I. Foreign Aid Policy

Course of Development in Foreign Aid

China's foreign aid began in 1950, when it provided material assistance to the Democratic People's Republic of Korea (DPRK) and Vietnam, two neighboring countries having friendly relations with China. Following the Asian-African Conference in Bandung, Indonesia in 1955, the scope of China's aid extended from socialist countries to other developing countries, along with the improvement of China's foreign relations. In 1956, China began to aid African countries. In 1964, the Chinese government declared the Eight Principles for Economic Aid and Technical Assistance to Other Countries, the core content of which featured equality, mutual benefit and no strings attached, hence the basic principle for China's foreign aid was formulated. In October 1971, with the support of other developing countries, China resumed its legal seat in the United Nations, established relations of economic and technical cooperation with more developing countries, and funded the Tanzania-Zambia Railway (TAZARA) and other major infrastructure projects. In this period, China overcame its own difficulties, and provided maximum assistance it could afford to other developing countries in their efforts to win national independence and to develop national economy, thus laying a solid foundation for its long-term friendly cooperation with developing countries.

After the adoption of the policies of reform and opening up in 1978, China's economic cooperation with other developing countries extended from economic aid to multi-form and mutually-beneficial cooperation. China adjusted the scale, arrangement, structure and sectors of its foreign aid in accordance with its actual conditions. It strengthened its foreign assistance to the least developed countries, paid more attention to the economic and long-term effects of aid projects, and provided aid in more diversified and flexible ways. To consolidate the achievements of existing productive projects, China conducted multi-form technical and managerial cooperation with recipient countries, such as managing aid projects on behalf of recipient countries, lease management and joint ventures. After adopting the aforesaid cooperation models, some already-completed productive projects accomplished more than traditional technical cooperation in improving enterprise management and production level. Through adjustment and consolidation, China's foreign aid embarked on a development road which suits better to China's actual conditions and the needs of recipient countries.

In the 1990s, in the course of the shift from the planned economy to the socialist market economy, China took a series of measures to reform its foreign aid mechanism, focusing on diversifying the sources and means of funding. In 1993, the Chinese government set up the Foreign Aid Fund for Joint Ventures and Cooperative Projects with parts of the interest-free loans repaid to China by developing countries. The fund was mainly used to support Chinese small and medium-sized enterprises to build joint ventures or conduct cooperation with the recipient countries in the production and operation spheres. In 1995, China, via the Export-Import Bank of China, began to provide medium- and long-term low-interest loans to other developing countries, effectively expanding funding sources of its foreign aid. Meanwhile, it attached greater importance to supporting the capacity building of recipient countries, and kept enlarging the scale of technical training. Officials from recipient countries receiving training in China became an important part in the cooperation of human resources development between China and those countries. In 2000, the Forum on China-Africa Cooperation (FOCAC) was initiated, and it became an important platform for dialogue between China and friendly African countries and an effective mechanism for pragmatic cooperation in the new circumstances. Through reforms in this period, China further expanded its foreign aid with more notable effects.

In the 21st century, especially since 2004, on the basis of sustained and rapid economic growth and enhanced overall national strength, China's financial resource for foreign aid has increased rapidly, averaging 29.4% from 2004 to 2009. In addition to deciding aid projects arranged through traditional bilateral channels, group consultations were held by China with recipient countries at the international and regional levels. The Chinese government announced a series of well-targeted foreign aid policies at many international and regional conferences, such as the UN High-Level Meeting on Financing for Development, UN High-Level Meeting on the Millennium Development Goals, Forum on China-Africa Cooperation, Shanghai Cooperation Organization, China-ASEAN Leaders Meeting, China-Caribbean Economic & Trade Cooperation Forum, China-Pacific Island Countries Economic Development & Cooperation Forum, and Forum on Economic and Trade Cooperation between China and Portuguese-Speaking Countries, to strengthen foreign aid in the fields of agriculture, infrastructure, education, health care, human resources, and clean energy. In August 2010, the Chinese government held the National Conference on Foreign Aid to summarize its experience of foreign aid work, and define the major tasks for strengthening and improving foreign aid in new circumstances. China's foreign aid thus entered a new stage.