China rises and rises, yet still gets foreign aid

[ray245]

BEIJING — China spent tens of billions of dollars on a dazzling 2008 Olympics. It has sent astronauts into space. It recently became the world's second largest economy. Yet it gets more than $2.5 billion a year in foreign government aid - and taxpayers and lawmakers in donor countries are increasingly asking why.

With the global economic slowdown crimping government budgets, many countries are finding such generosity politically and economically untenable. China says it's still a developing country in need of aid, while some critics argue that the money should go to poorer countries in Africa and elsewhere.

Germany and Britain have moved in recent months to reduce or phase out aid. Japan, long China's biggest donor, halted new low-interest loans in 2008.

"People in the U.K. or people in the West see the kind of flawless expenditure on the Olympics and the (Shanghai) Expo and it's really difficult to get them to think the U.K. should still be giving aid to China," said Adrian Davis, head of the British government aid agency in Beijing, which plans to wrap up its projects in China by March.

"I don't think you will have conventional aid to China from anybody, really, after about the next three to five years," he said.

Aid to China from individual donor countries averaged $2.6 billion a year in 2007-2008, according to the latest figures available from the Organization for Economic Cooperation and Development.

Ethiopia, where average incomes are 10 times smaller, got $1.6 billion, although measured against a population of 1.3 billion, China's share of foreign aid is still smaller than most. Iraq got $9.462 billion and Afghanistan $3.475 billion.

The aid to China is a marker of how much has changed since 1979, when the communist country was breaking out in earnest from 30 years of isolation from the West. In that year, foreign aid was a paltry $4.31 million, according to the OECD.

Today's aid adds up to $1.2 billion a year from Japan, followed by Germany at about half that amount, then France and Britain.

The U.S. gave $65 million in 2008, mainly for targeted programs promoting safe nuclear energy, health, human rights and disaster relief. The reason Washington gives so little is because it still maintains the sanctions imposed following the 1989 military crackdown on pro-democracy demonstrators at Tiananmen Square, said Drew Thompson, a China expert at the Nixon Center in Washington, D.C.

China is also one of the biggest borrowers from the World Bank, taking out about $1.5 billion a year.

Asked why China still needed foreign aid after making so much economic progress, the Commerce Ministry said that China remains a developing country with 200 million poor and big environmental and energy challenges.

The current debate spotlights the challenges of addressing poverty in middle-income countries such as China, India and Brazil, where economic growth is strong but wealth is unequally spread. After the U.S., China has the world's most billionaires, yet incomes averaged just $3,600 last year.

Roughly three-quarters of the world's 1.3 billion poor people now live in middle-income countries, according to Andy Sumner, a fellow at the Institute of Development Studies at the University of Sussex in the U.K.

That's a major shift since 1990, when 93 percent of the poor lived in low-income countries, Sumner said. It raises the question of who should help the poor in such places: their own governments or foreign donors?

Experts say it's hard to justify giving aid to China when it spent an estimated $100 billion last year equipping and training the world's largest army and also holds $2.5 trillion in foreign reserves.

"China's made a strategic choice to invest in building its military and acquiring these massive reserves, but at the same time it's underfunding social services, so I think it's going to be harder and harder for donor nations to continue to fund projects in China," said Thompson.

Japan's generosity has historically been driven at least in part by a desire to make amends for its invasion of China in the 1930s. But in recent years Japanese lawmakers and officials have repeatedly questioned whether the money flow should continue, pointing to China's emergence as a donor to African countries.

China provided around $1.4 billion in aid to Africa last year, according to Professor Deborah Brautigam, an expert on China-Africa relations at the American University in Washington, D.C.

Japan has cut its aid down to grants and technical help for environmental and medical projects. Germany's current projects are due to be completed by 2014.

China is cautious about its new status. It is proud of having lifted half a billion people out of poverty and is beginning to flex the muscle that comes with being an economic power. Yet when, for instance, it is called on to agree to binding reductions in carbon emissions, it replies that it can't because it's still a developing country.

At this week's U.N. global summit on fighting poverty, Premier Wen Jiabao pledged to expand Chinese foreign aid and announced an additional $200 million in aid to flood-hit Pakistan.

But he also stressed that China still had to help its own tens of millions of poor. And when Europe's top diplomat, Catherine Ashton, visited China this month, her hosts made sure to take her to a poor village in the remote southern province of Guizhou.

Development aid is not always solely based on need either. Aid groups say China is an ideal place to try out projects, because the authoritarian government can expand successful ones rapidly on a large scale.

But China is effectively robbing the poor by competing for grants, said Dr. Jack C. Chow, who was the lead U.S. negotiator in talks that set up the Geneva-based Global Fund to Fight AIDS, Tuberculosis and Malaria, a major funder of health programs.

The $1 billion China has been awarded in grants from the fund could have paid for 67 million anti-malarial bed nets, 4.5 million tuberculosis treatments, or nearly 2 million courses of AIDS therapy in poorer countries, Chow said.

"I think the milestone that China is now the second largest economy, arguably, I would say that it's no longer a developing country with the likes of sub-Saharan Africa," Chow said in an interview. "Having money from the Global Fund going to China really detracts and depletes that mission of helping people in the poorest of countries."

Global Fund spokesman Jon Liden said China has not taken any money away from other countries so far, because the organization has had sufficient funds to approve all applications "of quality" that it has received. But China could help by contributing more to the fund, he said.

The World Bank defends its assistance to China, saying it enables the bank to work with Beijing on climate change and projects in sub-Saharan Africa.

"Sometimes there's a simplistic view that there should just be the developed countries and the very poorest countries," the bank's president, Robert Zoellick, said recently in Beijing. "But that would run exactly against ... the changes in the world economy, where the role of the emerging economies are to support demand, to take on responsibilities as stakeholders with the environment, to help support other poor countries."

http://www.google.com/hostednews/ap/art ... QD9IF3FDO1

[mr friendly guy]

Swedish statistician Hans Rosling also noted this phenomena, although apparently their ability to store high amounts of foreign reserve only occurred in the last decade or so. In the 90s they were borrowing quite a bit (and still are it seems) from the World Bank for various environmental projects (see world bank website), however one of the more famous ones was reversing the desertification of the Loess Plateau.

If they get less 2.6 billion a year, it most likely means they can't store 2.6 billion extra in foreign reserves. However since everyone is worried about the future of the USD, ie if America starts printing money to pay its debts, it most probably isn't a bad idea to use that money on yourself re : more aid to the poorer regions of China.

Of course it may be possible to advertise from private aid donors. I am thinking in the following forms

1. Microfinance vendors which help small businesses in the poorer regions with loans, the usual "we give a hand up, not a hand out" type of policy. I also donate to such microfinance organisations.

2. The other thing which might be a potential money maker in terms of foreign aid, is to advertise fighting climate change by planting trees. Hear me out, there are rich westerners who want to fight climate change by planting trees, but if you are too lazy to do it yourself, get someone else to do it. The trees don't have to be planted in your country. So why choose China? Because despite the corruption they can get things done when the government puts it mind to it. The reversing the desertification of the Loess Plateau proves it that they can plant trees on a vast scale. China has instituted other anti desertification projects, so perhaps if more money was put into it, it could be done faster.

[Broomstick]

Wasn't it mentioned that some of the money was in form of disaster relief? You know, the US has occasionally accepted money from abroad as well - such as after Hurricane Andrew when Kuwait donated to disaster relief in Florida (which had a great deal to the US liberating Kuwait from Iraq - it wasn't a huge amount of money but it was a very nice gesture and thank you). I'm in favor of nations helping out other nations during a crisis, I think that promotes a lot of good things both short and long term.

But yeah, some of the other stuff should probably be tapered off and stop. China has come along way in recent decades, they should be standing on their own two feet at this point.

[Pelranius]

Some of the aid is probably pork barrel projects for corporations from the donor nation. China would be a pretty good place to run foreign aid pork because a lot of multinationals are already doing things there anyways.

[Fingolfin_Noldor]

China is a glorious hypocrite. They want the developing nations tag, but they have shit load of cash far more than even the richest developing nation.

This was one the big issues that came up in the last climate talks. No biggie really.

Throw in the fact that China is perpetuating its influence in the WTO and the World Bank etc. so as to defeat measures leveled against it. Yeah. Fun.

[mr friendly guy]

Except in emergencies such as natural disasters, I don't think China needs such aid except in its poorer regions. What it might benefit more is from foreign expertise in areas such as public health etc rather than "here have some cash and do what you want with it". That being said, if someone gave me $2.6 billion a year I am not going to turn it down either.

I am not sure why if a country has influence, it can't be a developing nation. China ranks only in the middle of HDI among nations. The reason that the usual foreign aid should be reduced to it is because it most likely has enough cash to fund its own development. That does not mean it shouldn't be classified as a developing nation.

[ray245]

I am not sure why if a country has influence, it can't be a developing nation. China ranks only in the middle of HDI among nations. The reason that the usual foreign aid should be reduced to it is because it most likely has enough cash to fund its own development. That does not mean it shouldn't be classified as a developing nation.

Hell, we don't even need to use HDI to determine if China is a developing nation. Using the good old GDP per capita is more to enough to give us an idea if we should call China a developing nation.

[Fingolfin_Noldor]

I am not sure why if a country has influence, it can't be a developing nation. China ranks only in the middle of HDI among nations. The reason that the usual foreign aid should be reduced to it is because it most likely has enough cash to fund its own development. That does not mean it shouldn't be classified as a developing nation.

Where did I make the connection? The point of my statement was that China continues resisting any attempt to change the developing nation tag so that it continues to get the money as a developing nation.

But the truth is, it doesn't need any external money at all. And that money can go to some nation that needs it more.

[Lusankya]

Where did I make the connection? The point of my statement was that China continues resisting any attempt to change the developing nation tag so that it continues to get the money as a developing nation.

Well, it is a developing nation. If it was a nation of 1.3 million people with the same demographics, as opposed to a nation of 1.3 billion, we wouldn't be having this conversation at all, because nobody would be bitching about them having lots of money as a nation. (Never mind that as far as individual people are concerned, the situation is the same.)

But the truth is, it doesn't need any external money at all. And that money can go to some nation that needs it more.

This is a fair point, but coming to this conclusion by saying "well, they shouldn't be classified as a developing nation" is faulty reasoning.

[Fingolfin_Noldor]

This is a fair point, but coming to this conclusion by saying "well, they shouldn't be classified as a developing nation" is faulty reasoning.

That depends on what metric we use to determien whether its a developing nation, doesn't it? Nevermind that the size of China tends to distort statistics, along with the highly varied standard of living.

[ray245]

This is a fair point, but coming to this conclusion by saying "well, they shouldn't be classified as a developing nation" is faulty reasoning.

That depends on what metric we use to determien whether its a developing nation, doesn't it? Nevermind that the size of China tends to distort statistics, along with the highly varied standard of living.

What kind of metric should we use to determine if china is a developed or a developing nation?

[Fingolfin_Noldor]

This is a fair point, but coming to this conclusion by saying "well, they shouldn't be classified as a developing nation" is faulty reasoning.

That depends on what metric we use to determien whether its a developing nation, doesn't it? Nevermind that the size of China tends to distort statistics, along with the highly varied standard of living.

What kind of metric should we use to determine if china is a developed or a developing nation?

We could start by looking at its foreign currency reserves and its ability to generate money for it. Quite frankly, most developing nations struggle to even accumulate that sort of cash, without fucking off its poor masses.

That should be one of many criteria of course. China is such a jugganaut and with all the foreign investment flowing in, there's going to be tonnes of cash that any developing country would love to have.

[ray245]

We could start by looking at its foreign currency reserves and its ability to generate money for it. Quite frankly, most developing nations struggle to even accumulate that sort of cash, without fucking off its poor masses.

That should be one of many criteria of course. China is such a jugganaut and with all the foreign investment flowing in, there's going to be tonnes of cash that any developing country would love to have.

But doesn't developing nation like Brazil and India have quite a bit of foreign currency reserves as well? Hell, many developing nation have a much greater currency reserve than Greece.

[mr friendly guy]

I am not sure why if a country has influence, it can't be a developing nation. China ranks only in the middle of HDI among nations. The reason that the usual foreign aid should be reduced to it is because it most likely has enough cash to fund its own development. That does not mean it shouldn't be classified as a developing nation.

Where did I make the connection? The point of my statement was that China continues resisting any attempt to change the developing nation tag so that it continues to get the money as a developing nation.

If that is the case it wasn't clear from the post, since China opposes a lot of measures aimed against it in the WTO, but none that I have heard of with the aim of saying they are NOT a developing nation. In fact I thought foreign aid was dependent on the donor nation not the WTO. As for aid from the world bank, its in the form of loans no? Ergo China still has to pay them back like any other borrower.

EDIT - Just for interest, you stated in the thread on climate change you don't give a shit about the third world, so why now do you care that China gets money that should go to a more needy country? You not one of those contrarians are you?

[Lusankya]

A nation with the population of China also needs greater amounts of money to develop properly than most other developing nations. Tiny nations in Africa don't need to build a railway system capable of transporting over 50 million people a day. China does. Tiny nations tend to only have to build schools and hospitals for up to tens of millions, while China has to do the same for over a thousand million - and while it is probably cheaper per capita due to economies of scale, it is still much more expensive.

If one is to look at China's currency reserves as a yardstick for whether or not it's a developing nation, then one must look at that alongside its population figures. It's all very well to say "huge currency reserves", but if those currency reserves are either unusable (for whatever reason) or not significant on a per capita basis, then it doesn't really say anything.

That is, of course, assuming that currency reserves have anything at all to do with development.

[Fingolfin_Noldor]

If that is the case it wasn't clear from the post, since China opposes a lot of measures aimed against it in the WTO, but none that I have heard of with the aim of saying they are NOT a developing nation. In fact I thought foreign aid was dependent on the donor nation not the WTO. As for aid from the world bank, its in the form of loans no? Ergo China still has to pay them back like any other borrower.

The issue came up in the last Copenhagen climate talks when it came to the issue of aid to developing nations and China happened to one of those nations backing that proposal.

Now sure it is a loan, but do they even need the damn loan in the first place? No doubt by not being a "Developing Nation", it places greater demand on China than most on the international arena with regard to international bodies etc. (For one thing, China cannot weasel themselves and stand among the developing nations to demand a better deal.)

EDIT - Just for interest, you stated in the thread on climate change you don't give a shit about the third world, so why now do you care that China gets money that should go to a more needy country? You not one of those contrarians are you?

I just despise blatant hypocrisy and tomfoolery politics which pervades most of international politics.

A nation with the population of China also needs greater amounts of money to develop properly than most other developing nations. Tiny nations in Africa don't need to build a railway system capable of transporting over 50 million people a day. China does. Tiny nations tend to only have to build schools and hospitals for up to tens of millions, while China has to do the same for over a thousand million - and while it is probably cheaper per capita due to economies of scale, it is still much more expensive.

If one is to look at China's currency reserves as a yardstick for whether or not it's a developing nation, then one must look at that alongside its population figures. It's all very well to say "huge currency reserves", but if those currency reserves are either unusable (for whatever reason) or not significant on a per capita basis, then it doesn't really say anything.

That is, of course, assuming that currency reserves have anything at all to do with development.

If they can accumulate money to fund their own development while accumulating such a reserve? Currency reserves has plenty to do with development. Just about any Asian country started accumulating cash to protect themselves from another 1997 crisis. No one wants a repeat of a collapse of a currency and the economy with it.

[ray245]

If they can accumulate money to fund their own development while accumulating such a reserve? Currency reserves has plenty to do with development. Just about any Asian country started accumulating cash to protect themselves from another 1997 crisis. No one wants a repeat of a collapse of a currency and the economy with it.

But that doesn't mean a country that accumulate a big reserve should be considered as a developed nation.

[Fingolfin_Noldor]

If they can accumulate money to fund their own development while accumulating such a reserve? Currency reserves has plenty to do with development. Just about any Asian country started accumulating cash to protect themselves from another 1997 crisis. No one wants a repeat of a collapse of a currency and the economy with it.

But that doesn't mean a country that accumulate a big reserve should be considered as a developed nation.

No it doesn't.

But I think my basic objection is to have China lumped together with some random African nation that is in far deeper shit than China is.

[mr friendly guy]

Currency reserves are more useful I think to indicate whether you need aid to develop (since the money they accumulate in reserve can also be used to aid development), not whether you have reached developed status (the money still has to be spent and time pass for the investment to bear fruit).

After all, a lot of developed nations are hugely in debt. Theoretically if we accept FN assertion that foreign reserves are part of the equation of whether you are developed or not, then if a developed nation has the opposite characteristic, ie accrues shit loads of debt, can it be counted as NOT developed anymore before the debts are called in?

At the end of the day, most of us think China most probably doesn't need aid in the form of unrequited cash *, we just arguing what constitutes a developing nation. I also find it funny that if we take the unspoken premise that - no longer developing nation = no foreign aid, that means the United States after receiving foreign aid from Hurricane Katrina and 9/11 must have reverted back to being a developing nation.

* I still believe they could benefit from aid in the form of foreign expertise and some sectors who don't get enough of the government cash may benefit from microfinance, which while counted as a charity for the purpose of my tax deductions, it really is if you think about it a loan (to people the banks won't normally lend to) rather than an unrequited transfer.

Now sure it is a loan, but do they even need the damn loan in the first place?

Given that even developed nations need loans cough US cough bond sales to China & Japan cough cough, I fail to see why the fact they take a loan out impacts on their status as developing / developed. Now the world bank may loan for the purpose of reducing poverty, so to my mind even a rich country could take out a loan if it has some regions which are poor and not in keeping with the rest. However its more humiliating for say a Western Nation to do so than for China.

No doubt by not being a "Developing Nation", it places greater demand on China than most on the international arena with regard to international bodies etc. (For one thing, China cannot weasel themselves and stand among the developing nations to demand a better deal.)

I am going to hazard a guess that given the way they have "come out" and promoted themselves with hosting of big events, China would rather prefer to be a developed nation than developing one despite the free $2.6 billion which is minor compared to the money they spent on hosting these events eg 2008 olympics, 2010 expo etc. The indicators like HDI, GDP / capita just doesn't support them laying claim to be a developed nation just yet.

[Fingolfin_Noldor]

Currency reserves are more useful I think to indicate whether you need aid to develop (since the money they accumulate in reserve can also be used to aid development), not whether you have reached developed status (the money still has to be spent and time pass for the investment to bear fruit).

Japan is strongly considering a Sovereign Wealth fund. Norway, a developed nation has one. The US could never bring itself to have one because it would smack of government intervention in business. But having such a huge wealth fund like what China and others have, does however grant them considerable flows of money in terms of cash both hard and soft.

Further, some countries have more than one fund, one for currency, and one for investment. Or sometimes the line outright blurs. It depends.

After all, a lot of developed nations are hugely in debt. Theoretically if we accept FN assertion that foreign reserves are part of the equation of whether you are developed or not, then if a developed nation has the opposite characteristic, ie accrues shit loads of debt, can it be counted as NOT developed anymore before the debts are called in?

Just because the whole lot of them decided to jump off the cliff, should we follow? As it is, Some countries in the EU are barely developed. Spain and Greece are deep in the shitters as it is. The whole GDP per capita can be distorted quite severely by the rich-poor gap after all.

At the end of the day, most of us think China most probably doesn't need aid in the form of unrequited cash *, we just arguing what constitutes a developing nation. I also find it funny that if we take the unspoken premise that - no longer developing nation = no foreign aid, that means the United States after receiving foreign aid from Hurricane Katrina and 9/11 must have reverted back to being a developing nation.

* I still believe they could benefit from aid in the form of foreign expertise and some sectors who don't get enough of the government cash may benefit from microfinance, which while counted as a charity for the purpose of my tax deductions, it really is if you think about it a loan (to people the banks won't normally lend to) rather than an unrequited transfer.

The US is something of a living contradiction when it comes to a lot of things, to be honest.

And the point of this discussion is certainly not "developing nation = no foreign aid" but rather whether China needs any of the damn aid at all. I have not said anything to suggest the former.

I am going to hazard a guess that given the way they have "come out" and promoted themselves with hosting of big events, China would rather prefer to be a developed nation than developing one despite the free $2.6 billion which is minor compared to the money they spent on hosting these events eg 2008 olympics, 2010 expo etc. The indicators like HDI, GDP / capita just doesn't support them laying claim to be a developed nation just yet.

Of course. But that hasn't stopped them from standing with developing nations and torpedoing the Copenhagen Talks.

While they are not a developed nation, they certainly cannot be treated like some dingy African country and given loans with darn attractive terms.

[K. A. Pital]

I can't believe this thread is fucking serious. 2,5 billion in aid? What sort of a fucking joke is that - China is the world's second largest economy and this is a drop in the bucket that is China's GDP. 2,5 billion is a drop in the bucket in the U.S. 14-trillion GDP, the GDP of the same nation which consumes several - is it 40? - times the world average per capita (if I'm remembering correctly).

Take away this aid and it won't matter. Leave it, and it won't matter anyway, because the chief donor nations are uber-rich First World nations. Whose citizens' living standard is created by exploiting the world rich-poor gap anyway, so no big deal.

I'm deeply amazed such a pitiful sum even matters.

[mr friendly guy]

Just because the whole lot of them decided to jump off the cliff, should we follow? As it is, Some countries in the EU are barely developed. Spain and Greece are deep in the shitters as it is. The whole GDP per capita can be distorted quite severely by the rich-poor gap after all.

Of course we shouldn't go into debt like them. My point however still stands since if we go by the model you use, foreign reserve is a marker for us to judge level of development along with other factors. Thus I can conclude that the opposite, ie debt is a marker for us to judge development as well, albeit in the opposite direction. Which is why I proposed the scenario for you. Is there a level of debt where it becomes so high a developed country no longer gets to be called developed? The thrust of my argument is that I think that more traditional metric like GDP/capita, HDI etc give a better picture of development than how much you have in foreign reserve, and the example was just to illustrate that.

Let me put it as an analogy for you. Development basically represents standard of living of the citizens, while a foreign reserve represents a country's savings. So if we have an old guy who lives in a shitty house in squalor. Does he have a high or low standard of living? Most people would say low. Now suppose that he died of natural causes and when his will is read out we find that he had a few million dollars in the bank (these stories of old people living in squalor but are really millionaires to crop up occasionally). Are we going to say his standard of living prior to death is suddenly high? You can say its his choice to live like this, and I agree. However its tangential to my main point, that his standard of living was crap, and the 2nd point being, savings (foreign reserve) is not a good way to judge standard of living (development).

And the point of this discussion is certainly not "developing nation = no foreign aid" but rather whether China needs any of the damn aid at all. I have not said anything to suggest the former.

I think most people here agree with the first statement. As for the second statement, your first post gave me the impression that was what you meant, but fine consider it a misunderstanding then.

Of course. But that hasn't stopped them from standing with developing nations and torpedoing the Copenhagen Talks. While they are not a developed nation, they certainly cannot be treated like some dingy African country and given loans with darn attractive terms..

While I agree with your conclusion about them not being treated like some dingy African country (presumably you mean and under developed), how you got to that from the premise sounds strange to me because in a democratic meeting, weak countries can torpedo talks the same as strong countries.
I offer the examples of the whaling commission of which my country (Australia) pushes the anti whaling side, while our opposite number is predominantly Japan and some European minnows. Our position has time and time again been stymied when it comes to votes by poor countries who have equal voting power to us and side with Japan because Japan bribes them, er I mean offers them foreign aid. Nevertheless it shows that a shit country can "torpedo" talks just like a strong country.

[Chirios]

Don't forget that even though China has a high GDP, it's growth is embarassingly unequal. The coastal cities benefit heavily from the exports, whilst the Chinese interior hasn't got a standard of living much higher than Nigeria.

[CJvR]

I dont see any reason nations able to fund their own nuclear weapons and space programs should get any development aid. Clearly they are quite able to take care of themselves, if they rather have nukes than power and roads that is their privilege and responsibility.

[Chaotic Neutral]

Space program, yes, but nukes are pretty effective defensive weapons. How many nuclear armed countries have been invaded? They shouldn't disqualify a country for funding.