Beijing's new partners: How China works with traditional donors

CANBERRA — In 2015, China and Australia quietly announced a landmark program to help tackle malaria in Papua New Guinea. Over three years, Australia would invest $4 million Australian dollars ($3.2 million), while China would provide technical assistance and an unspecified in-kind contribution. Working closely with Port Moresby, the program utilizes Australian and Chinese expertise to assist with the implementation of PNG's National Malaria Strategic Plan.

Tentatively, but with increasing success, China has been partnering with countries such as Australia, New Zealand and the United Kingdom on third-country development projects. In doing so, they are shifting from donor-recipient relationships to partners in development.

“Australia’s engagement with China on development cooperation has been positive and constructive,” a spokesperson for the Department of Foreign Affairs and Trade told Devex of the relationship between the two nations.

In PNG, the countries have worked side-by-side to strengthen national laboratory institutions, improve malaria diagnostic products and services, conduct research to inform policy and share lessons from the cooperation.

In February, a senior management meeting took place in Beijing to review and progress work for the year ahead with attendees including Minister Counsellor Benedict David from the Australian High Commission in PNG.

A month later, China and Australia updated their 2013 memorandum of understanding on development cooperation. With no end date, the latest memorandum opens the possibility for a range of collaborations supporting developing nations. The new agreement — which takes into consideration changing priorities in the era of the Sustainable Development Goals — underscores Beijing’s interest in expanding its relationships with other donor nations.

Testing the waters

Dr. Merriden Varrall, director of the East Asia program for the Lowy Institute, was in China working for the United Nations Development Programme in 2013 when the two countries put ink to paper.

“Australia’s [memorandum of understanding] set the framework for their trilateral cooperation with China,” she told Devex. “That represented a massive shift from the bilateral donor-recipient agreement that had been in the past to this new model of cooperating together. The cooperation was new, and signaled a good relationship between the two.”

At this time, Australia was seen as a trusted partner, along with countries including the U.K. and New Zealand. This was key for China to develop relationships, build trust and set the foundation for future projects and development cooperation.

But it was also a time to learn more about development needs and the criticism it was facing, particularly in its delivery of aid to Africa.

“The Ministry of Commerce of the People's Republic of China began to be open to the idea of learning from others and cooperating with others around the 2010 mark,” Varrall said. “We understand that this was when African government officials were communicating they were not entirely happy with how Chinese aid was being delivered. China listened and thought they could do better.”

Under agreements with traditional donors, however, the selection of projects has been strategic.

“As far as I understand, MOFCOM have been pretty cautious on selecting projects,” Varrall said. “They didn’t want to do projects in high-profile places such as Africa to begin with. They wanted smaller areas that did not receive as much attention to see what worked.”

Along with the PNG initiative, China has also been dipping its toes in development cooperation initiatives elsewhere — with New Zealand in the Cook Islands and with the U.K. in Africa and through development research initiatives.

Research on Chinese foreign aid in the Asia Pacific by Denghua Zhang, a student with the school of State, Society and Governance in Melanesia at the Australian National University, showed the importance of China’s engagement with traditional donors in learning about planning, monitoring and maintenance of development projects. But Zhang acknowledged in an interview with Radio New Zealand that it was too early to determine the impact these partnerships were having on China’s development program.

In the cooperation projects engaged in to date, scale and impact has been less of a priority for China than testing the waters of partnerships. And Zhang believes that while further projects may be seen in the future, they will remain small scale.

“If they do have this kind of trilateral aid cooperation in the future I expect that that will happen in those less sensitive sectors, such as the sectors of agriculture, public health and even climate change,” he said. “It could be more difficult for China and the traditional donors to pilot projects in those big infrastructure projects, because that will involve a lot of economic interests there and for the large infrastructure projects they are very, very complicated and very, very difficult to manage, compared with current small-scale trilateral projects.”

The projects so far have not just been a learning curve for China, but for their partners who have gained a firsthand insight into the Chinese view of development assistance.

The challenge of partnering with China

China’s process for identifying and engaging development projects can create issues for donor partners, including Australia. “China has a principle of their aid being demand driven,” Varrall explained, saying they insisted this in trilateral partnerships, including with Australia. MOFCOM have limited resources and are cautious in taking on new projects — and they are not interested in taking on tasks beyond their capacity. So it is important for China to ensure the assistance they are delivered is desired within the country and by the government. In comparison, while countries such as Australia will consult with recipient countries, there will also be a political agenda they push.

The differences in approaches have had unintended consequences of a perceived negative relationship between China and traditional donors.

“There were a couple of occasions where bilateral partners wanted to do trilaterals with China,” Varrall said. “They’d go to China and discuss a project for country x. China would then go to that country and confirm it was something they wanted. And if it wasn’t, China would reject the project.”

Projects China chooses to engage in, meanwhile, may also create controversy. The country has given more than $12 million to Tonga to construct a lavish government building — St George Palace — used to house Tonga’s ministry of finance, the prime minister's office and the ministry of foreign affairs. While this was a desire of the government’s, few deem it an appropriate use of development assistance.

“China’s aid may be demand driven, but the weakness is it is government-demand driven,” Varrall said. “If you don’t have the most responsible government, projects may not be advantageous to development concerns.”

But when it is advantageous to development concerns, China’s approach can open the door to better discussion and delivery of aid that can complement and not compete with other donors. And understanding that a different approach is important in understanding and leveraging what China does well in development.

What is the value of formalized donor agreements?

For Varrall, the value of memorandums between China and other donors is more likely symbolic. “The MOUs themselves are not particularly useful, but they are representative of cooperation,” she explained.

There was a reputational advantage for China in engaging in formalized development agreement — and looking like they were interested in cooperating with traditional donors. “But I really think their openness to learning and doing aid better is an important driver,” Varrall said.

Trilateral development partnerships, including partnerships with Australia, New Zealand and the U.K., were primarily about mutual learning — for all parties involved. They give both parties the opportunity to understand what they do well and to learn from mistakes.

For Australia, this has certainly been identified as a priority in their memorandum by DFAT.

“The MOU recognizes Australia and China have different skills and strengths in planning and delivering development assistance,” the spokesperson for DFAT said, saying they have prioritized poverty reduction, health and health security, environmental protection, economic development, trade facilitation, food security and disaster management in the development focus of their agreement with China.

But for bilateral and trilateral cooperation, a memorandum is not a necessary item. New Zealand and China have successfully been collaborating for their water project in the Cook Islands, Te Mato Vai. Yet, according to government documents, the two countries are only now scoping a formalized development agreement for further collaborations in the Pacific.

Where memorandums do exist, their success depends on the people involved. “When you have people on both sides of a partnership that have the time and are open to prosecuting it, you have better learning outcomes,” Varrall said. But MOFCOM only have a staff of approximately 60 to 70 people working in development assistance, and resources to build relationships between donor countries is limited. On the part of the traditional donor, if the country is not committed, the results can also be limited.

How are projects identified and prioritized?

Identifying and prioritizing development projects to engage in under these arrangements has been ad hoc to date. But there are formalized opportunities for discussion. Under the memorandum between Australia and China, senior officials meet each year to discuss their development priorities and objectives.

According to DFAT, it is important for Australia to be engaging other donors such as China to support its aid program. “Australia’s development objectives in the Indo-Pacific region cannot be achieved by working in isolation,” the spokesperson for DFAT said. “Australia works with other donors to maximize the impact of its development activities, share experience and expertise and avoid policy fragmentation and duplication of effort.”

But Australia also has agreements with Canada, France, Germany, Japan, New Zealand, the Republic of Korea, Singapore, the U.K. and the United States. And with only one project engaged under the memorandum with China, there are questions over the partnership being productive and a priority in the development sphere.

What makes a successful donor partnership with China?

In Australia’s partnership with China, quantity is certainly not the grounds for success. But “success” may not be the same for all sides.

For China, Varrall believes simply engaging in a partnership is the definition of success. For Australia, the memorandum offers a forum for discussion and collaboration — and this makes the collaboration a success. And DFAT said that they are hopeful for future projects.

“Australia will seek to undertake further joint development projects with China where there are complementarities,” they said, echoing the sentiment of former Foreign Minister Bob Carr when the partnership was first announced in 2013.

Whether or not China is successfully working with donors to improve development outcomes is still a question for discussion. But they are willing to be at the table to listen, learn and share. And traditional donors, including Australia, need to be willing to work on that partnership and create success beyond the signing of a document.

In this six-week special series, Devex examines China's expanding role in aid and development across the globe. From tensions in Ghana to projects in Pakistan, from climate financing to donor partnerships, from individual philanthropy to state-financed investment, this series traces the past, present and future of Chinese aid and development. Join the conversation on our Facebook discussion forum.