VZCZCXRO5152
PP RUEHBZ RUEHCN RUEHDU RUEHGH RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA
RUEHRN RUEHTRO RUEHVC
DE RUEHBJ #1311/01 1350843
ZNR UUUUU ZZH
P 150843Z MAY 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3998
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZO/AFRICAN UNION COLLECTIVE
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 04 BEIJING 001311 
 
STATE PASS USTR 
STATE FOR EAP/CM FLATT AND THOMAS 
STATE FOR S/P CHOLLET AND GREEN 
STATE FOR EEB/TPP/BA, EAP/EP, AF/EPS 
STATE PASS USAID FOR ALONZO FULGHAM 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL ECON EAID EINV CH
 
SUBJECT: China's Africa Aid Aims to Achieve 
Political Goals 
 
REF: BEIJING 955 
 
This cable is Sensitive but Unclassified (SBU) and 
for official use only.  Not for transmission outside 
USG channels. 
 
¶1. (SBU) Summary.  China has a distinct approach to 
Africa development assistance and is open to 
exchanging views with the United States.  Ministry 
of Commerce (MOFCOM) officials provided an overview 
to Emboffs of their African aid priorities, but 
skimped on budget and project details.  They 
acknowledged shortcomings in their evaluation of 
aid's effectiveness, recognized China has much to 
learn from the international donor community, and 
want to focus more on capacity building.  Chinese 
scholars separately told Emboffs China wants to 
exchange aid to Africa for access to resources. 
They downplayed concerns that aid recipients would 
default on loans, arguing China was prepared to 
write off the debts.  The scholars said China was 
reluctant to join multilateral aid organizations in 
which China does not have a strong voice but was 
willing to consider "gradual, small-scale" 
collaboration with the United States on concrete 
projects.  End Summary. 
 
China "Open to Exchanging Views" on Development 
--------------------------------------------- -- 
 
¶2. (SBU) On April 27, USAID Counselor and Econoffs 
met MOFCOM Department of Aid to Foreign Countries 
International Cooperation Division Director LU Feng 
to discuss African development assistance.  The 
International Cooperation Division, which was 
established this year and has only three staff, 
appears to be MOFCOM's foreign liaison office on 
overseas development assistance (ODA).  Director Lu 
opened by explaining that China does not consider 
itself a new Africa donor because it has a half 
century history of assistance to African countries, 
noting the 1955 Bandung Conference of Asian and 
African leaders as key to launching South-South 
economic cooperation.  China started to diversify 
its international aid after its economic opening in 
¶1979.  Lu said China is now very open to discussions 
and exchanges on international development. 
 
MOFCOM Aid: Structure and Funding 
---------------------------------- 
 
¶3. (SBU) Director Lu explained that Chinese 
development assistance is very centralized. 
Programs are managed from Beijing and MOFCOM relies 
heavily on the economic/commercial officers at 
Chinese Embassies to oversee in-country projects. 
The economic/commercial officer positions are 
staffed by MOFCOM and cover aid as well as trade and 
investment.  Lu stressed that Chinese aid is viewed 
more as a commercial transaction than development 
assistance is viewed in the West. 
 
¶4. (SBU) Lu explained that assistance budgets are 
drafted by MOFCOM and approved by the Ministry of 
Finance.  MOFCOM typically provides 95% of funds for 
bilateral foreign aid, but other ministries, like 
the Ministry of Health, also have some separate 
funds for specific projects.  MOFCOM usually manages 
bilateral assistance, while the Ministry of Finance 
handles contributions to multilateral and regional 
organizations.  (Note: other Chinese agencies have 
told us their assistance budgets are much higher 
than the 5% figure Lu relayed.  End Note.) 
 
¶5. (SBU) Asia and Africa are the biggest recipients 
of China's assistance but Pacific, Caribbean and 
Latin American countries also receive assistance. 
In contrast to USAID's large budget and extended 
number of programs, Lu described China's foreign aid 
program as smaller and less extensive.  He portrayed 
 
BEIJING 00001311  002 OF 004 
 
 
the Chinese approach as more "balanced" than the U.S. 
system, citing China's even distribution of aid 
throughout Africa.  However, this even distribution 
limits resources for each individual project. 
Therefore, unlike U.S. foreign aid, which is "more 
targeted on problems," China does not have broad 
initiatives that focus on particular issues.  Lu 
characterized Chinese aid as small and more 
technical with very "clear" goals like the 
commitment to build 30 hospitals and 100 schools in 
Africa.  After funds have been allocated, China asks 
recipient countries to submit project requests. 
China then conducts feasibility studies and 
determines which requests to approve.  This 
recipient-directed process has been the norm, Lu 
said, and reflects "the spirit of South-South 
cooperation."  However, China has on occasion been 
more proactive in determining how it would spend its 
aid money, as in the aforementioned case of schools 
and hospitals, which were not requested by African 
governments. 
 
China Needs Improved Assistance Evaluation 
------------------------------------------ 
 
¶6. (SBU) Director Lu explained that MOFCOM only does 
technical evaluations of whether a particular road 
or building was built to specification and on 
schedule.  MOFCOM does not usually evaluate the 
impact of Chinese aid projects on the recipient 
country's economic development because it lacks the 
resources.  MOFCOM currently has only 70 people 
working in its Department of Aid to Foreign 
Countries.  However, Lu said MOFCOM is beginning to 
realize the importance of such evaluations and would 
like to do more. 
 
Interest in Capacity Building 
----------------------------- 
 
¶7. (SBU) Lu acknowledged that China has a lot to 
learn from the international aid community.  In 
particular, he mentioned that the Chinese government 
is slowly moving towards providing more capacity 
building, as opposed to brick and mortar-type 
projects.  He gave the example that for some 
development projects, they are now sending 
consultants instead of technicians. 
 
China Wants to Trade Infrastructure Development for 
Resources 
--------------------------------------------- ------- 
 
¶8. (SBU) In a separate meeting, Chinese Institute of 
Contemporary International Relations (CICIR) 
Institute of Asian and African Studies scholars XU 
Weizhong and ZENG Qiang told Emboffs China's "new 
way of economic engagement," which seeks to exchange 
infrastructure development for natural resources, 
was appealing to African countries, pointing out 
Angola and the Democratic Republic of Congo (DRC) as 
examples.  He said that China was not overly 
concerned about African countries defaulting on 
loans.  At the 2006 Forum of China-Africa 
Cooperation (FOCAC) summit, China wrote off 10 
billion RMB of loans and is prepared to write off 
more in the upcoming FOCAC Ministerial in Egypt.  He 
said that as this is a new type of international 
cooperation, China does not know what the results 
will be and is expecting to learn from the process. 
Xu said China offered Africans an alternative to 
Western countries' assistance model, commenting that 
African countries have the right to choose between 
the two. 
 
China Reluctant to Join Some Multilateral 
Development Bodies 
--------------------------------------------- ------- 
 
¶9. (SBU) Xu said China was reluctant to cooperate 
 
BEIJING 00001311  003 OF 004 
 
 
with multilateral development organizations in which 
China does not have sufficient representation.  In 
particular, he cited Chinese aversion to closer 
cooperation with the Organization for Economic 
Cooperation and Development (OECD) Development 
Assistance Committee (DAC), which he said would not 
give China a real voice.  He acknowledged China has 
begun cooperating more with international donor 
organizations and can learn from Western countries 
about development assistance, however. 
 
Collaboration on Concrete Projects, Starting Small 
--------------------------------------------- ---- 
 
¶10. (SBU) Xu emphasized the need for the United 
States and international donors to give China 
concrete proposals for collaboration.  He suggested 
China and the United States start by collaborating 
on small projects and working gradually towards 
larger projects.  He explained that this is the 
Chinese way. 
 
Categories of Foreign Aid 
------------------------- 
 
¶11. (SBU) In the meeting with MOFCOM, Director Lu 
outlined nine categories of Chinese foreign aid -- 
 
a. Infrastructure projects:  The Chinese government 
completes a whole project, from funding to design to 
construction, in a recipient country. 
 
b. Provision of Goods:  China will grant, or enable 
the recipient country to acquire, materials 
necessary for projects or production.  For example, 
China will provide tractors or construction 
materials to a country that has the capability to 
complete a particular construction project on its 
own. 
 
c. Technical Cooperation:  China will send technical 
experts, e.g., agronomists, to countries in need. 
At the 2006 meeting in Beijing of the Forum on 
China-Africa Cooperation (FOCAC), China committed to 
setting up 10 demonstration farms throughout Africa. 
 
d. Emergency Aid:  China provides emergency aid in 
the case of a disaster.  For example, China gave 
emergency aid to Mali and to the United States after 
Hurricane Katrina. 
 
e. Human resources development program:  China 
provides technical and managerial training for up to 
10,000 people yearly (approximately 3000 from 
Africa), mainly in China.  Lu added that China was 
committed to increase training to support African 
efforts to reach the Millennium Development Goals 
(MDG) goals. 
 
f. Preferential loans:  These loans are provided by 
banks but the interest rates are subsidized by the 
Chinese government. Of China's commitment to provide 
RMB 5 billion in soft loans to Africa, 2 billion is 
through MOFCOM-managed preferential loans and 3 
billion is through EXIM Bank-type concessional loans. 
 
g. Chinese medical assistance:  China sends medical 
teams that provide services, medicine and equipment. 
 
h. Youth Volunteers:  Chinese Youth League sends 
volunteers to developing countries to provide 
technical assistance, teach Chinese, teach martial 
arts, etc.  This program exists in Africa but the 
number of volunteers is very limited. 
 
i. Cash Aid:  In limited cases, China provides cash 
aid to recipient countries, usually in cases of 
emergencies. 
 
Presentation of USG development priorities 
 
BEIJING 00001311  004 OF 004 
 
 
------------------------------------------ 
 
¶12. (SBU) Embassy Beijing USAID Counselor presented 
USG development priorities and briefed on current 
USAID projects in Africa.  She highlighted the 
overall increase in assistance to Africa over the 
last decade, noting that an increasing number of U.S. 
development resources come from the private sector, 
including a U.S. oil project in Angola.  In response, 
Lu explained that China had developed a fund for 
projects in Angola in exchange for oil which is 
managed by MOFCOM's West Africa Division and which 
is supported by the China Development Bank (CDB) and 
Export-Import Bank (EXIM).  USAID Counselor focused 
on a few development areas where the Chinese 
government might be particularly interested in 
exchanging ideas or working together, such as non- 
emergency food aid, child survival, malaria 
initiatives, and trade and investment facilitation - 
- all areas in which China has previously offered 
assistance in Africa.  As an example of how to 
combine efforts, she mentioned the existing 
collaboration between USAID and China's State 
Forestry Administration, which are working together 
on a project in Congo as part of the U.S.-China 
Strategic Economic Dialogue. 
 
Comment 
------- 
 
¶13. (SBU) Chinese officials have long been wary of 
discussions with the international ODA donor 
community, but recently have become more open to 
exchanging experiences and collaborating on targeted 
projects on an equal footing.   The formation of a 
foreign liaison division within MOFCOM's Department 
for Aid to Foreign Countries is a manifestation of 
this trend, which was also reported reftel.  As we 
engage China on development assistance, we should 
keep in mind China's preference for incremental 
changes to policy and the political goals of Chinese 
aid.  End comment. 
 
PICCUTA 
 
YY