Steve Kapfer and Dr. Eric Hyer, Political Science
As development continues to remain a stubborn, yet salient problem to address, an increasing number of researchers are trying to determine what factors affect development. One of the most popular means of promoting development is through official development aid (ODA) because it is thought to provide the necessary capital and technical know-how needed to spur development. However, the benefits of ODA are increasingly being called into question as economic analysis shows marginal growth rates in many targeted developing countries, and in those targeted countries aid produces decreasing marginal returns.
Researchers have found that ODA fails to act as a catalyst for development for several reasons. First, aid given to governments may make government skip important steps in development. Second, aid may reduce a government’s dependence on its citizenry by reducing its reliance on tax revenue, thus reducing the government’s desire to institute good policies, or for that matter, do anything at all. Third, because aid is fungible, governments may shift how money is used from projects that are necessary to pet-projects, which then causes governments to become dependent on aid in order to implement essential projects. Finally, recipient countries may be able to play donors off each other, receiving aid for the same projects.
In an attempt to combat these ills, aid donors have devised numerous policies aimed at controlling how aid is used by recipient countries. Some donors require countries to hold a transparent bidding process on aid-financed projects. Other donors give conditional aid or give aid in tranches in order to constrain how countries use aid. Additionally, countries are increasingly giving aid to multilateral institutions in order to eliminate the ability of recipient countries to play donors off each other and to help coordinate development projects.
It is surprising, then, that despite the ambiguity of the effectiveness of aid, especially bilateral aid, China has recently become a major aid donor. Additionally surprising is the fact that Chinese foreign aid is completely at odds with western aid donors’ practices. Instead of tying aid, placing onerous conditions on aid, or creating a transparent project development process, China is simply giving aid to developing countries with no-strings attached.
There are several proposed reasons why China has recently decided to become an aid donor. First, with a healthy economy in place, China now feels it is obligated to help other developing countries successfully develop. Second, as a major recipient of aid from the World Bank, the Asian Development Bank, and Japanese bilateral aid, as well as being a developing country transitioning to a developed country, China believes it has a unique perspective on aid that helps China provide the kind of aid developing countries need. As a result, China’s foreign aid is driven not only by its Sino-socialist government policies, but also by it past experiences with foreign aid. Finally, China sees economic aid as a way to get the raw materials and other inputs it desperately needs to help fuel its economy.
Unfortunately, because Chinese foreign aid is an understudied subject, no systemic research has been done on this subject and no one knows for sure why China gives foreign aid. In addition, no one knows who receives Chinese foreign aid or how much recipient receive. In an effort to provide greater understanding, I traveled to China to collect Chinese foreign aid documents and interview several Chinese foreign aid scholars.
My trip to China was rewarding and interesting, both because I was able to find Chinese foreign aid documents and because I was able to gain a better understanding of China’s experience with foreign aid. Fortunately, by the end of the third day I had collected the documents I had gone to China to get, documents that no one else had or knew existed. I then spent the rest of my time in China trying to learn more about Chinese foreign aid from scholars and by studying China’s experience as a recipient of foreign aid.
After finding the Chinese foreign aid documents, I interviewed scholars on Chinese foreign aid. It was clear from my interviews that China believes donors should not attach onerous conditions on aid and that donors should only direct aid at economic development. After all, economic aid to China from the West had helped lift millions of Chinese out of poverty and provided meaningful opportunities for its citizens. In addition, the scholars suggested that donor countries did not have the prerogative to try to stimulate other kinds of development or meddle in other states’ affairs through political or social aid. The perspectives on aid the scholars provided were very different from my own experience, and I am interested to see if the data on Chinese foreign aid that I collected will support their views on foreign aid.
Currently, I am in the process of translating the documents I collected in China and creating a comprehensive database of Chinese foreign aid. In addition to data on Chinese foreign aid, I plan to include data on economic treaties China has signed with other countries to get a fuller idea of how China is using its growing economic prosperity to help and to influence other developing countries. Hopefully, I will have completed the database by this summer, enabling me to start analyzing the data that will provide a clearer picture of Chinese foreign aid.