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II.B. Official Development Assistance and Debt Relief: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA

Written by: International Monetary Fund

Article Overview: China started providing aid to Africa in 1956. By May 2006, it had contributed a total of 44.4 billion yuan (US$5.7 billion) for more than 800 aid projects, according to a researcher at the Chinese Academy of Social Science (He, 2006).

II.B. Official Development Assistance and Debt Relief: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA

China started providing aid to Africa in 1956. By May 2006, it had contributed a total of
44.4 billion yuan (US$5.7 billion) for more than 800 aid projects, according to a researcher at
the Chinese Academy of Social Science (He, 2006).7 The last officially reported flows are for
2002, when the Chinese government reported that it provided US$1.8 billion in economic
support to Africa.8 The Chinese National Bureau of Statistics reports annual data on
contracted projects in SSA countries, which include “projects financed by the Chinese
government under its aid program.”9 While the foreign aid component of the figures is hard
to pin down, it is even more difficult to estimate the value of Chinese technical assistance
and aid in-kind because of problems in pricing Chinese labor. Assuming Chinese aid,
including technical assistance, is about 50 percent of the value of contracted projects, China’s
official development assistance (ODA) to SSA could amount to US$1.0–1.5 billion annually
for 2004–05 (Figure 5).10 In comparison, China’s aid flows to Africa averaged about US$310
million annually for 1989–199211.

China has also been providing debt relief to African countries on its own terms. At the first
China-Africa Cooperation Forum in October 2000 in Beijing, the Chinese government
pledged to write off in two years overdue obligations on 156 loans owed by African
countries; these totaled 10.5 billion yuan (US$1.3 billion). The pledge was fulfilled ahead of
schedule (He, 2007). In November 2006 China announced that it would cancel another
10 billion yuan (US$1.3 billion) in debt—168 interest-free government loans that had
matured by the end of 2005 and were owed by 33 of the heavily indebted and least developed
countries in Africa. By mid-May 2007 China had signed debt forgiveness agreements with
11 of these countries and expected to conclude agreements with the other 22 by the end of
2007.
The terms of China’s ODA follow the principles established during late Primer Zhou Enlai’s
visit to Africa in the early 1960s: no conditions or demand for privileges can be attached to
ODA; China provides ODA in the form of grants, interest-free or low-interest loans (i.e.,
preferential loans that have an interest subsidy); and repayment will be rescheduled if
necessary.12 China’s aid program also includes technical assistance, with an emphasis on
agricultural technology and training in Chinese institutions. China’s ODA has focused on social and humanitarian projects, such as hospitals, schools, low-cost housing, sport venues,
and library and government buildings, and often is delivered in kind. ODA has also been
used for infrastructure construction (133 out of the more than 800 aid projects) and
agricultural development (137 projects).

IMF Working Paper
African Department
What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang
October 2007

Related Articles
  V. C. China’s Approach to Financing: AID VS. COMMERCE: FACTORS INFLUENCING THE GROWING TIES
  What Drives China’s Growing Role in Africa?
  II.D. Foreign Direct Investment: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  II.a Merchandise Trade: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  V. A. Markets for Exports: AID VS. COMMERCE: FACTORS INFLUENCING THE GROWING TIES

Article Tags: african countries, aid projects, beijing, bureau of statistics, chinese academy, chinese government, chinese labor, countries in africa, debt forgiveness, debt relief, developed countries, development assistance, economic support, foreign aid, free government loans, national bureau of statistics, social science, ssa countries, statistics reports, yuan



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