West takes up Chinese aid model
Australia recently announced plans to set up a A$2 billion ($1.4 billion) infrastructure aid fund for South Pacific nations, which will provide grants and long-term loans to support energy, transport, water and telecommunications projects in the region.
Further, Australia’s export credit agency – Export Finance and Insurance Corp – announced it will offer another A$1 billion to support infrastructure projects and business development in the South Pacific region.
These moves were quickly interpreted by some Western media outlets as a response to “counter China’s growing influence” in the region.
Yet, compared with Australia’s previous attitude toward South Pacific issues, and given the adjustments made by developed countries to their foreign aid, it seems that China’s aid model of respecting recipient countries’ willingness to develop independently has been widely recognized by developing countries. This recognition has also gradually influenced the traditional Western aid system.
Australia’s latest aid plan is in sharp contrast with the comments it made several months ago. In January, Concetta Fierravanti-Wells, the-then minister for international development and the Pacific, told reporters that China was funding unneeded infrastructure projects in the South Pacific, which led to “useless buildings” and “roads to nowhere.”
In April, Julie Bishop, Australia’s former foreign minister, said that her country didn’t want to see development aid turn into a burden on vulnerable economies. Using this logic, it seems contradictory for the country to change its practice of only providing grants while starting to offer long-term loans to South Pacific nations. Australia’s moves are not merely intended to react to geopolitical competition, but also to fulfill the demand of recipient countries.
The policies and practices adopted by countries of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) have expanded to include what look like Chinese characteristics.
First, OECD/DAC countries have expanded the scope of development aid from projects meant to improve living standards (for example, education) to infrastructure investment. Western donor countries usually limit their foreign aid on non-production sectors, avoiding industrial projects that might pose competition to their own industries. But this deprives recipient countries of the ability to develop independently and leads to their long-term economic dependence on donor countries.
In comparison, China-funded infrastructure, such as roads, bridges and factories, has enhanced the connection between recipient countries and the world market, thus winning them recognition and prompt Western countries to pay attention to the infrastructure aid they criticized before.
Second, OECD/
DAC countries have evolved from offering free aid as they did in the past to a model of providing “grants plus loans.” Since the end of the
Cold War,
Western countries have attached reform conditions to their financial aid.
Countries that moved toward the reform targets set by the West could get direct cash transfers, which led to excessive dependence of the recipient countries. For this reason, Western countries have to learn from China’s experience to offer preferential loans, so as to push recipient countries to take more responsibility for their own development.
Third, China’s model of respecting recipient countries’ willingness to develop independently has caused some observers to criticize and reflect on the Western development aid model. When drawing up its foreign aid strategy, China fully respects the autonomy of recipient countries in formulating and implementing their own development strategies.
Based on a detailed understanding of the development needs of each recipient country, China revises its foreign aid development plan every five years, making systematic arrangements for medium- and long-term foreign aid targets, the scale of investment, capital structure, key areas and safeguards. Aid guidelines of these countries are also formulated every five years to develop specific foreign aid policies that suit the recipient countries’ economic and social development plans.
During the preparation and implementation of aid projects, China also communicates closely with all interested parties in recipient countries to gain a full understanding of their development needs. In contrast, Western countries have long neglected recipient countries’ demand for independent development, and they have attached political conditions to aid, violating the principles of political and economic development.
Beijing’s foreign aid concepts have been different from those of the West from the start, because of China’s semi-colonial experience, its identity as a developing country and its independent, self-driven development.
Since reform and opening-up began in the 1970s, top Chinese officials have repeatedly said that China will respect the independent development of recipient countries in its foreign aid program, without attaching political conditions to its aid. This aid model has won wide recognition among developing countries, and it has also put the development of the Western-led global governance model on a path with more justice and rationality.
China’s aid model has put the development of the Western-led global governance model on a path with more justice and rationality.
The author is an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation. bizopinion@globaltimes.com.cn