Saturday, February 27, 2010

Billions in Aid?

Here in Washington, it's widely believed that China gives "billions in aid" to Africa. And no wonder. A World Bank report cited a figure of $44 billion for China's total aid to Africa between 1960 and 2006. (I point out in The Dragon's Gift that what the Chinese actually said was 44 billion renminbi (about $5.6 billion) over nearly 50 years.)

Mistakes like this are not too surprising, given the secrecy of China's actual aid figures.  However, up on Capitol Hill, a 2009 report from the Congressional Research Service "China's Foreign Aid Activities in Africa, Latin America, and Southeast Asia," has gone much further and in the process, done a great disservice to efforts to understand this issue.

Why? The simple reason is that that the CRS authors defined Chinese "aid" as all of China's state-sponsored activities: grants, loans, export credits, infrastructure projects and foreign investment. Their argument: "many PRC economic investments abroad can be counted as aid rather than foreign direct investment (FDI) because they are secured by official bilateral agreements, do not impose real financial risks upon the PRC companies involved, or do not result in Chinese ownership of foreign assets." But these factors, even if true (and that is debateable, particularly regarding financial risks), do not come close to making an economic transaction into "aid"!

(They also took their "data" from news reports, but that's another story.)

In 2007, they contend, China provided Africa with $17.962 billion in "aid" (Table 4, p. 8). This compares with estimates by a range of people (myself included) that put Chinese official development aid to Africa in 2007 much closer to $1.4 billion.

Then, having defined "aid" as all of China's state-related economic activities, they argue that "China’s aid to Africa is driven largely by its objective of securing access to oil and minerals for its growing economy" (p. 10).  But this reasoning is entirely circular. Having previously defined "aid" as including investment by China's state-owned companies in oil and minerals, as well as oil-backed, market-rate export credits, how could you come to any other conclusion?

Not surprisingly, this analysis of China's "aid" is now feeding into scholarly journal articles and books (I first noticed the report when an article I was asked to review cited it as the  source for a statement that China had given Africa $17.96 billion in aid in 2007).

Let's try harder to compare apples and apples, not apples and lychees. As a Washington Post article said yesterday, "China is no enemy, but inflating the challenge from China could be just as dangerous as underestimating it."

7 comments:

  1. Hello Deborah
    Suppose this is an intentional distortion, do you have an idea what motivates it?
    Who appoints CRS and what interests drive it?
    How will inflated figures effect Congress?

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  2. Hi Ioel -- I doubt this is directly intentional. The report itself is overall fairly sober and balanced. But your comment is interesting. There certainly is a feeling on the Hill that China is a rising threat, and distorted "headlines" like this are bound to feed that, no matter how much the unusual definition of aid is explained in the small print. Perhaps an underlying motive was that they wanted Congress to increase the US aid budget for Africa!

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  3. That idea that CRS may be exaggerating Chinese aid in order to increase the US aid budget has very interesting implications. What I find interesting is the underlying assumption that higher Chinese aid is a threat rather than a plus, which then allows application of the traditional military-industrial complex logic of exaggerating threats in order to increase the budget that can meet the threat (Soviet military spending, power of Al Qaida, ...). : if we (traditional donors) are about poverty-reduction, then increased Chinese aid should be a plus, implying if anything less rather than more need to increase our aid budgets.

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  4. So far here in Washington, official views on Chinese aid and state-sponsored engagement in Africa are still stuck at a very early stage -- people are trying to learn the basics. I don't think there has been any real thinking of the potential impact of Chinese aid and engagement on poverty reduction. That's one place where I hope my book can make a contribution.

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  5. Ironically enough, I contacted the authors of this CRS report to ask about the origins of the data, as I am finishing up my MA at the University of Hawaii, and writing about Chinese foreign aid to Africa, and I got two interesting responses. The first was "we won't furnish the actual NYU Wagner School report to the public", and the second was "check out Deborah Brautigam's book The Dragon's Gift".

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  6. Interesting on both fronts! DB

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  7. Deborah,

    As you correctly point out, there is no hard data on the actual amount of aid Africa receives from China, unless you go directly to the source. I am a little surprised at your comment in regards to China's ambition of securing natural resources in Africa. The African Continent has always been an after thought to the west. The recent resurgence and focus by the U.S foreign policy in dealing with Africa, only means that it is meant to counter China's motives in Africa. I am sure you are fully aware of AFRICOM. This goes well beyond china's aid to Africa and deals precisely with the procurement of natural resources by China. Interested in your opinion.

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