China-Africa relations: Beijing’s financial aid leans towards grants, away from cheap loans, white paper shows
- Proportion of aid in grant form increases to 47 per cent in 2013-18 from 36 per cent in 2010-12, government report shows
- While interest-free loans still exist, they are ‘mainly as a gesture to show that China is doing something about debt relief’, director of China Africa Research Initiative says
As well as paying for soccer stadiums and government buildings in the Republic of Congo, Lesotho, Mozambique and Sierra Leone, Beijing has funded presidential palaces to Togo, Sudan, Burundi and Guinea-Bissau among others through grants and interest-free loans.
China says the projects are intended to increase cultural and sporting activities in the countries and enrich cultural life, but analysts say the spending reflects a strategic shift in Beijing’s foreign aid policy – by providing grants rather than loans to countries already mired in debt.
A new white paper released by the State Council Information Office in Beijing provides a glimpse into Chinese aid to Africa and other emerging economies.
According to the report, titled “China’s International Development Cooperation in the New Era”, Beijing has “steadily increased the scale and further expanded the scope of its foreign aid”.
The last such paper was published in 2014 and covered the 2010-12 period.
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The change in stance began with the creation of the China International Development Cooperation Agency in 2018.
Zhou Yuyuan, a senior fellow at the Centre for West Asia and African Studies at the Shanghai Institutes for International Studies, said the white paper was the first of its kind to talk of international development cooperation rather than foreign aid.
“This shows China wants to promote the social and economic development of its partners and is a response to the realities of the international development landscape,” he said.
“We can also read that Chinese aid is a supporting factor rather than a determining factor, which means Chinese aid should be utilised with other cooperation factors such as trade, investment, infrastructure, development financing and social development”, he said, adding that Africa remained a priority area for China’s international development cooperation.
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Between 2013 and 2018, China allocated 270.2 billion yuan (US$41.8 billion) in foreign assistance, according to the white paper. The total comprised 127.8 billion yuan in grants, 11.3 billion yuan in interest-free loans and 131.1 billion yuan in concessional loans. About 45 per cent of the money went to Africa, with Asian nations receiving just over a third.
According to David Shinn, a professor at George Washington University’s Elliott School of International Affairs, in the 2010-12 period, concessional loans accounted for more than 55 per cent of China’s global aid, with grants at 36 per cent and interest-free loans at 8 per cent.
In the report covering 2013-18, the share for concessional loans fell to just under 49 per cent, grants increased to 47 per cent, and interest-free loans dropped to 4 per cent.
“This tells me China is increasingly worried about debt repayment and is switching to more grant aid. There is good news and bad news for Africa,” Shinn said.
In the 2010-12 period, Africa received almost 52 per cent of China’s global foreign aid, but that fell to 48.5 per cent between 2013-18, he said.
From 2010-12, Africa received about US$2.5 billion a year in foreign aid from China, rising to US$3.3 billion a year for the 2013-18 period, he said.
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Deborah Brautigam, a professor of international political economy at Johns Hopkins University and founding director of the China Africa Research Initiative, said there had been a significant change in the relative amounts of the three aid instruments.
In its 2011 aid white paper, China said it had paid out 256.3 billion yuan in aid to foreign countries as of 2009, including 106.2 billion yuan in grants, 76.5 billion yuan in interest-free loans and 73.6 billion yuan in concessional loans, she said.
The numbers represent a split of about 41 per cent for grants, 30 per cent for interest-free loans and 29 per cent concessional loans.
Brautigam said the report showed that in the 2013-18 period, China’s foreign aid comprised 47 per cent grants, 4 per cent interest-free loans and 49 per cent concessional loans.
Some people in China had argued that interest-free loans should be eliminated as an aid instrument and at one point Beijing was poised to do that, she said.
While they still existed, they were now used “mainly as a gesture to show that China is doing something about debt relief”, Brautigam said.
“Some governments seem not to have focused on which kind of Chinese loans are being cancelled or the relatively small sums cancelled – just that China was cancelling their debt and might do so again,” she said.
“But there is no indication that China will cancel any of the concessional loan debts. China Eximbank expects repayment.”
According to the white paper, between 2013-18 China cancelled 4.18 billion yuan worth of debts involving 98 interest-free loans to developing countries.