5 questions on China's planned foreign aid agency

MANILA — A huge structural overhaul in China’s Cabinet includes plans for the establishment of an international development cooperation agency, raising significant questions about the future of Chinese aid.

The plan was unveiled on Tuesday before the 13th National People’s Congress, China’s legislature body. It includes the reshuffle of several ministries and commissions under China’s State Council, and the formation of new entities.

The proposal to create China’s own development cooperation agency is seen as a means to further the country’s diplomacy, and support President Xi Jinping’s ambitious Belt and Road initiative. Early reports from Xinhua, the national press service, note the planned agency will be responsible for China’s foreign aid guidelines, plans, policies, coordination, oversight, and project evaluation.

The agency is still up for approval, a decision expected to take place on Saturday. But the very idea has captured the attention of many in the aid community and the academe, particularly those who have dedicated their time through the years to understanding how Chinese aid works. And it has sparked conversations as to what a dedicated aid agency would mean for China’s aid future. Below are five key questions about the new agency.

1. What will its structure look like?

Chinese aid has traditionally been handled and managed by different ministries, departments, and entities under the State Council. The varied actors, coupled with scant access to information, has made it difficult for experts to chart a definitive organizational chart that sets clear lines of responsibility within the aid system.

It’s early days to know how the creation of the aid agency would change this, but some researchers observe the government seems to be aligning itself with other developed countries.

“If you look at what is likely to be the new administrative structure within China, in a way China seems to be creating new ministries, departments and agencies — which are more in line with more developed countries. For example, they are now thinking of creating an immigration department. Immigration in China has to this point been a matter for police,” said Pradeep Taneja, who lectures on Chinese politics, political economy, and international relations at the University of Melbourne.

But the creation of other ministries, particularly a new department in the Ministry of Finance on international cooperation, muddles the picture, and signals that foreign aid may still not be handled by a single entity. Lauren Johnston, director of New South Economics, says that this may suggest a broadening of China’s aid program however.

“To me, it signals probably that China’s foreign aid has outgrown a project-level bilateral model and is shifting to a broader era of innovative development finance that means ties/coordination with the ministry of finance and central bank could be as important as [its ties] with the Ministry of Commerce and Ministry of Foreign Affairs.”

2. Will anything change in China’s development approach?

Despite providing grants and loans to developing countries, China has shied away from calling itself a “donor,” but instead a “partner” to developing countries. But with the creation of a dedicated development cooperation agency, some researchers think China may have started to accept growing recognition of its “great power.”

“I think as China's economic status has changed, they have begun to refer to themselves as a great power. Even in this statement Wang Yong made to the National People's Conference, he says, ‘this will allow aid to fully play its important role in great power diplomacy,’” Taneja said.

But the shift will not be total, and China is likely to continue using dual personalities, depending on who it engages with.

“China has multiple identities. When it talks to the U.S., it is a major power or a great power. But when it talks to developing countries it talks about China being a developing country,” he said.

3. Will this usher in better foreign aid coordination?

With so many entities involved in handling and implementing Chinese aid across the Chinese government, it’s often difficult to trace who is doing what and who is accountable for a particular project.

But with the prospect of a dedicated aid agency, the hope is that this would help improve coordination between the different ministries and departments, as well as between other bilateral and multilateral donors.

“I think, maybe, we can expect great coordination, more cooperation with other donors, and more coherence in the aid program than we have seen in the past,” said Graeme Smith, research fellow at the Australian National University. He is also co-host of The Little Red Podcast.

4. Might this produce better transparency?

With very little and up-to-date information on Chinese aid, it’s impossible not to misunderstand it. A few years back, the government released information that provides some explanation on Chinese aid policy and what types of projects they are funding. The government also issued a policy guidance that was supposed to lead to the creation of a project-level foreign aid database. Many hope for this to happen, but no announcements or follow-up has been made to date.

“It will be interesting to see if the newly proposed International Development Cooperation Agency takes on the responsibility of collecting and publishing data about China’s large and growing portfolio of development projects,” said Brad Parks, executive director and lead researcher on China at AidData.

He said China investing and establishing robust data collection systems would help it to effectively supervise and implement projects, and evaluate their impacts.

But some are not betting on it.

“I personally don’t think this will increase transparency significantly in terms of foreign aid,” Taneja said. “I think it’s going to be under the State Council, and if that is the case, it will have no reporting requirement.”

5. What will this mean in terms of aid budgets and personnel?

When a new government agency or department is established, two of the first questions are: What will be its operating budget, and who will be involved in its operations?

“The key to any bureaucratic change comes down to three things: Personnel, finance, and materials,” said Smith.

“We have already seen the political will and they are telling ambassadors around the world that they want more reporting. But if you also see staff increase and a clear indication of budgets increasing, then we know it is a serious repurposing of China's aid program,” he said.

If the aid agency aims to have more oversight over its projects, then having more staff on the ground is vital.