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Are China’s Dichotomies fueled by the U.S.?

August 24, 2011

On August 13, the Financial Times ran an article contrasting China’s new found wealth, “Diamond iPads and Gold-plated limousines”, with China’s continued epidemic of abandoning babies in anonymous alleyways. As China’s wealth increases this is just one of many internal issues China is facing. However, perhaps most interesting is to what extent is the U.S. foreign aid and tax-exempt funds complicit with China’s dichotomies?

One of the most recent examples of U.S. giving to China is in the form of development aid. While China does not directly have a compact or threshold relationship with the Millennium Challenge Corporation (MCC), the MCC has contracted development and capacity building projects to aid a number of African countries via Chinese state-owned companies valued at around $327.8 million dollars.

 The MCC has sets of different indicators where they score potential grantees, and based on these indicators countries are eligible for MCC money. The MCC prides itself on being distinctive in the use of U.S. taxpayer funds, relative to USAID, by requiring “countries to develop their MCC proposals in broad consultation with their society” and meeting rigorous indicators. The issue here lies in the questionable middle-man actors, such as China, who are not properly scrutinized or vetted.

 Like China, the MCC has its own dichotomy, contrasting its ‘rigorous standards’ for compact and threshold programs with its lack of consideration on the middle-man actors. In the case of China, the MCC grants are awarded to four African countries which then contract with Chinese state-owned companies to finance: in Ghana (China’s Railway Corporation at $42.2 million); in Tanzania (China’s SinoHydo and China New Era at $112 million and $57 million respectively); in Namibia (China’s Jiangsu International Ltd. at $4.6 million); and in Mali, (China’s SinoHydro with two contracts valued at $112 million.)

Allowing China to use its state-owned enterprises to aid development projects raises some troubling issues:

 • China is a one party state that not only denies voice and accountability to its own citizens, but also to minority groups within the country. For example, the territory of Tibet, Chinese government troops have quashed religious and political freedoms while at the same time eliminating its sovereignty and disrespecting their human rights.

• Does China, as the third largest economy in the world, need U.S. taxpayer dollars to finance its state-owned companies’ foreign investments? Since these contractors are working under the institutional legitimacy of the MCC, shouldn’t they at least mirror the core values and indicators which every other grantee of MCC funds is required to meet, such as “ruling justly”?

• If these grants to industries in Ghana, Tanzania, Namibia and Mali were so important to these countries, why did the MCC need China to act as broker? Are these industries hiring African workers, or are they following the current employment standards used by China in its agricultural investments, now employing more than 1 million Chinese throughout Africa?

In addition, the MCC is not the only U.S. entity giving money to China. In June, PEPFAR released a report to Congress. The report provided a country by country listing of beneficiaries which showed U.S. taxpayer funds providing care and treatment for 226,600 patients in China.

Other organizations have also given tax-exempt grants to China. The Bill & Melinda Gates Foundation had provided $62.9 million to China for TB Control and HIV/AIDS Prevention in the past four years. Additionally, China is the fourth largest recipient of grants from the Global Fund to Fight AIDS, TB and Malaria, receiving $578 million since 2003. Of that amount, 33% is provided by U.S. foreign aid funds, or $191 million. Another example of U.S. aid to China is in the USAID budget for 2011, a total of $12.9 million has been allocated to China for “community building and support in Tibet”.

In 2009, the World Bank gave China $710 million, of which 18% is represented by U.S. foreign aid funds, or $127.8 million. Other foreign aid funds flow to China through the World Health Organization (WHO), at 23% of its annual budget; UNICEF at 44% of its annual budget (mostly through the U.S. Fund for UNICEF, composed of tax-exempt donations from individuals, corporation, and foundations); and the Asian Development Bank, at 16% of its annual budget. Essentially, much of the aid is made up of U.S. tax-exempt dollars—the people’s money.

From what can be counted in the specific resource flows mentioned above, and only for the years specified, China is essentially the beneficiary of $719.7 million in U.S. taxpayer funds.

Since China is the third largest economy in the world there can be no doubt that it has needy AIDS patients, but so too can these same patients be found in every OECD country with less in terms of their GDP. So why are we providing aid and massive amounts of assistance to China while citizens of our own country are being given improper care? In the U.S. AIDS Drug Assistance Program the number of people on its waiting list “ballooned from 99 in June 2009 to 8,506 on June 23, not counting those that have been kicked out of the program or disqualified from joining. It has literally become easier to obtain AIDS drugs in some African countries than in many states in this country”.

U.S. efforts to assist China are over the top and they receive little back. The Financial Times reported that during Vice President Biden’s recent trip to China, he was less than five minutes into a press presentation alongside his counter-part, Xi Jinping. Suddenly, Chinese security staff and officials began pushing the reporters out of the room, yelling: “it’s over, it’s over, let’s go”. When White House and US Embassy staff tried to intervene, they were pushed and shoved as hard as the reporters. China clearly does not respect the MCC’s indicators of political rights. But why does this silence the MCC?

China needs to budget more domestic funds to aid its own people. In the 2011 pledging session to replenish the Global Fund to Fight AIDS, China pledged $60 million. For a country of such vast and increasing wealth, this is pathetic. Essentially, China does not allocate enough out of its own pocket for the health requirements of its own people; why should U. S. foreign aid and tax-exempt funds fill that gap?

 The Financial Times article on abandoned babies provides insight into the vast number of issues China faces. China needs to be more active about aiding its own people, and the U. S. should realize that the world’s third largest economy has the fiscal capacity to do so. If China wants to be a contractor in Africa though its state-owned companies, fine. But it doesn’t need U.S. foreign aid funds for that purpose. Given that the mantra of the MCC is “country ownership”, what are the Africans in these four countries to think: are these Chinese projects or American projects? The U.S. should stop being an enabler, look internally, and allow China to fend for itself. With the budget crisis in the U.S. this might express a rare commodity in our foreign aid program: common sense.

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