Chinas Foreign Aid and Regional Development Cooperation with Asia

Dr. Huo Jianguo

President of Chinese Academy of International Trade and Economic Cooperation (CAITEC), Ministry of Commerce of P. R. China Sept. 13, 2011, Jakarta

Background and Main Considerations

In recent years, the scale and influence of China's
foreign aid continue to expand, arousing widespread international concern. It is important to introduce and analyze the basic policies, practices, characteristics and trends of Chinas foreign aid. To clarify the efforts and contributions China has made in broader development cooperation. in addition to providing assistance to developing countries, China also develops trade relations with and invests in developing countries, which is more conducive to the sustainable economic growth in developing countries. To analyze Chinas regional development with Asia as Asia is the most important development cooperation region of China.

Structure of the Paper

I.
Background of China's Economic Development China's Foreign Aid in International Development Context China's Regional Cooperation with Asia Promote inclusive growth

II.
III. IV.

I. Background of China's Economic Development

China's economic development has an important
impact on China's foreign aid
China's economic development experience is a reference for China's foreign aid. China's economic development provides a material basis for the expansion of China's foreign aid. China remains a developing country, which determines the positioning of China's foreign aid.

II. China's Foreign Aid in International Development Context

Positioned as part of South-South Cooperation, China's
foreign aid policy has two main features: First, equality and without any political conditions; secondly, mutual benefit and promoting common development. Characteristics of Chinese practices in foreign aid: Prioritizing aid to low-income developing countries Focusing more on project-based assistance Focusing more on economic dimensions of cooperation, including economic infrastructure and such productive sectors as agriculture and industries.

II. China's Foreign Aid in International Development Context

Besides providing aid, China tries to promote trade and
investment with developing countries, and has become an important economic partner of other developing countries, which promote their economic development. In recent years, the Chinese Government has adopted many measures to promote trade and investment with developing countries. Chinas trade with developing countries expands rapidly. Except Hong Kong, more than 60% of Chinas foreign direct investment (FDI) flows to developing countries.

Table 5. Development of Chinas trade and investment in major developing regions

Trade 20032010 Annual growth (%) 20032010 Changes of Chinas proportion in the region Total trade with ASEAN Of which: Chinas imports Total trade with Africa Chinas imports Total trade with Latin America Chinas imports Investment flow 20.7 27.2 31.6 34.6 31.6 29.5 20032009 Annual growth (%) from 9.2% up to 14.7% from 10.4% up to 14.7% from 5.6% up to 14.2% from 4.9% up to 14.6% from 3.7% up to 10.7% from 4% up to 10.8% 20032009 Changes of Chinas proportion Investment in Asian developing countries Investment in Africa Investment in Latin America Investment stock Investment in Asian developing countries Investment in Africa Investment in Latin America Source: authors calculation 45.6 63.4 37 from 0.5% up to 1.4% from 0.24% up to 1.9% from 0.7% up to 2% 58.4 63.7 38.5 from 0.8% up to 2.4% from 0.4% up to 2.4% from 2.3% up to 5.2%

III. China's Regional Cooperation with Asia

Trade: China has become an important export
market of Asian countries.
10000

2003-2010 Chinas foreign trade with Asia

50% 40% 30% 20% 10% 0% -10% -20% 2003 2004 2005 2006 2007 2008 2009 2010

100 milli USD

8000 6000 4000 2000 0

Export value Growth rate of export

Import value Growth rate of import

Source: Statistics of China Customs

III. China's Regional Cooperation with Asia

TradeChina tries its best to develop trade with the
developing countries in Asia
China is now the largest trade partner of North Korea, Mongolia, India, Malaysia and Vietnam On January 1, 2010, China-ASEAN Free Trade Zone was officially launched and became the largest free trade zone among developing countries. The establishment of the FTZ has further promoted the trade between China and ASEAN. In 2010, the trade between the two sides amounted to US$ 292.78 billion, an increase of 37.5% over the previous year. Among that, Chinas export was US$ 138.21 billion, an increase of 30.1%; and import was 154.57 billion, an increase of 44.8%. To promote the economic and trade cooperation and expand the import from South Asian countries, since 2007, China has held four exhibitions for presentation of the commodities of South Asian countries.

III. China's Regional Cooperation with Asia

outbound investment.
2000 1800 1600 1400 1200 1000 800 600 400 200 0

FDIAsia is the most important area for Chinas

2003-2009 Chinas investment stock and flow to Asian countries and regions
90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

100 milli USD

2003

2004

2005

2006

2007

2008

2009

FDI flow to Asia Proportion of FDI flow to Asia

FDI stock in Asia Proportion of FDI stock in Asia

Source: Amounts from 2009 Statistical Bulletin of China's Outward Foreign Direct Investment; ratios are calculated by the author.

III. China's Regional Cooperation with Asia

Changes in the proportion of China's investment in the total foreign
investment in Asia
3500 3000
100 milli USD

2500 2000 1500 1000 500 0

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

2003

2004

2005

2006

2007

2008

2009

China's FDI to Asia Total FDI in Asia (except China) Proportion of China's FDI

III. China's Regional Cooperation with Asia

FDIChinas investment in the developing
countries in Asia increased rapidly.
In 2009, Chinas FDI flows to 31 countries exceeded US$ 100 million, including 14 Asian countries and 10 Asian developing countries, namely Myanmar (US$ 376.7 million), Turkey (US$ 293.26 million), Mongolia (US$ 276.54 million), Indonesia (US$ 226.09 million), Cambodia (US$ 215.83 million), Laos (US$ 203.24 million), Kyrgyzstan (US$ 136.91 million), Iran (US$ 124.83 million), Turkmenistan (US$ 119.68 million) and Vietnam (US$ 112.39 million).

III. China's Regional Cooperation with Asia

FDIChinas investment in the developing
countries in Asia increased rapidly.
China has also become the most important investment source of some countries. In 2009, for example, Chinas investment accounted for 65% of the total FDI in Burma, 63.7% of the total in Laos, 44.3% in Mongolia and 40% in Cambodia. Among the 15 Asian countries with the largest Chinese FDI stock, nine are developing countries (see the following table). Chinas FDI stock accounts for 44% of the total in Mongolia and 31.1% in Laos.

III. China's Regional Cooperation with Asia

Chinas investment stock in major developing countries in Asia Unite: hundred million US dollars
2003 Kazakhstan Pakistan Mongolia Burma Indonesia Vietnam Cambodia Laos Thailand 0.2 0.3 0.1 0.1 0.5 0.3 0.6 0.1 1.5 2006 2.8 1.5 3.1 1.6 2.3 2.5 1 1 2.3 2007 6.1 10.7 5.9 2.6 6.8 4 1.7 3 3.8 2008 14 13.3 9 5 5.4 5.2 3.9 3.1 4.4 2009 15.2 14.6 12.4 9.3 8 7.3 6.3 5.4 4.5 Ranking in Chinas FDI in Asia in 2009 4 5 6 8 9 10 13 14 15

Source: 2009 Statistical Bulletin of China's Outward Foreign Direct Investment

III. China's Regional Cooperation with Asia

AidAsia is one of the key areas for Chinas

foreign aid. In 2009, Chinas aid to Asia accounted for 32.8% of the total aid volume.
Economic infrastructureby the end of 2009, China had helped Asian developing countries build more than 200 economic infrastructure projects Public facilitiesby the end of 2009, China had helped Asian developing countries build more than 100 public facilities of various kinds Production projects: by the end of 2009, China had helped Asian developing countries build nearly 400 production and management projects

III. China's Regional Cooperation with Asia

AidAsia is one of the key areas for Chinas
foreign aid.
Human resource development cooperationChina had provided financial assistance for a large number of Asian students and trainees to study in China Emergency humanitarian assistanceChina launched the largest ever emergency relief operation following Indian Ocean tsunami, assisted Pakistan and Iran following severe earthquakes, Burma following tropical storms, Pakistan following a severe flood, and Indonesia following tsunami and volcanic eruption.

IV. Promote inclusive growth

Global development challenges
Increased risks of economic growth in developed countries New challenges developing countries are facing Worrying trend of international development cooperation

IV. Promote inclusive growth

Chinas foreign aid strives to promote the
inclusive growth with other developing countries.
Gradually increase foreign aid funds according to national strength Further increase assistance to agriculture to contribute to the food security of developing countries Put more emphasis on medical service, health care and other livelihood-related assistance as well as soft aid to better benefit local people. Continuously reduce and cancel the debts of the LDCs

IV. Promote inclusive growth

Working together to promote inclusive growth in
Asia
Asian countries should adhere to a new security concept of seeking common ground and advocating mutual trust, mutual benefit, equality and cooperation to strengthen the coordination of macroeconomic policies and financial cooperation, maintain regional financial stability, enhance regional cooperation mechanisms, give full play to the role of various mechanisms and further promote trade and investment facilitation to accelerate common development.

IV. Promote inclusive growth

Working together to promote inclusive growth in
Asia
Based on the actual situation of their own development, all countries should strive to change the mode of economic development, adjust economic structure, maintain stable economic development and improve people's livelihood to promote equal access to development opportunities so that everyone can share the fruits of development. China will also further deepen mutually beneficial cooperation with Asian countries.