economics

March 25, 2010

The Dark Side of China Aid

Filed under: Uncategorized — ktetaichinh @ 11:57 pm
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A growing number of developing countries receive billions of dollars a year in assistance, loans, and investments from China. Already in 2010, Beijing has committed $25 billion to Asean nations. In March, Zambia’s president returned from a trip to China with a $1 billion loan in hand.

As Beijing’s levels of foreign assistance swell and its relationship deepens with countries across Africa, Asia and Latin America, a key question emerges: What impact will investments by an opaque and repressive superpower have on governance standards in the developing world?

Findings from a Freedom House analysis, “Countries at the Crossroads,” point to the challenges that many of these recipient countries confront as they struggle to build more transparent and accountable systems. Fighting corruption and safeguarding freedom of expression and assembly are proving especially difficult. The dark side of Beijing’s engagement, with its nontransparent aid and implicit conditions, risks tipping the balance in the wrong direction.

To appreciate the “China effect” on developing countries, it is essential to understand the methods Beijing is using to exert influence and warp incentives for accountable governance.

First, as international financial institutions and donor organizations seek to encourage stronger governance norms, aid from China has become an alternate source of funds. Recipient governments use these as a bargaining chip to defer measures that strengthen transparency and rule of law, especially those that could challenge elite power.

Cambodia is a telling example. The government in Phnom Penh, which has received substantial aid from the United States and other democracies, now receives comparable amounts from China. The Cambodian authorities have used this “assistance competition” to their advantage. Rather than combating corruption and implementing sorely needed reforms to the judiciary and media sector, Prime Minister Hun Sen’s government has shrunk space for alterative voices and independent institutions. Western donors, fearful of losing influence, have been increasingly hesitant to penalize the regime for its failures.

In October, the Guinean government announced a $7 billion deal with the China International Fund just as the international community was considering sanctions following a massacre of opposition supporters. The case underscores how even investments by a private entity, this one with ties to Beijing, can be manipulated to undermine efforts to support human rights standards.

Second, while “no strings attached” is commonly used to describe China’s approach in the developing world, the reality is not quite so benign. A combination of subtle and not-so-subtle conditions typically accompanies this largesse. Included among these is pressure to muzzle voices critical of the Chinese government, often undermining basic freedoms of expression and assembly in these countries. The authorities in Nepal, which have recently received a 50 percent boost in aid from Beijing, have violently suppressed Tibetan demonstrations, including the arrest of thousands of exiles in 2008. In December of last year, Cambodia’s government forcibly repatriated 20 Uighurs to China, where they face almost certain imprisonment and torture. Three days later, Beijing announced a package of deals with Cambodia estimated at $1 billion.

Even more democratically developed countries are not immune to such pressures. In March 2009, the South African government barred the Dalai Lama’s attendance at a pre-World Cup peace conference.

Third, Chinese aid funds are frequently conditioned on being used to purchase goods from firms selected by Chinese officials without an open bidding process. In Namibia, anti-corruption agencies are investigating suspected kickbacks in a deal involving security scanners purchased by the government from a company until recently headed by President Hu Jintao’s son. Beijing’s response has been to stonewall investigations and activate its robust Internet censorship apparatus, sanitizing online references to the case Chinese citizens might stumble across.

Observers such as the scholar Larry Diamond have identified countries that are semi-democratic, rather than autocracies, as the most promising ground for expanding the ranks of consolidated democracies globally. The patently negative aspects of the Chinese Communist Party’s developing world influence could deal a real blow to this aspiration.

Findings from Freedom House’s global analysis of political rights and civil liberties put this phenomenon in perspective. Over the past five years countries with only some features of institutionalized democratic systems have slipped significantly — 57 countries within the “partly free” category have experienced declines, while only 38 improved.

Beijing’s deepening involvement in these cases may generate a number of effects, some perhaps positive for short-term economic development. But the dark underbelly of the Chinese regime’s involvement — the opacity of its aid and the illiberal conditions that underpin it — means that over the long haul, incentives for strengthening accountable governance and basic human rights are being warped, or even reversed.

Christopher Walker is director of studies and Sarah Cook is an Asia researcher at Freedom House.

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