What can we learn from Chinese aid?

June 10, 2010

     By Duncan Green     

I’m at a two day EU conference ‘Development in times of crisis and Achieving the MDGs’ (snappy eh?). It’s in Madrid, but you wouldn’t know it. We’re in an airless, windowless room in an aircraft hangar of a conference centre miles out from the city. I was on a panel on the impact of the crisis on how we think about aid (powerpoint here, fyi). Often the main benefit from attending these events is not the specific presentations (apart from mine of course, which was fascinating, path-breaking etc etc) but a chance to assess the mood of a particular constituency – in this case the European aid community.

Overall, there’s genuine alarm at Europe’s sudden descent into fiscal masochism (see Tuesday’s excellent article by the FT’s Martin Wolf on this). This goes much wider than aid (although aid too is getting battered in spending cuts in Spain and a number of other countries) – there is a real concern that if everyone cuts spending and gives up on Keynesian reflation, we will go into a double dip recession. All this appears to be driven by suddenly all-powerful financial markets. What happened? Last time I looked they were in intensive care, sucking up taxpayer dollars by the trillion. Suddenly they are back on their feet and turning on their erstwhile saviours in European governments, who ‘have no backbone’ as one academic lamented. One speaker blamed the G20, which talked a good talk in its communiqués last year, but has failed to act on financial regulation, ratings agencies etc while it had the chance.

China in AfricaApart from that, not much new so far, other than this intriguing discussion of Chinese aid in a paper by Andy Mold, of the OECD Development Centre:

“The low conditionality and project-based approach of Chinese aid and the way it is linked with trade and investment policies provides some useful lessons for the donor community. There are four potential advantages:
i) the aid is more targeted to important infrastructure projects with long maturity and long-term potential (there is no hurry for disbursements);
ii) it is less bureaucratic and with lower transaction costs;
iii) it is more efficient, with lower costs and faster, and
iv) it allows more policy space (i.e. lower conditionality) and increases the bargaining power of African countries vis-à-vis other donors. (In fact, contrary to some reports, it is untrue that the Chinese employ no conditionality to the use of their aid, and on occasions have vigorously expressed their concerns about corruption and the possible diversion of their resources towards illegitimate uses).

Legitimate concerns have been raised about the appropriateness of some projects supported by Chinese financing, and whether it China in Africa 2encourages low-income countries to take on more debt in a way which is not sustainable. The Chinese are also widely accused of turning a blind eye to human rights abuses in some African countries and of refusing to lay down governance conditions on their African trading partners.

An alternative view is that growing Chinese engagement in Africa is laying the ground for a promising new, more workmanlike relationship between recipient governments and donors, one built on mutual respect. Chan (2008) puts the point forcefully: “Africans are not naïve and should not be patronised with concerns that they are being taken for a ride. Like Hugo Chavez in Venezuela, they are rejoicing at least in having options and having suitors….The Chinese provide not only an alternative to the West but also leverage to use in continued dealings with the West. Being courted might be the prelude to being taken seriously and, in a long string of African capitals, this is the true sunrise that the Chinese bring.”

The success of Chinese aid, at least in the eyes of its recipients, is partly responsible for leading Andy to question the focus on budget support to governments and arguing instead for ‘a shift in emphasis back to a more project-based approach’. That’s probably as near to heresy as you can get in Europe’s aid industry.

Finally, has anyone got any recommendations for reading material on the real (unstated) purpose of these large international meetings? Anthropologists or others must have studied them, surely? Tribal solidarity rituals for epistemic communities – that kind of thing?