China’s foreign aid programs are distinguished by size (much larger than those of other countries), breadth (encompassing 92 emerging-market countries in six geographic regions), and composition (focused on mining and exports of natural resources and supporting infrastructure). They are also unique in their accompanying quid pro quo conditions: For example, increased production and exports of mineral resources are explicitly consigned for delivery to China—payback conditions characteristic of commercial investments rather than bilateral foreign assistance.
China’s pledged assistance in the past six years varied from a low of $91 billion (2012) to a high of $317 billion (2013), with an annual average of $174 billion. By way of comparison, U.S. foreign economic assistance in 2012 amounted to $37 billion, including aid for economic development, international narcotics control, international refugees, and children’s survival programs. Notably, U.S. aid represents appropriated funds provided as grants, while Chinese aid mainly represents pledges to lend. Security assistance is not included in either country’s figures.
How the pledges are divided—by type and among regions and countries—provides a crude indication of China’s purposes and priorities. Seventy-five percent are devoted to natural resource (mainly oil, gas, and coal) and infrastructure projects. Some infrastructure (such as roads, rail, warehousing) directly supports the resource projects, while other infrastructure (schools, office buildings, housing, stadiums) is separate. The remaining 25 percent include medical supplies and serv-ices, humanitarian aid, technical assistance, and training.
China’s ministry of commerce—ostensibly the lead agency among the several that oversee these programs, including the foreign ministry, state-owned enterprises, and perhaps the People’s Liberation Army—divides recipient countries into six regions. The regional shares of total pledged assistance from 2001 through 2014 (in billions): Africa ($330), Latin America ($298), East Asia ($192, excluding the bulk of China’s aid to North Korea), the Middle East ($165), South Asia ($157), and Central Asia ($69).
The following table shows the top six country recipients of China’s assistance, in total and per capita, in the last 14 years. Singapore’s outsize per capita figure reflects the city-state’s importance as the entrepôt trade link between the Indian Ocean and South China Sea, its role as a key member of the Association of Southeast Asian Nations (ASEAN), and its small population (under five million).
Funding is principally provided by China’s Export-Import Bank and the China Development Bank, an elite policy institution responsible to China’s State Council. The terms of these loans include annual interest rates between 2 and 3 percent and repayment spread over 15 to 20 years. Estimating the implicit subsidies in these terms is difficult because most of the 92 recipients would not qualify for long-term loans from international capital markets irrespective of interest rates. On the other hand, the few recipients whose credit ratings are relatively favorable (e.g., Indonesia, Brazil, India) might qualify to borrow at rates only 3 or 4 percent above the London Interbank Offered Rate. For these countries, the implicit subsidy is between 3 and 5 percent.
China’s delivery of equipment and services has markedly but unsurprisingly lagged far behind its pledged assistance. The lag is unsurprising because project implementation involves geological surveys, civil engineering, mining operations, construction, and logistic arrangements stretching over several years. And the projects typically import thousands of Chinese workers (a unique requirement of China’s assistance programs, often not welcomed by recipient countries), necessitating additional housing construction and logistic support. Deliveries usually lag approximately six years behind pledges; pledges made in the years from 2001-2008 correlate with deliveries made in 2007-2014. (The payout period associated with U.S. grant assistance is typically much shorter.) By 2014, China’s cumulative delivered aid accounted for more than 95 percent of total pledges from 2001 through 2008. We can project that pledges made between 2009 and 2014 will result in deliveries of $500 billion between 2015 and 2020.