Maite Nkoana-Mashabane and China’s President Xi Jinping pose as Xi meets officials from the BRICS countries, Brazil, Russia, India, China and South Africa, in Beijing on June 19. Over 15 years, China’s foreign aid contributions have almost matched those of the United States. (Associated Press)

The group estimates the U.S. spent $ 394.5 billion on foreign assistance between 2000 and 2014, while China spent about $ 354.3 billion. (All figures are in U.S. dollars.)

What’s starkly different is how they spend it.

The U.S., like most western donors including Canada, puts most of its contribution into foreign aid in the strictest sense — called Official Development Assistance (ODA) — which is aimed at developing nations and includes at least a quarter in grants.

China has spent only one-quarter of its funds on projects that meet that strict definition.

The data suggest most of its contributions have instead been focused on projects that are more commercially oriented and involve loans at market prices — ultimately, to make money. That has effectively made China the world’s largest individual country creditor, says Parks.

The projects tend to focus on sectors like infrastructure, energy, mining and transport.

“Those funds tend to go to China’s trading partners, to countries that are rich in natural resources, and to countries that generally are credit-worthy and capable of repaying loans,” said Parks. Those have included Iran, Pakistan, Russia and Venezuela.

“It’s largely to make money, to expand their presence into overseas markets, to help their exporters gain access to those markets and to ensure that China can import the natural resources that they don’t have at home, so it’s clearly about China’s self-interest.”

China has argued that assistance can and should go beyond traditional handouts.

India BRICS Summit

Indian Prime Minister Narendra Modi meets with Xi at the 2016 BRICS summit in Goa, India. China’s foreign aid is ‘clearly about China’s self-interest,’ says Brad Parks, executive director of AidData. (Associated Press)

The turning point appears to have been in 2009. The data show a marked increase in the more commercially driven type of assistance. In one year, the number of countries receiving such assistance went up by 16 per cent, and countries with existing contracts saw the value of those contracts soar.

One of the biggest beneficiaries is Egypt, which saw its assistance go from $ 4 million to $ 298 million. Zimbabwe saw a surge from $ 14 million to $ 281 million. By 2012, Zimbabwe was seeing assistance in the $ 1 billion range.

AidData says research shows the economic benefits for recipient countries tend to be greater with ODA.

Interestingly, China has been under pressure to increase its contributions on the humanitarian front. For example, it only recently started contributing to the World Food Program, according to Mathieu Duchatel, senior policy fellow and deputy director of the Asia and China program at the European Council on Foreign Relations.

It had become a goal for many on the international stage, including the U.S., Europe and Japan, to “convince China to play a greater role” in funding foreign aid. “In multilateral institutions, there is a demand for more Chinese funding.”

CHINA-BRICS/

Xi uses a gavel during a plenary session of the 2017 BRICS summit. China has argued that foreign aid should go beyond traditional handouts. (Reuters)

In the past five years, individual African nations have risen on the list of recipients of China’s ODA. Cuba, however has been the biggest beneficiary.

Over the 15 years, Cuba received $ 6.7 billion in aid from China, including money for building hospitals. The U.S., which until Donald Trump’s election as president had been on a path of reconciliation with Cuba, contributed $ 195.8 million.

Parks says that in traditional foreign aid, China tends to favour countries that have the greatest need and that are most aligned with it politically. That’s not much different on the Western donor side, he added.

But China’s contributions have often been seen as preferable to Western aid in some developing countries because it otherwise comes with no strings attached. Western aid often requires recipient countries to meet human rights benchmarks or to make political or structural reforms.

In a previous study, AidData suggested Chinese aid was therefore more likely to lead to cases of corruption.

“If you care about economic growth, environmental degradation governance, conflict, all around the developing world it’s extremely important to understand China’s growing global development footprint because the financial flows have very real world consequences,” said Parks.

China BRICS

Chuina hosts leaders from the BRICS nations and Egypt, Guinea, Mexico, Tajikistan and Thailand at the 2017 summit. Recently China has been under pressure to increase its humanitarian contributions. (Associated Press)

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