Sunday, December 19, 2010

China's "Rogue Aid": Japan Times

The Wikileaked documents have spawned a number of stories on China and Africa. Here's one from Japan Times that offers up some interesting insights, but that also gets a bit garbled, particularly the part that purports to discuss my book, The Dragon's Gift. The headline ("Pernicious 'rogue' offers of aid") is calculated to push the "China threat" button, even if, as in this case, the reporter's story itself is fairly balanced.

One of the myths that circulates widely (and is repeated without question in this story) comes from a much-criticized report on Chinese aid prepared by the US Congressional Research Service. According to the Japan Times:
A U.S. congressional report last year quoted research showing that total Chinese aid in 2007 was $25 billion. Aid to Africa in the 2002-2007 period was more than $33 billion.
As I've noted on this blog before, these estimates are so preposterous that they should simply be treated as amusing, a funny story, except that they were presented to the US Congress as serious. Here's the inside story: what was the "research" quoted by the CRS report? A background paper on "Chinese aid" done as a class project by a group of graduate students from NYU. The students, perhaps encouraged by the researchers, decided to count every media report of a flow of finance from a Chinese entity into Africa, Latin America, or Asia as "aid". They lumped together grants, official and commercial bank loans, export credits, supplier finance, foreign direct investment, and so on. As long as it had some link to the Chinese government (i.e. it was from a state-owned bank or company) they added it to their database and called it "aid". 

This methodology has two obvious problems. First, investment, export credits, supplier finance, etc., is not "aid" but commercial in nature, and should not be counted as official development assistance. Second, the fraction of projects mentioned in the media that actually go forward is small, no matter who is financing them. This overstates the size of Chinese engagement. While the CRS report claimed that China gave $18 billion in "aid" to Africa in 2007, by my estimates, the real figure of official aid disbursed in 2007 was less than 8 percent of that.


Sigrid said...

Hi Deborah!

Just got an email from the Economist Intelligence Unit on African growth performances. It state that investment to Africa is mainly led by China.

As you have shown, aid is often extremely overstated, but the next question for you then is, is China the leading investor in Africa? (never mind that the question itself lumps Chinese investments into one single actor)

Deborah Brautigam said...

Hi Sigrid! We don't know whether or not China is the leading investor in Africa. MOFCOM's official data do not support this, but as I've pointed out in this blog, the official data are not reliable. I think it's safe to say that for FDI stocks (accumulated investment) China is still well behind the major Western countries. In 2008 alone, total stock of FDI in Africa from all sources was $511 billion, and that year flows were $88 billion (UNCTAD 2010).