Foreign aid: China gives a fifth as much as the U.S., and there is no ‘master plan’ – China’s latest political and current affairs news


A summary of the top news in Chinese politics and current affairs for October 17, 2017. Part of the daily SupChina newsletter, a convenient package of China’s business, political, and cultural news delivered to your inbox for free. Subscribe here.

Last week, the U.S.-based research group AidData released an extensive data set and study of China’s financial transactions abroad, including official development assistance (ODA) as defined by the Organisation for Economic Cooperation and Development (OECD). Here’s what the study found:

  • AidData found that across 4,368 projects from 2000-2014, China gave $354.3 billion in “aid,” while the U.S. gave just barely more — $394.6 billion.
  • But only 23 percent of China’s “aid” is ODA, while the U.S.’s aid was 93 percent ODA. Everything else is various forms of cheap loans, credit, and debt forgiveness.
  • That means the U.S. actually gave $366.4 billion in aid, whereas China gave just $81.1 billion. Neither number is small, but it is a huge stretch to say — as many media outlets did — that China is set to “surpass” or “overtake” the U.S. in foreign aid. In reality, China gives only a fifth as much ODA as the U.S.

The gap between ODA and other forms of overseas finance is not a distinction without a difference. As the Economist points out (paywall) in its coverage of AidData’s analysis, “a doubling of Chinese grant aid [ODA] is associated with a 0.4-point increase in the rate of GDP growth of the recipients after two years,” but “China’s no-strings-attached concessional lending [non-ODA]…has no effect on the receiving country’s GDP. It appears to be tantamount to an export subsidy to Chinese firms, with a side order of backhanders for local elites.”

The tendency in western media to play up China’s competition with the U.S. in overseas finance is often accompanied by a narrative of a Chinese “master plan” for regional economic dominance, particularly as the Belt and Road Initiative has progressed. But David Dollar of the Brookings Institution puts cold water on this theory, finding that based on AidData’s data, “Chinese lending in recent years is indiscriminate in terms of geography and quality of governance—suggesting that it is demand-driven rather than supply-driven by Chinese planning.”