China’s Strategic Vision: Rethinking Global Aid

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By Maximilian Marweld

China’s renewed superpower status, heralded by its economic momentum, has so far mostly expressed itself in the arenas of soft power. If still Western-dominated, Western governments have reduced the rate of increase in their aid budgets or even cut them  back, allowing China to step up and fill the gaps by boosting its foreign assistance.  China’s impact on developing countries only becomes apparent when looking at Cities  like Addis Ababa or Lusaka with new, Chinese-built high-rise offices, roads, and shopping malls.  

China’s Approach to Development Assistance: A South-South Model

China’s role in global development has evolved massively over the last seventy years. Initially motivated by solidarity, foreign aid has become a robust component of China’s international policy, establishing the country as a significant global development actor. Especially now, as the CCP is taking a more proactive approach to international cooperation and development, it is ever more critical to understand and study Chinese development assistance in terms of its doctrine and method.  

Unfortunately, as is common when dealing with Chinese policy, the only official documents presenting thoughts and strategy behind China’s foreign aid are three white papers published by the Information Office of the State Council in 2011, 2014, and 2021. Unlike traditional aid, often characterized by donor-recipient dynamics that impose some political and governance conditions, China’s approach emphasizes “South-South cooperation,” a model that frames its aid as mutual assistance among developing nations. Their policy is focused on infrastructure and outcome-driven projects that prioritize recipients’ practical needs.

This is a common thread in the White Papers and is essential to understand. China views itself as the “world’s largest developing country” and draws direct comparisons between its own experience of foreign aid and its aid strategy today. All White Papers emphasize  infrastructure as a catalyst for sustainable development. Infrastructure is seen as an essential stepping stone for establishing the foundational system that allows countries to develop independently. 

This contrasts with strategies by established donors within the OECD’s Development Assistance Committee (DAC), whose aid is distributed more evenly and puts great importance on sectors like health and education. 

China’s Financial Model for Development Aid 

China has also taken a unique approach to financing and modeling its development aid to states by favoring bilateral aid arrangements with fewer economic and political conditions, adding that recipient countries can expect more flexibility in how aid is received. This flexibility positions China as an attractive alternative for nations seeking development financing without implicit governance reforms and oversight constraints. Within this usually bilateral framework, China employs a range of financial instruments, including grants and concessional loans definable as official development assistance (ODA) by DAC standards to non-concessional loans and export credits backed by China’s policy banks, such as the Export-Import Bank and the China Development Bank. These state-backed institutions, alongside Chinese enterprises, play a pivotal role in implementing China’s foreign assistance policy by identifying strategic investment opportunities beyond the regulatory scope of mainland China. Interestingly, the state  plays a minor role in funneling foreign aid to recipients; it primarily consists of enterprises backed by state-owned banks with a genuine economic interest in developing a recipient infrastructure that provides financing.  

Today, estimates put China’s 2024 foreign aid between US$5 and US$7.9 billion, placing them somewhere between the 6th and 13th largest donors globally. However, this represents only 0.004% of China’s GNI, a minimal share of the economy, indicating room for growth. China has yet to fully embrace development aid in the way Western countries have done, and its development assistance strategy is instead intended to support domestic economic goals. 

In recent years, concessional loans represent about 49% of China’s foreign assistance, followed by grants at 47%, and interest-free loans at only 4%. This loan-heavy structure underscores China’s focus on infrastructural investments with measurable economic returns, which differs from OECD donors, who aim for a more balanced approach that includes social sectors. It is again noteworthy that China’s aid is increasingly aligned with the Belt and Road Initiative (BRI), underscoring the sense that China is using its development aid to strengthen its economic strategies overseas

Geographic and Sectoral Focus: Strategic Partnerships in Key Regions

Overall, ODF has particularly focused on Africa and Asia, where infrastructure needs to be closely aligned with China’s capacity to deliver large-scale projects. Between 2000 and 2014, China disbursed $354 billion in ODF, 61% of which were non-concessional flows categorized as “Other Official Flows” (OOF), and 23% were similar to Official Development Assistance (ODA). Africa, receiving 34% of this aid, remains a primary focus, followed closely by Asia at 33%. For example, due to their strategic locations and resource wealth, Angola, Ethiopia, and Pakistan are top recipients, again highlighting China’s interest in securing energy supplies and regional stability. 

angola
China-Funded Hydropower Project in Angola. Source: US Government Accountability Office

It is noteworthy that China is increasingly blurring the lines between grants, loans, credits, and investments by aligning aid more and more with the Belt and Road Initiative and vice versa. This is even more apparent as China’s 2021 white paper on foreign aid claims that it will “increase assistance to participating countries of the Belt and Road Initiative,” making being a partner of the Belt and Road Initiative a direct conditionality for development assistance. 

China’s development assistance and ODF disbursements still rely on strategic partners, mainly within the Belt and Road Initiative and heavily focus on infrastructure and energy projects. Chinese aid is more of a strategic economic strategy, supporting projects important to both China and the recipient in a relatively economic matter. Although there has been an increase in “ODA-like” disbursements, China will need to put greater emphasis on diversifying its sectoral aid to include more health and education, ultimately more closely aligning its aid strategy with traditional Western formats. A shift toward increased concessional aid, especially grants, to reduce debt burdens in least developed countries would greatly shift Chinese aid to more traditional development assistance. As always with China, increasing transparency is critical to building international trust and positioning China as a more respectable development agent rather than one who wants to strengthen its economic muscle in developing countries.

Featured image courtesy of Unsplash.com

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