Comparing development cooperation models: China and the U.S.

12 October 2017 | 09:37

Comparing development cooperation models: China and the U.S.

American and Chinese flags. Photo: futureatlas

  

The increasing engagement of emerging donors in development assistance programmes in Africa is considered to be one of the most important events in the global aid regime. The changing picture of global development aid architecture is part of a process of global power transition and global economic capability reconstruction. The aftermath of drastic consequences of the aid projects sponsored by the western donors have brought up the widening gap between two approaches: on the one hand the preference for good governance from the West, and on the other hand an emphasis on economic development from the so called “rising donors,” especially the BRICS countries.

 

At the forefront of these two approaches two countries are particularly worth the comparison: China and USA. After being for a long time an aid recipient, China is now competing with the Unites States as one of the largest donors in the world. But, how does their aid model differ? The two countries have different definitions of aid, different aid management structures and different project priorities.

 

The U.S. defines aid following the Official Development Assistance (ODA) definition under the Development Assistance Committee (DAC). This definition identifies development assistance as grants or loans to developing countries that are “a) undertaken by the official sector; b) with the promotion of economic development and welfare as the main objective; c) at concessional financial terms (with a grant element of at least 25%)”. While China do not reject the ODA definition, compared to traditional donors, Chinese foreign assistance is much broader in its content, including not only grants, free interest-loans, and concessional loans but also preferential loans, loans based on market interest rates as well as comprehensive export buyer's credit, credit certificates and a series of financial activities.

 

Also in terms of management structure China differs widely from the U.S. counterpart. Namely, in the Chinese case, the administrative structure responsible for cooperation programmes consists of three levels: central, provincial and municipal. The State Council is the central agency responsible for policy-making. The Ministry of Commerce and the Ministry of Foreign Affairs are the two main regulatory bodies. The Department of Foreign Assistance under the Ministry of Commerce, The Export-Import Bank of China, China Development Bank play an important role in implementing foreign assistance projects. The Department of Foreign Assistance is mainly responsible for grants, interest free loans, youth volunteer projects and technical assistance. Preferential loan projects are sponsored by Export-Import Bank of China, which started to provide official assistance since the beginning of 1995.

 

In the U.S. there are tree main agencies responsible for decision making and budget planning for foreign aid. These are the White House, the State Council, and the Congress. Unlike the People Congress in China, the U.S. Congress can influence the allocation of aid through legislative and budget approval. The U.S Agency for International Development is the main implementation body, which has been in charge of over half of the funds for operation and spending. Besides, there are other 18 agencies at national level or state level that also participate in foreign aid implementation. These include the Ministry of commerce, the Ministry of finance, the Ministry of agriculture, the Department of defense, the Department of homeland security, the Ministry of justice, the Ministry of labor, the Ministry of health, the Ministry of communications, the Ministry of environmental protection, the Ministry of finance, the Federal Trade Commission, as well as the Millennium Challenge Corporation.

 

Another difference between China and the U.S is related to their aid projects priorities. According to the 2014 China's foreign aid white paper, China foreign assistance to developing countries consists of 8 main project types that involve complete construction project, general materials, debt relief, technical cooperation and human resources development, medical assistance and humanitarian assistance. It is important to note that China provides aid mainly in the form of technical assistance, with an emphasis on training, grants, interest-free loans and preferential loans that are combined with interest subsidy and debt relief. Among the total 89.34 billion RMB that China has spent on foreign aid between 2010 and 2012, African countries received 51.8%. The top founded sectors include: economic infrastructure (44.8%), social public infrastructure (27.6%), material assistance (15%), human resources cooperation and development (3.6%) and aid to agriculture (2%).

 

The U.S. foreign aid to Sub- Saharan countries is mainly composed by financial assistance, technical assistance, food aid and debt relief. From 2008 to 2012, the amount of U.S. official development assistance to Sub-Saharan countries was more than $7 billion per year. Of this total, more than half of the funding was directed towards health care, agriculture and education. The data from USAID indicates four key areas of U.S. aid spending: peace and security, governance and democracy, investment in the people and economic development. 

 

The increased attention being paid to foreign aid by China and the U.S. is an encouraging development for developing countries. This new flux in the existing global aid system enables recipient countries to pursue a suitable mix of aid, assistance and partnership options on bilateral, regional and global level. Moreover, it gives them new opportunities to balance negotiating power and exploit the different comparative advantages of the U.S. and China.

 

Yuying Chen received a double Bachelor’s Degree in International Politics and Economy from the Xiamen University, and she is currently finishing her last year of double Master’s Degree in International Public Policy from Fudan University (China) and Gothenburg University (Sweden). She worked as a research intern in the Department of Labor and Program on Local Governance and Development in Sweden. Her research interest includes: development aid, South-South cooperation and political economy

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