Op-Ed Contributors

White paper: China's foreign aid

(China Daily)
Updated: 2011-04-22 08:02

II. Financial Resources for Foreign Aid

Financial resources provided by China for foreign aid mainly fall into three types: grants (aid gratis), interest-free loans and concessional loans. The first two come from China's State finances, while concessional loans are provided by the Export-Import Bank of China as designated by the Chinese government. By the end of 2009, China had provided a total of 256.29 billion yuan ($38.83 billion) in aid to foreign countries, including 106.2 billion yuan in grants, 76.54 billion yuan in interest-free loans and 73.55 billion yuan in concessional loans.

Foreign aid expenditure is part of the State expenditure, under the unified management of the Ministry of Finance in its budgets and final accounts system. The Ministry of Commerce and other departments under the State Council that are responsible for the management of foreign aid handle financial resources for foreign aid in their own departments in accordance with their respective jurisdictions. Each of these departments draws up a budget for foreign aid projects every year and submits it to the Ministry of Finance for examination, and then to the State Council and the National People's Congress for approval and implementation. Each department controls and manages the funds for foreign aid projects in its budget. The Ministry of Finance and the National Audit Office supervise and audit the implementation of foreign aid budget funds of these departments based on relevant State laws, regulations and financial rules.

Grants

Grants are mainly used to help recipient countries to build hospitals, schools and low-cost houses, and support well-digging or water-supply projects, and other medium and small projects for social welfare. In addition, grants are used in projects in the fields of human resources development cooperation, technical cooperation, assistance in kind and emergency humanitarian aid.

Interest-free loans

Interest-free loans are mainly used to help recipient countries to construct public facilities and launch projects to improve people's livelihoods. The tenure of such loans is usually 20 years, including five years of use, five years of grace and 10 years of repayment. Currently, interest-free loans are mainly provided to developing countries with relatively good economic conditions.

Concessional loans

Concessional loans are mainly used to help recipient countries to undertake productive projects generating both economic and social benefits and large and medium-sized infrastructure projects, or to provide complete plant, mechanical and electrical products, technical services and other materials. Concessional loans are raised by the Export-Import Bank of China on the market, and since the loan interest is lower than the benchmark interest of the People's Bank of China, the difference is made up by the State as financial subsidies.

At present, the annual interest rate of China's concessional loans is between 2 and 3 percent, and the period of repayment is usually 15 to 20 years (including five to seven years of grace). By the end of 2009, China had provided concessional loans to 76 foreign countries, supporting 325 projects, of which 142 had been completed. Of China's concessional loans, 61 percent are used to help developing countries to construct transportation, communications and electricity infrastructure, and 8.9 percent are used to support the development of energy and resources such as oil and minerals.

III. Forms of Foreign Aid

China offers foreign aid in eight forms: complete projects, goods and materials, technical cooperation, human resource development cooperation, medical teams sent abroad, emergency humanitarian aid, volunteer programs in foreign countries, and debt relief.

Complete projects

Complete projects refer to productive or civil projects constructed in recipient countries with the help of financial resources provided by China as grants or interest-free loans. The Chinese side is responsible for the whole or part of the process, from study, survey, to design and construction, provides all or part of the equipment and building materials, and sends engineers and technical personnel to organize and guide the construction, installation and trial production of these projects. After a project is completed, China hands it over to the recipient country.

Complete projects are a major form of China's foreign aid. From 1954, China had helped Vietnam and the DPRK repair war-damaged railways, roads, ports, bridges and urban transport facilities, and assisted them in building a number of basic industrial projects, thus making great contributions to their post-war reconstruction and economic development. Later, foreign aid in complete projects expanded in scale and scope, and accounted for a bigger proportion among China's foreign aid expenditure. At present, they account for 40 percent of China's foreign aid expenditure.

By the end of 2009, China had helped developing countries construct and complete over 2,000 complete projects closely linked to local people's life and production, covering industry, agriculture, culture and education, health care, communication, power supply, energy, transportation and others.

Goods and Materials

They include materials for production and living, technical products or single-item equipment, and necessary technical services covered by foreign aid financial resources provided by China.

China started foreign aid by providing goods and materials. In the 1950s and 1960s, China was short of goods and materials at home. But to help Asian and African countries win national independence and develop their economies, it provided these countries with a large amount of goods and materials. In addition, China provided supporting equipment and materials for complete projects. China always uses products of the highest quality for foreign aid, and the materials it provides include machinery, equipment, medical devices, testing equipment, transport vehicles, office equipment, food and medicine. These supplies meet recipient countries' urgent needs in life and production; and some equipment, such as civil airplanes, locomotives and container-testing equipment, have helped recipient countries improve their equipment capacity and develop their industries.

Technical Cooperation

Technical cooperation means that China dispatches experts to give technical guidance on production, operation or maintenance of complete projects after they are completed, and train local people as managerial and technical personnel; to help developing countries grow crops, raise animals and process products on a trial basis, and teach local people China's agricultural technologies and traditional handicraft skills; and to help developing countries in inspection, survey, planning, research and consultation work of some industries.

Technical cooperation is an important means by which China helps recipient countries strengthen their self-development capacity. It covers a wide range of fields, including industrial production and management, farming and poultry raising, handicrafts such as weaving and embroidery, culture and education, sports and physical training, medical and health care, clean energy development such as bio-gas and small hydropower generation, geological survey and prospecting, and economic planning. Technical cooperation projects usually last one to two years, and can be extended at the recipient country's request.

Human Resource Development Cooperation

Human resource development cooperation means that China, through multilateral or bilateral channels, runs different kinds of research and training programs for government officials, education programs, technical training programs, and other personnel exchange programs for developing countries.

China started to run such programs in 1953. From then until 1979, China hosted a large number of trainees from the DPRK, Vietnam, Albania, Cuba, Egypt and some other countries, covering over 20 sectors, including agriculture and forestry, water conservancy, light industry, textiles, transportation and health care. Since 1981, China has worked with the United Nations Development Program and hosted training courses in practical techniques in different fields for developing countries. In 1998, the Chinese government began to run seminars for officials. The departments involved and the scale and scope of such training programs have expanded rapidly. By the end of 2009, China had run over 4,000 training sessions of different types for developing countries, attended by some 120,000 people, including interns, managerial and technical personnel and officials. These trainees were from over 20 fields, including economy, diplomacy, agriculture, medical and health care, and environmental protection. At present, roughly 10,000 people from developing countries receive training in China every year. Moreover, China has trained a large number of managerial and technical personnel for recipient countries by means of technical cooperation and other ways.