DFID and the end of its aid to China

Andrew Mitchell, Alan Duncan and Stephen O’Brien, the new trio in charge of DFID have recently ended their bilateral aid programme to the People’s Republic of China (PRC). It’s not anything new coming from these politicians; after all they’ve been much against given aid to China while in opposition–see this parliamentary debate and and another parliamentary debate.

Their logic runs pretty simply: China is a middle income country with a sizeable GDP and holding a vast amount of the world’s financial reserves (such as US Treasury bonds). China is also a member of the G20 (although it should also be part of the G8), is a nuclear weapon state and a world power. Given all this, it’s not practical to spend British taxpayer’s money on such a country. In official language, they call it getting “Value for Money” (VfM)–see the National Audit Office and the VfM Commission for a definition of VfM [1].

Mitchell & Co. (again the Lib Dems have no “control” over DFID despite being in coalition) have struck a chord with many UK taxpayers given these hard economic times. (This can be easily seen on any news/forum site regarding DFID). Yes China is an economic power strong enough to care for its own needs. The World Bank statistics also back up this point: China’s GDP in 2008 was $4,327,000,000,000. In terms of GNI per capita that equals to $2,940. The country’s growth rate in the same year was 9.0% while life expectancy was 73 and the the literacy rate was 93.7% (see this data table). (Note: these should be as accurate as can be. They are only 2008 figures; even so China has had strong growth in recent years). Furthermore, the country is a nuclear weapons power and a rising country on the world stage. Such a country should hardly have been a target for any bilateral donor in the first place.

The counter argument of course is that these figures fail to highlight any of the real problems in China. The same data indicates that China still has a poverty gap of 9% (2008) with a high inequality (a Gini index of 46.9–see p.282 of the UNDP’s HDR 2007/2008). It’s also a leading producer of greenhouse gases–119,720 metric tons in 2005 (same table). In fact, a DFID blogger–yes a member of the department the Tories control–once quoted Premier Wen Jiabao:

China is a big country. Any achievement, however large, when divided by 1.3 billion people is a very small achievement. And any problem, however small, when multiplied by 1.3 billion people, is a very large problem

So middle income developing country or not, there’s still a vast amount of development challenges that should be tackled with aid–of course, effective aid.

Second and following suit, there’s the argument about the poor. Naturally politicians, academics and others revert to the metric measurement of the poor as a base line. In relative terms, Mitchell has stated that the poor in China are better off than the poor in India (see Column 1045), feeding more to the argument for ending aid to the PRC. The money metric argument however does have its flaws (see for example the chapters in Ananad et al (2010) nd based on that, certain portions of the poor in China may be “just as poor” as the fellow Indian or African. If we consider the multidimensional approach of poverty–see the new MPHI–it would probably show much different story. Therefore, there still is poverty to be tackled in China–poverty that is just as challenging as in any other country or region.

Third, it’s the moral and MDG argument. Mitchell has jumped on the same development bandwagon as his Labour predecessor to say that Britain cares for the global poor. For countries like China and Russia, he however strangely sees it as last of his concerns. One should also note that other bilateral donors such as the USA and France are still maintaining their bilateral programmes in the PRC. Similarly, the World Bank,whom DFID contributes funds to, also has an array of projects in China. Simply cancelling DFID aid to China won’t stop UK funds from still reaching that country. On the MDG front, if aid to China is stopped, not all the MDGs will be reached (well maybe not for China’s case–depends on other factors). Will Mitchell simply say in 2015 its not his responsibility to help one country reach the MDGs because of its economic rise?

That’s not the only country that there’s talk in cancelling UK aid too. Tories (the UK Conservatives) such as Jo Johnson (Column 1074) are using the same line to argue for the end of UK aid to India. Mitchell (thankfully) isn’t taking that bait (yet). Stepping back, this begs the question of aid allocation. An Overseas Development Institute (ODI) report has provided more information. Another blog post by Director Alison Evans shows that the UK isn’t addressing at the aid-to-India argument the right way. So Mitchell & Co. should think again before closing the door to every middle income country.

Yes China (and India) are beyond the classification of Least Developed Countries (LDCs) and are emerging as the next economic powerhouses. It seems logical to stop aid when a country has progressed so well that it can manage on its own two feet. However, such countries still are plagued with millions of poor people and an unbalanced income distribution. Aid still may be need to fight such poverty even though these countries are growing at rates much faster than their donors. Furthermore, DFID leaders have to re-think their idea of aid allocation before shutting of the tap to any country.

References:

Anand, S. et al, 2010, Debates on the Measurement of Global Poverty, Oxford: Oxford University Press

[1] Ending aid to a middle income country still may not mean that VfM is achieved. Furthermore, there isn’t really a strong criteria as to what is VfM.


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This entry was posted in Alan Duncan, Andrew Mitchell, DFID, International Development, ODI, Posts, Stephen O'Brien and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

One Response to DFID and the end of its aid to China

  1. Pingback: The percularity (and possibly hypocrisy) of the UK’s development policy | Ipeanddevelopment's Blog

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