Operaciones autosegmentales

China refuses the label of “donor,” considering its aid rather as mutual assistance between Southern countries. China presents itself as the largest developing coun- try, while Africa is the continent that contains the greatest number of developing countries. Its solidarity with Africa is based on a shared feeling of humiliation at the hands of the Western powers, which carved up the Chinese empire in the nineteenth century, and of Japan, which occupied China in the twentieth. On the strength of this common experience, China considers that it can empathize more readily with African aspirations than Western countries can.

While Europe perceives Chinese presence in Africa as a new phenomenon, Chinese insist on their anteriority and they are fond of recalling the contacts made in the early fifteenth century by Admiral Zheng He, thirty years before the Portuguese came to East Africa. In addition to their political and histori- cal legitimacy, the Chinese can point to their economic success: between 1978 and 2007, economic growth increased per capita income by a factor of seven and reduced the number of people living on less than a dollar a day by 500 million.8

This spectacular performance cannot be attributed to the “money doctors.” Chi- nese authorities did not follow the advice of international organizations as they adopted “heterodox” strategies. China learned from the economic experience of Japan, Korea and Taiwan as well as the political experience of Singapore which proved since 1965 that economic openness can co-exist with a single-party system.

China still faces development problems despite its spectacular growth. These problems are particularly acute in the western provinces. Since China itself is still an ODA beneficiary, it is more sensitive to the expectations of African countries than Western donors are.

China ’s development aid was placed under the authority of the State Council and was initially administered by the Ministry of External Economic Relations, whose minister sometimes held the post of Vice-Premier. In 1982, this ministry was folded into the Ministry of Commerce (MOFCOM), and aid management was assigned to a division of MOFCOM. Each year the Ministry of Finance is in- structed to allocate funds to foreign aid that will be disbursed as grants (in kind), interest subsidies for interest-free loans or soft loans. A unit from MOFCOM prepares for bilateral negotiations, administers aid, draws up plans for receiving countries and analyzes projects; it is represented in embassies by the economic advisor. MOFCOM is not the only public institution involved. All of the techni- cal ministries have development aid departments, making some 30 separate bod- ies. There are also the provinces: the Chinese government is highly decentral- ized, and some provinces – particularly the coastal provinces – have sufficient resources to open offices abroad (several have done so in South Africa ). Following

 Chinese aid to Africa, origins, forms and issues

various interviews with government officials and think tanks on the subject, Mar- tin Davies (2008) concludes that Chinese aid spending is quite disorganized and lacks effective coordination.

Established in 1994, the Exim Bank has assets comparable to those of the US Ex-Im Bank as it manages both commercial loans and soft loans. Other banks involved in Chinese overseas aid include the China Construction Bank, which manages the five billion US$ investment fund for Africa, and the People’s Bank of China, which is in charge of China’s participation in multilateral institutions. China participates in the Bretton Woods institutions and the African Devel- opment Bank (AfDB); the annual meeting of the AfDB was held in Shanghai in May 2007. It has also taken equity interests in two regional African banks (those for West Africa and Central Africa) and in the African Development Bank (AfDB). Although it is taking a more active role in these bodies, China has a preference for bilateral aid.

Since the Beijing summit, the foreign affairs ministry has been tasked with monitoring commitments in Africa. These commitments are very difficult to co- ordinate because of the number of institutions involved. China ’s ODA system may be headed for change. The government is planning a reform that should lead to the establishment of a national development aid agency. This body would be placed under the supervision of one or more ministries that are apt to have diver- gent goals: for example, the trade ministry wants support for exports, while the foreign affairs ministry is sensitive about China’s image in the world.

Until 1995, China provided aid only in the form of grants – made in kind in the case of health and education projects – and no-interest loans for construction work. Since that year, it has added loans at concessional rates. The weight of no- interest loans and concessional aid has led China to carry out regular remissions of debt.9

Aid is delivered with hardly any financial transfer to the recipient country. The African government submits a request to the Exim Bank, and after an evaluation by MOFCOM, the governments sign a framework agreement. When the projects provided for in the agreement have been completed, the Chinese firms present their invoices to the project owner, which passes them on, via its government, to the Exim Bank for payment. The African government’s payments of interest and principal are made to the Exim Bank. These financing procedures limit corrup- tion problems. Exim Bank has also innovated by proposing an infrastructure de- velopment finance package (“the Angola Mode”). In such a package, the Chinese government mandates a Chinese construction company to build infrastructure projects which are financed by Exim Bank. Simultaneously, the African govern- ment offers a Chinese mining or oil company the right to mine natural resources (either by offering equity stakes in a national company or mining licenses). The

 Jean-R aphaël Chaponnière

revenues of the mining operation will first reimburse the investment and later on the infrastructure-related loan. By implementing this scheme, Exim bank hedges the country sovereign risk.10

Whereas Western countries are turning towards program aid and budgetary supports,11 _{China finances projects only. Major projects such as the Tanzam rail-}

way, large public building complexes and sports stadiums have long been the ex- ceptions, as China has emphasized small projects such as introducing rice farm- ing or horticulture and building bridges, roads and hospitals in rural areas. This situation could change with the announced increase in aid.

China also has provided technical assistance for health. According to the Chi- nese Ministry of Health, by 2005, 15,000 Chinese health workers were active in Africa and these had attended to about 170 million patients in 47 African coun- tries. In 2007, China pledged to build 30 anti-malaria centers in Africa by 2009 as part of a broader health sector training and cooperation scheme.

Chinese teachers are engaged in training African professionals in different fields and in 2006, China pledged to double their number from 7,000 to 15,000 by 2009. In addition, China has pledged to double the number of scholarships offered to African students to 2,400 in 2009; it has also become more active cul- turally through the creation of the Confucius Institutes.

Th e scale and geographical structure of Chinese aid

Measuring development aid, be it Chinese or Western, has always been a delicate task. In donor meetings, each participant announces its commitment for the com- ing year, and the sum of these commitments is made public at the conclusion of the meeting, giving an idea of the amount of support provided by the internation- al community. The problem is that this sum is calculated by adding components that are not comparable, from either the donor or recipient standpoint. A 100 million US$ grant has a budget cost of 100 million US$ for the donor, whereas a 100 million US$ loan has a higher cost for the recipient – as it has to reimburse – and a lower cost, which varies with interest rates, the length of the grace period and the maturity.

The OECD Development Assistance Committee (DAC) is responsible for checking whether the assistance offered by DAC member countries is properly classified as ODA. To be considered as ODA, aid must: i) come from an official institution; ii) benefit a developing country; iii) be intended to foster develop- ment, and iv) include a minimum concessional element if it is not a grant. This “grant element” is measured by the difference between the face value of the loan and the discounted value (using a fixed rate of 10 percent) of the borrower’s re-

 Chinese aid to Africa, origins, forms and issues

payment flows (interest and principal); the ratio between this difference and the face value of the loan is the grant element. To qualify as ODA, a loan must have a grant element of at least 25 percent, which rises to 35 percent when the aid is tied to purchase of goods and services produced by the donor. A thirty-year loan of 100 million US$ at the concessional rate of 2.5 percent, with a ten-year grace period, contains a grant element of 60 percent.