Why are the United States and Japan still giving tens of millions of dollars in aid to China?
In 2010, China surpassed Japan as the world’s second largest economy. In the years since, its economy has grown roughly four times as fast as Japan and the United States; a March report by the Organization for Economic Cooperation and Development (OECD) forecast that China will overtake the United States as the world’s biggest economy by 2016, when assessed in purchasing power parity terms. China has the largest foreign exchange reserves in the world — $3.4 trillion, as of the first quarter of 2013. When President Barack Obama sat down with President Xi Jinping in an early June summit, it was a meeting of equals. And in the Strategic and Economic Dialogue, the annual meeting between high-ranking U.S. and Chinese officials that this year took place on July 10-11 in Washington D.C., the balance might even have been in China’s favor: the country sent two lower-ranking officials to meet with U.S. Secretary of State John Kerry and Secretary of the Treasury Jack Lew.
The stories, facts, and figures that show how global wealth and influence is shifting from the Western world and Japan to China and other developing nations are widely known. What most people overlook, however, is that the United States and Japan — China’s two largest trading partners, and its most significant geopolitical rivals — still provide China with tens of millions of dollars annually in aid and assistance.
The United States provided $28.3 million in foreign assistance and funding programs to China via USAID and the State Department in 2012, according to a May report from the Congressional Research Service. It projects that number to decrease slightly in 2013, to $25.5 million. Roughly half of the U.S. funding is administered by the U.S. Agency for International Development (USAID), which focuses on four main areas in China: environmental protection, rule of law, HIV/AIDS, and sustainable development for Tibetans. "I believe that our foreign aid to China furthers U.S. interests," said Sen. Ben Cardin (D-MD), who chairs the East Asian and Pacific Affairs Subcommitttee of the Foreign Relations Committee, in a phone interview. But a USAID official, who asked to speak on background, took issue with calling the assistance to China "aid." "We are using some assistance to do technical cooperation in a few key areas, which are narrow and defined in scope," the official said. It’s "directed" assistance, the official added, noting that these programs were not controversial.
It is certainly controversial for Japan, whose relationship with China is extremely fraught. On July 9, Japan released its annual defense white paper, which warned that China was engaging in "dangerous actions" around the Senkaku islands, which China claims but Japan administers. Despite the tensions, Tokyo still provides China with "a huge amount of money," said Kae Yanagisawa, the director general of the East and Central Asia and the Caucasus Department of the Japan International Cooperation Agency. The OECD estimated that in 2011, the latest year for which data is available, Japan gave nearly $800 million in development assistance to China. In 2000, Japanese economic aid to China peaked at $1.98 billion, according to an article on People’s Daily Online, a Chinese Communist Party website.
Japan has been a major donor to China, in part out of feelings of guilt arising from the invasion during World War II. But some Japanese worry that now their country is donating money that abets their enemy. "It’s controversial. Many countries stopped providing aid a long time ago," but Japan "cannot move totally away from China," Kae said, adding that the government tries to target the "aid to China to the sphere that directly benefits Japan," like air pollution. (A February article in the Japanese newspaper Asahi Shimbum, reported that traces of Chinese pollutants reached southwest Japan.)
Foreign aid is sensitive in China as well. In the wake of an earthquake this April, Beijing declined Tokyo’s offer of assistance. Yet Japan gratefully accepted a 15-member team sent to help search for survivors after Japan’s March 2011 tsunami. What makes the relationship odder is that Beijing is now a major international donor itself, providing billions of dollars of aid and favorable loans to African and Asian countries. I asked Kae if China provides any aid to Japan. "No, of course not," she said. (USAID said it wasn’t appropriate for them to comment on whether the United States would welcome aid from Beijing, or whether China currently gives any aid to the United States. A State Department spokesperson referred the request to the Federal Emergency Management Agency; a spokesperson there did not respond to an interview request.)
U.S. aid to China became an issue in Washington in 2011. In 2010, the year that China overtook Japan to become the world’s second largest economy, U.S. aid to China reached its highest point over the last 15 years, at nearly $47 million. In August 2011, a bipartisan group of U.S. Senators wrote a letter calling for the end of development aid to China, stating that "China certainly has the financial resources to … care for its citizens without relying on U.S. assistance." A November 2011 hearing before the House Subcommittee on Asian and Pacific affairs entitled "Feeding the Dragon: Reevaluating U.S. Development Assistance to China," focused on the $3.95 million USAID used to ‘‘engage China as a partner in addressing climate change," and on why the United States borrows "money from China to give back to China to help it fix its own domestic problems." In that hearing, Congressman Steve Chabot (R-OH) peppered Nisha Desai Biswal, USAID’s assistant administrator for Asia, during testimony, noting that it’s a "hard sell explaining to the American people" why "China can’t use their own money" to fund assistance to China. Since then, Congress has reduced or withdrew aid in some areas, such as environmental programs. "The need for U.S. involvement is not as strong as it was in the past," says Cardin.
The USAID official, like many of the people interviewed for this article, stressed that the money goes not to the government in Beijing, but to the Chinese people. The United States spends $7.5 million, or roughly 25 percent of the annual Chinese aid budget, to help Tibetans with business development and cultural preservation. Aid to Tibetans "was set up to fill some of the cracks in Tibetan society," said Todd Stein, director of government relations at the International Campaign for Tibet, a D.C.-based advocacy group. The aid programs to assist Tibetans, a beleaguered Chinese minority persecuted by the Chinese state, steer far away from anything the Chinese might deem as sensitive. The Tibet programs are "not politically oriented," said the USAID official, adding that the Chinese government acknowledges the aid and has "allowed [it] to continue." That is because the programs don’t involve sensitive areas like democracy and rule of law, said a policy analyst who works on China and Tibet issues, and who asked to speak anonymously because of the sensitivity of the issue. That said, USAID’s page on the U.S. Embassy in Beijing’s website does not mention Tibet. A USAID spokesperson responded by email and said that they will contact the State Department "and make certain [that] USAID programs centered around Tibet are included and posted."
Of the remaining $14 million not administered by USAID, $3 million goes to fund the Peace Corps, which currently has 146 volunteers in China, although none are allowed to operate in Tibet. The remaining $11 million, administered by the State Department, is spent on programs that advance "human rights, democracy, rule of law," and is mostly given to U.S.-based NGOs and universities that operate programs in China, "although Chinese NGOs, universities, and some government entities have participated in, benefitted from, or collaborated with U.S. programs and grantees," according to the May Congressional Research Service report. This shows that "U.S. promotion of democracy and rule of law [in China] has not totally disappeared as a policy matter," says Dan Blumenthal, director of Asian Studies at the American Enterprise Institute.
At what level of Chinese economic and political development will U.S. aid to China disappear as well?