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The nature of China’s aid

This week, the Chinese Minister for Commerce, Chen Deming, has been speaking about his country’s aid policies at the UN summit on the Millennium Development Goals. Frequently criticized by the West for paying scant regard to human rights issues in developing countries, Mr Deming reiterated that “cultural systems” and “political regimes” varied, and China would never attach “political conditions to developmental assistance”.

But though China’s stance on not interfering with the “internal affairs” of other countries remains unchanged, Mr Deming was quick to assure the international community that his country was concerned to minimize corruption. China rarely grants aid in the form of money and provides assistance in the form of specific projects, where money is channelled directly into local facilities. And Mr Deming denied such projects only used Chinese workers. He said that Chinese companies brought new employment opportunities to poor nations, because they were increasingly hiring and training local staff.

China is also committed to offering debt relief and zero tariff imports for poorer countries. Trade between countries in the Southern hemisphere now accounts for 50 per cent of the commerce conducted by many poor countries, who are increasingly replacing old trade links with the former colonial powers of the West.

Following the recent financial crisis, poor countries are also finding they cannot rely on promises of increased foreign aid from the West. However, Chinese officials have made it clear they have no plans to fill in any gaps in aid funding. The Premier of China, Wen Jiabao, said in a statement before the United Nations summit, that China was “simply too poor” to increase its foreign aid giving. Mr Jiabao stressed that development within his own country still remains an arduous and long-term task. According to official figures, China still has 150 million people who live below the poverty line. And though China recently boasted the world’s second highest growth in Gross Domestic Product (GDP), its GDP per capita still ranks as low as 100 in the world, alongside countries such as El Salvador and Albania.

China therefore expects that most of the money it spends in developing countries, estimated to reach 70 billion dollars by 2014, will come in the form of business investments, often through state-owned companies. These companies are particularly involved in the extraction of natural resources, required for China’s manufacturing industries.

Such investment in poor countries often causes concern in the West, because of China’s support for regimes such as those in Sudan and Zimbabwe. But though its “purely business” approach is not always welcomed, China’s involvement in developing countries does bring certain benefits. The growing demand from China’s industry has meant the price of natural resources like minerals and oil has risen, increasing the money flowing into poor African countries and giving them better bargaining positions for negotiating debt relief. And Chinese technicians have overseen the construction of roads and infrastructure, as well as developments in industry and agriculture, which are vital for growth in poor countries.

As China’s involvement and influence within developing countries grows, some believe the only way forward is to find common objectives and try to work side by side for improving the prospects of poorer nations.

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