New landscape for China's foreign aid

China-US frictions and the impacts of the novel coronavirus health crisis are reshaping the future of global foreign assistance

Although the United States and European Union remain the major donors of official development assistance, their investment in foreign aid has been stagnating due to their relatively slow economic growth. According to data collected by the Organization for Economic Cooperation and Development, foreign aid from official donors fell by 2.7 percent year-on-year in 2018, with a declining share going to the neediest countries. In 2018, the bilateral ODA to the least-developed countries fell by 3 percent in real terms from that in 2017, aid to Africa fell by 4 percent, and humanitarian aid fell by 8 percent.

"The picture of stagnating public aid is particularly worrying as it follows data showing private development flows are also declining," said OECD Secretary-General Angel Gurría. "Donor countries are not living up to their 2015 pledge to ramp up development finance, and this bodes badly for us being able to achieve the 2030 Sustainable Development Goals."

China and the US are competing in many different areas, with foreign aid emerging increasingly as a new focus of their contest. Over the past decade, the US has concentrated its bilateral ODA on Africa and Asia, with the former seeing a rising status. In 2018, 35.7 percent of the US' bilateral ODA went to African countries, up from 30.5 percent in 2009. In December 2018, the US administration rolled out a new Africa strategy, the first of its kind since Donald Trump took office. The plan laid out the US' new approaches to Africa in areas including the economy and trade, investment, military and security, and primarily aims to counter the influence of China. Other major international donors are tightening and readjusting their foreign aid, reshaping the landscape for foreign aid.

The rapid spread of the novel coronavirus has brought healthcare to the forefront of foreign aid. The efforts to contain the virus have wreaked havoc on the global economy, and recipient countries face growing pressure from debt service payment and a greater challenge to finance their development. In its updated World Economic Outlook issued in June, the International Monetary Fund predicated that the global GDP is set to contract by 4.9 percent. According to World Economic Situation and Prospects 2020 issued by the United Nations on May 13, the public health crisis will likely push 34 million people into extreme poverty, with 56 percent of the increase occurring in Africa. Developing countries are under pressure to repay debts. How to help them ease the liquidity crisis is a common responsibility for all creditors including China.

Sino-US friction and the relentless spread of the virus pose higher requirements for China's foreign aid work. In the future, relevant departments should improve the mechanism for coordination between domestic and international aid with the China International Development Cooperation Agency at the core. To adopt more proactive foreign aid approaches, China should pay attention to the following aspects.

First, it should choose proper recipient regions. The areas of China's foreign aid highly overlap with that of developed countries such as the US and the United Kingdom. Under the new situation, the US is attaching growing importance to Africa while the UK pays more attention to Asia, which should prompt China to reconsider its choices of recipient countries and assistance fields. China should put the focus of its foreign aid on vaccine development, traditional Chinese medicine and productive investment, and actively respond to demands from recipients for prevention and control assistance, production development and economic recovery in the post-pandemic era. It should work with traditional donor countries to explore new patterns for three-party aid cooperation to increase the effectiveness of aid programs in Asia and Africa, which will not only help it better play its role as a developing donor country, but also enlarge its "circle of friends".

Second, it should participate in the design of a global health governance system. In the short term, cooperation to curb the transmission of the virus and in healthcare will become a focal point of foreign aid. The withdrawal of the US from the World Health Organization poses a serious threat to multilateral cooperation to combat the virus, sending the global aid governance system into a chaos. At the 73rd session of the World Health Assembly held on May 18, President Xi Jinping pledged that China will provide $2 billion over two years to help other countries overcome the impact of the pandemic, establish a cooperation mechanism for its hospitals to pair up with 30 African hospitals and work with the United Nations to set up a global humanitarian response depot and hub in China. He also said that any COVID-19 vaccine developed by China, when available, will be made a global public good. These measures are the key approaches China will take to take part in and design the global health governance system.

Third, it should alleviate recipient countries' debt burdens. Due to the impact of the pandemic, developing countries, especially those in Africa, are under increasing strain of debt service, with some facing a liquidity crisis. China has taken tangible measures to relieve debt pressure on African countries. It will work with other G20 members to implement the Debt Service Suspension Initiative for the poorest countries to help them tide over the current difficulties. China has announced the suspension of debt repayments for 77 developing countries and regions. Nevertheless, we should bear in mind that the meaning of solving the debt problem is not limited to debt relief itself, instead, it is meant to boost the economy and trade and increase the incomes of affected nations. To this end, China should explore new approaches in its cooperation with African nations.

The author is a researcher with the Institute of World Economics and Politics and the National Institute for Global Strategy at the Chinese Academy of Social Sciences. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.