Monday, 12 July 2010Opinion
Business Mirror (The Philippines)WHEN Britain announced it would stop giving public money to China as part of a plan to direct financial aid to countries in greater need, it was symbolic of China’s shift from aid receiver to aid giver.
Thus did a weekend Inter Press Service story on China’s shift in status lead off, as the planet’s largest nation continues to make a difficult transition in so many other ways.
According to the IPS article, China, “whose own poverty rate has plummeted over the last two-and-a-half decades, has in recent years become a formidable aid donor and investor in developing countries.”
It noted a report released in 2009 by the US Congressional Research Service showing China’s aid to Africa, Latin America and Southeast Asia increased from under $1 billion in 2002 to a whopping $25 billion in 2007.
A look at the nature of the activities China funds gives one an idea of how a country—predicted by experts to soon become the world’s largest economy—rationalizes a twenty-five fold increase in aid in just five years: simply put, why does it make sense for China to pour in so much money into strategic sectors in strategic countries?
According to the US study cited by IPS, “China’s foreign-aid activities in African and Latin-American countries serve its long-term economic interests via infrastructure and public-works projects and natural-resource development, whereas those in Southeast Asia reflect longer-term diplomatic and strategic objectives.”
Such strategic sense in providing aid and investing is perhaps typified by the case of Cambodia, where China’s foreign direct investment hit a total of $8 billion this June, making China the largest investor in the poor Southeast Asian nation. China’s investments target the agriculture, tourism, infrastructure and hydropower and garment industries, Kong Vibol, secretary of state for the Ministry of Economy and Finance, was quoted as saying.
Still, while China’s aid projects “are a highly visible reminder of China’s growing ‘soft power,’ other countries and regions, such as the European Union, the United States and Japan, continue to dominate foreign direct investment in Africa, Latin America and Southeast Asia,” the report added.
On the whole, however, it is clear, it concluded, that “China’s growing aid and foreign direct-investment projects do reflect the country’s growing acceptance of its role as a leader of the developing world.”
Such emerging leadership role, however, has come with new challenges the past few years, not least of which is China’s struggle to deal with a rising restiveness in its labor class; the taint on its manufacturing sector by scandals, such as the poisoned-milk case and widespread allegations of toxic chemicals in some of its toy and home-furnishing exports; not to mention chronic ethnic tensions in certain strategic provinces.
The labor unrest is a difficult hurdle, and, as the outcome of the Foxconn episode showed—where management of the electronics giant had to jack up wages as a spate of worker suicides, directly attributed to poor work conditions, forced Western clients to ask for an investigation—the solution could, in fact, cause newer problems. As more labor-zone areas and factories are forced to raise wages, China is seen as in peril of losing part of its advantage, i.e, very low labor cost, as more importers are, in fact, starting to look at even cheaper alternatives like Bangladesh.
“As it becomes richer, it’s China’s responsibility to help other poor countries,” IPS had quoted Wang Yaohui, director general at the Center for China & Globalization, as saying. Yet that altruistic bent may have to be tempered by pressures from home for China to look at its own people and deal with the widespread impression that despite the salutary macroindicators, the rich-poor divide in the country remains as stark as ever; or that its economic progress has come at a steep price paid for by millions of ordinary Chinese workers.
Still, that mixed scorecard cannot diminish some of the sensible strategies China has adopted in its aid program, notably in Africa, where it has aggressively been buying stakes in mineral and energy projects and other extractive industries for natural resources. China has also nurtured its bilateral trade with the continent, becoming Africa’s second-largest trading partner; trade grew ninefold from year 2000 to 2009, or from $10.6 billion to $91.1 billion.
It has attained all these by, among other things, giving out its own tokens of goodwill. Besides putting “half of its 900 ongoing projects in Africa into improving the livelihood of local citizens through infrastructure projects like railways and power plants,” as the IPS account said, China has written off substantial chunks of debt, and invested in human development by funding scholarships for African students, setting up laboratories, funding school construction and dispatching teachers and young volunteers.
Those who would instinctively portray such altruism as being just a tool for economic designs would do well to remember that this is pretty much how the rest of the developed world had behaved in their aid diplomacy over the last several decades. And countries like the Philippines, which still looks to official development assistance 24 years since the People Power revolt at Edsa prompted the largest outpouring of foreign aid ever into a then-newly restored democracy, should in the end be reminded that beyond such aid—especially one with so many strings—it is far better to court direct investments. Assuming they are the ones that deserve priority because they promote the national interest, and will not saddle us and the Chinese side with such tainted projects to which closure seems out of grasp, as the NBN-ZTE broadband deal.
