China’s new aid agency

Last week, the Chinese Government announced its decision to establish China’s international development cooperation agency. As described by Beijing, the main purpose of the new agency is to give full attention to foreign aid, as a key means of major-country diplomacy. The goal is to:

enhance strategic planning and coordination of foreign aid, and better serve the country’s overall diplomatic layout and the Belt and Road Initiative.

The agency will assume duties previously scattered throughout China’s Ministry of Foreign Affairs (MFA) and Ministry of Commerce (MOFCOM), and report directly to China’s State Council.

Heated debates have taken place for decades in China within policy and academic circles about whether the nation needs to set up a separate agency to coordinate its aid program, in the same way many other donors have. When I raised this question with some former senior aid officials from MOFCOM and senior Chinese aid scholars in 2015, they said it was unlikely China would establish such an agency.

Two reasons were cited. First, MOFCOM did not want to relinquish control over the business of foreign aid, particularly at a time when it was expanding. Second, the general trend in China’s domestic institutional reform is to streamline rather than create new agencies. That speculation has proved wrong.

Many other Chinese aid scholars, however, long anticipated the establishment of an independent aid agency. Xu Weizhong, Director of the Institute of African Affairs, China Institutes of Contemporary International Relations, and his colleague Wang Lei strongly recommended in 2015 that China establish a separate aid agency. They argued:

the fragmentation of aid funding and management has greatly compromised the efficiency of China’s current inter-ministerial aid coordination system.

In an article published by People’s Daily on 2 March 2018, Ding Xuexiang, Director of the General Office of the Communist Party of China, said the cabinet restructuring was intended to address problems plaguing government agencies, such as organisational overlap, ambiguity of authority and responsibility, and low efficiency. Clearly, the Chinese aid system faces each of these challenges. It is complicated and consists of 33 government agencies.

There is a long history of internal competition between MFA and MOFCOM for control of the Chinese aid program. China’s foreign aid started as early as the 1950s when China provided aid, mostly in the form of in-kind donations supplemented by occasional money transfers, to other socialist countries and developing countries. China’s Ministry of Foreign Trade, established in August 1952, was given the job of managing China’s foreign aid by instructing its subordinate export and import companies to purchase materials and provide them to recipient countries.

Since then, MOFCOM and its predecessors have remained the custodians of China’s foreign aid. During my interviews in 2015, some Chinese officials and scholars challenged this arrangement. They said MOFCOM’s focus on seeking economic gains and promoting the interests of Chinese companies could have a negative impact on its management of foreign aid, the purpose of which is to support China’s strategic and diplomatic interests.

They suggested MFA should be in charge of China’s foreign aid. The State Council was occasionally called upon to deliberate this question, only to decide in favour of MOFCOM. A crucial factor is that former MOFCOM ministers, such as Li Lanqing and Wu Yi, were promoted to senior positions as vice premiers in China’s State Council – positions ranked higher than those held by former MFA ministers.

The establishment of China’s independent aid agency could be linked to efforts to restructure China’s diplomatic team. It is expected that Wang Qishan, the former anti-corruption tsar newly appointed Vice-President by the National People’s Congress, will advise President Xi Jinping on China’s foreign policy. With such a powerful figure overseeing China’s overall foreign policy, it will be much easier for Beijing to coordinate its nearly three-dozen aid agencies.

Details about the precise role and structure of an independent Chinese aid agency are yet to be released. However, as the Chinese Government has said, the agency’s main task will be designing aid policies and plans, and approving, monitoring, and evaluating projects. Implementation will remain the responsibility of existing agencies.

In this case, coordination among the large number of aid agencies could remain a challenge. But creating an independent agency to oversee China’s expanding aid program is a first step in the right direction.

Denghua Zhang