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Debt trap or generous foreign aid?

By Andreas Fuchs, Kiel Institute for the World Economy
Andreas Fuchs heads the Kiel China Initiative at the IfW

China’s development cooperation with the Global South has gained the attention of Western media. However, growing attention has not always led to growing understanding. Many media outlets, for example, speak of China’s “credit trap” and “debt-trap diplomacy”. At the same time, for example, Deborah Brautigam, a professor at Johns Hopkins University, and Meg Rithmire, an associate professor at Harvard Business School, argue: “The narrative wrongfully portrays both Beijing and the developing countries it deals with.” Is the charge of “debt-trap diplomacy” justified?

It is difficult to find answers to such a question. The reasons are twofold: A lack of sufficient data and lack of understanding of the inner workings of China’s foreign aid system. The lack of sufficient data is due in no small part to the absence of comprehensive reporting systems for China’s development projects. While Germany, like many other countries, reports its projects to the OECD, which prepares the information for all to access, China does not provide comparable data. In the absence of a reliable, official source, it has been difficult to paint a comprehensive picture of Beijing’s foreign development activities.

Analysis of public data proves to be a goldmine

Initiatives like AidData at the College of William & Mary have attempted to fill this gap. Since 2013, AidData, led by Dr. Brad Parks, has been tracking official financial transfers from China to developing countries using their so-called TUFF methodology. TUFF stands for Tracking Underreported Financial Flows. To do this, AidData brings together unstructured, freely accessible, project-related data published by a wide variety of sources and standardizes and simplifies the data. Based on this methodology, AidData initially began publishing region-specific datasets. In 2017, AidData unveiled the first dataset covering the entire Global South. Updated recently in September, the dataset covers 13,427 projects worth $843 billion in 165 countries in all major world regions over an 18-year period.

The combination of comprehensive data collection and sinological methods make it possible to improve the understanding of China’s foreign development cooperation. For Germany and the European Union as stakeholders, it is crucial that we get a clear picture of the working mechanisms and scope of Chinese development cooperation.

Under the title “Making Chinese Foreign Aid Transparent – What is Hidden in Data and Policy Documents?”, Dr. Brad Parks from AidData and Dr. Marina Rudyak from Heidelberg University will debate this topic on Thursday as part of the Kiel Institute China Initiative’s third Global China Conversation. China.Table is a media partner of the event series.

Prof. Andreas Fuchs heads the Kiel China Initiative of the Kiel Institute for the World Economy and is a Professor of Development Economics at the University of Goettingen. His research studies trade, investment, and development policies using quantitative methods and a special focus on China and other emerging economies.

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