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Monday, July 09, 2018, 13:01
China’s aid rises in significance
By Ian Goldin
Monday, July 09, 2018, 13:01 By Ian Goldin

Newly established International Development Cooperation Agency benefits recipient countries as a one-stop shop

The rise of China is good news for the world. There are many aspects to this. China’s economic strength and growing significance as a contributor to world production and trade is raising global growth. It also serves to stabilize global growth. At times when growth in the United States and Europe has been weak, China has provided much-needed economic dynamism.

In addition, China is a source of growing demand for products and services. Public and private investment flows from China are becoming increasingly significant, and these are key drivers of development globally. They contribute to the strengthening of government revenues and expenditures on infrastructure, health, education and other vital areas of development.

China’s active role in climate change negotiations is also vital to developing countries, as poor countries and poor people are particularly vulnerable to all risks. International cooperation to reduce climate change as well as pandemics and other systemic risks is essential for development, as is the prevention of conflict, since conflict leads to development in reverse and destroys life and the foundations of development.

The newly established International Development Cooperation Agency, by coordinating fragmented responsibilities and activities across the Chinese government, provides an opportunity to create a more harmonized aid program. This will be highly beneficial to foreign governments and recipients, who should find that their engagements with China are simplified through this one-stop shop. Greater coherence may also be anticipated, as the goals of the agency follow guidelines established by the State Council, China’s Cabinet. 

Greater efficiency and effectiveness will enhance the levels of financing and their positive impact.

It has been estimated that the United Nations’ Sustainable Development Goals, which have been universally agreed to, will require approximately US$2.3 trillion per year, which is well over double the current public and private investment in the countries concerned. To this must be added the urgent investments required to reduce carbon emissions, while still allowing developing countries to overcome their often crippling energy deficits.

The implication of this is that much higher levels of aid, particularly for the least-developed countries, and of private finance, for all developing countries, are required. The new China International Development Cooperation Agency will help China to play a greater role in addressing these pressing global concerns.

The volume, origin and composition of global aid flows have changed considerably in recent decades. Aid flows between developing countries are becoming more significant, and in recent years have accounted for as much as aid from nongovernmental organizations, and are about half as much as the amount channeled through long-standing multilateral financial organizations. China is estimated to give in excess of US$5 billion per year.

The Beijing-based Asian Infrastructure Investment Bank and Shanghai-based New Development Bank for the BRICS countries (Brazil, Russia, India, China and South Africa) will further leverage Chinese development assistance through cofinancing with the other shareholders in these institutions. To the extent that finance flows through these banks, and is further leveraged with investments from other development banks, bilateral aid agencies and private finance initiatives, Chinese development assistance will become even more significant globally.

China’s experience with aid to Africa goes back well over 50 years. In the 1970s, the construction of the TanZam railway — a 1,860-kilometer railway linking Tanzania and Zambia — helped relieve landlocked Zambia’s isolation. More recently, extensive Chinese investment in Africa and elsewhere has provided new investment alternatives to developing countries and much-needed sources of long-term finance.

From a development perspective, alternative sources of finance are welcome. The new International Development Cooperation Agency is likely to help with the coordination of this investment and the combination of concessional and commercial finance, which is vital for public-private partnerships. The harmonization of aid with national standards and international best practices should increase both the efficiency and effectiveness of aid.

Coherence of aid across different official agencies and institutions in China will increase, as will the leveraging of public and private finance. This is beneficial to recipient countries in meeting their national development objectives. China, by promoting sustainable development, will be developing long-term partnerships that are in its own interests and those of the international community.

Ian Goldin is a professor of globalization and development at the University of Oxford and author of Development: A Very Short Introduction. The views do not necessarily reflect those of China Daily.


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