CHINA'S COMFORT LEVEL WITH OTHER AFRICA DONORS

C O N F I D E N T I A L SECTION 01 OF 05 BEIJING 000955

SENSITIVE
SIPDIS

STATE FOR EAP/CM, AF/ , S/P, EEB/ODF, EUR/

E.O. 12958: DECL: 04/02/2019
TAGS: EAID EINV PREL EFIN CH UK AU SENV
SUBJECT: CHINA'S COMFORT LEVEL WITH OTHER AFRICA DONORS
RISING GRADUALLY

REF: (A) BEIJING 288 (B) LONDON 328 (C) PARTO 01 (D)
BEIJING 527 (E) CRS 2/25/09 REPORT

Classified By: Economic Minister Counselor Robert S. Luke. Reasons 1.4
(B and D).

Summary
--------------


1. (SBU) China says it will keep expanding its aid to Africa,
and though it is hard to measure, its aid level seems to be
significant and growing. Beijing continues to proclaim that
its aid has no political conditions attached, an implicit
rebuke to Western donors. However, China's premier has
called for cooperation with the United States and Britain in
assisting very poor countries. Beijing has a clear
preference for channeling assistance through bilateral
channels, but it is engaging with other donors in
knowledge-sharing activities and even joint project work,
though China's different approach to aid projects presents
obstacles to the latter. China has also expressed interest
in participating in proposed regional infrastructure projects
being touted by the Infrastructure Consortium for Africa
(ICA). Beijing does not respond well to what it considers
Western hectoring about "best practices" for overseas
development assistance, but is more willing to listen to
Africans themselves. Unfortunately, due to lack of African
unanimity, winning Chinese support for the New Economic
Partnership for African Development remains an uphill battle.
Major Chinese meetings this year with the United States and
Africa make the next few months promising for pushing China
to engage on development assistance in Africa. Such
engagement will require a sustained investment of political
capital to break through bureaucratic logjams posed by the
Ministries of Foreign Affairs and Commerce. End summary.


2. (C) In a press conference held after his January 2009
visit to various African nations (REF D),Commerce Minister
Chen Deming underlined China's commitment to increasing its
assistance to Africa, particularly in the areas of health,
public works, education, and agriculture, despite the global
economic crisis. He also reiterated that China's assistance
came with no political conditions attached, a long-standing
plank of China's non-interference policy and an implicit
rebuke to Western and multilateral donors who do impose
political conditions on aid to poor countries. According to
African expert He Wenping of the Chinese Academy of Social
Sciences, while there is little short-term prospect of China
abandoning this rhetorical position, in many ways it is
moving, however slowly, toward the rest of the international
donor community.

Wen's Cooperative Words Not Matched by MFA, MOFCOM Deeds
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3. (C) During separate bilateral meetings with British Prime
Minister Gordon Brown and Secretary Clinton early this year,
Chinese Premier Wen Jiabao called for cooperation in helping
lesser-developed countries (LDCs) reach the UN Millennium
Development Goals (REFS B and C). UK diplomats Mark George
and Gareth Ward told Econoffs they have been trying for
several years to engage China on coordinating their
development assistance programs in Africa. Working through
the Ministries of Foreign Affairs (MFA) and Commerce
(MOFCOM),the lead PRC agencies on international relations
and overseas economic cooperation, respectively, has proved
frustrating. The UK's Department for International
Development (DfID) and Foreign Office held two rounds of
dialogue with the MFA in 2007 and 2008 that MOFCOM did not
even attend, and separate efforts to engage MOFCOM's
Department of Foreign Assistance were "a total dead-end,"
though other PRC agencies have demonstrated more willingness
to cooperate in Africa. The British attributed much of the
difficulty with the MFA and MOFCOM to lack of inter-agency
(and even intra-agency) communication. They cited as an
example the UK desire to highlight its support for the
China-Africa Business Council during Wen Jiabao's visit. The
Council, which provides advisory services to PRC companies
investing in Africa (REF A),is in fact a joint initiative
between the UN Development Program and MOFCOM's Multilateral
Department. However, other parts of MOFCOM had not even
heard of the Council, let alone British support for it, and
consequently it was not mentioned in the Brown-Wen meeting.
Another possible self-inflicted wound, according to George
and Ward, was the failure to include ODA cooperation in the
agenda of the UK-China Economic and Financial Dialogue,

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chaired by Vice Premier Wang Qishan on the Chinese side.
This might have sent an unintended contrary signal.

PRC Aid to Africa Rising, Probably
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4. (U) MOFCOM is also reluctant to share data on aid flows.
At the FOCAC summit held in Beijing in 2006, President Hu
promised that Chinese assistance to Africa would double by
the end of 2009, and during his February trip to several
African nations, he echoed Minister Chen's promise that the
global economic crisis would not slow China's increased
assistance (REF D). But there are no official aggregate
numbers for Chinese aid to Africa, making it difficult to
measure progress toward the FOCAC goal. The varying forms of
Chinese aid are different from the commonly accepted OECD
definition of overseas development assistance, consisting of
a combination of grants, concessional loans,
government-supported private investment (REF A),and debt
cancellation. (Note: A promising sign on this front is
MOFCOM's decision to send one of its officials on temporary
duty to the OECD to learn about accepted international
definitions of ODA. End note.) According to a 2008 study by
NYU's Wagner School of Public Policy cited in a February
Congressional Research Service report on China's foreign aid
(REF D),a broad interpretation of Chinese "aid" to Africa
2002-2007 (including large amounts of what we would call
investment) totaled around USD 33 billion, with big spikes in
2006 (approximately 9 billion) and 2007 (18 billion). The
study's numbers come from adding up announcements of
individual projects, and are far from precise, according to
the authors. Slightly more than half these funds relate to
infrastructure or other public works, almost 30 percent
relates to natural resources, 2.5 percent to humanitarian
activities (perhaps most similar to what we would consider
development assistance),and 15 percent is unspecified.
While these numbers lack accuracy and are not a useful basis
for comparison to Western aid levels, they do point to a
consistent upward trendline that means China should be in
relatively good shape to meet its FOCAC aid goal. Comment:
The lack of transparency on aid levels could reflect a number
of political considerations by Beijing, including a desire to
avoid giving African capitals information they could use to
lobby for comparatively bigger slices of the Chinese aid pie,
a desire to avoid criticism by domestic audiences for
spending money on the poor overseas rather than China's own
large poor population, and discomfort with being seen as a
major donor country, which could impact China's own status as
an ODA recipient and raise expectations. End comment.


5. (C) MOFCOM Deputy Division Director for West Asian and
African Affairs Lin Pei told EconOffs that China is working
hard to fulfill its FOCAC commitments by the end of this
year. He did not share any aggregate aid numbers (colleagues
from MOFCOM's Foreign Assistance Department declined our
meeting request),though he did note China's progress on more
easily measured FOCAC goals such as: removing import tariffs
on a total of 466 goods from 31 African LDCs; building 30
hospitals, 100 rural schools, and 10 agricultural technology
demonstration centers across the Continent; establishing
three economic and trade zones (in Zambia, Nigeria, and
Mauritius); and providing training for 15,000 African
professionals. Lin said China has put in place a FOCAC
"follow-up commission" consisting of 20 different ministries
to ensure China can report "mission accomplished" on its 2006
FOCAC commitments at the FOCAC ministerial to be held in
Cairo this fall.

World Bank Info Exchange Going Well
--------------


6. (C) According to World Bank Country Director for China
David Dollar, China is becoming more comfortable dealing with
other donors and increasingly heeds at least some
international standards in its foreign assistance. In 2007
the World Bank signed an MOU on cooperation in third
countries with China's EXIM Bank -- the sole conduit for
Chinese export credit and concessional loans and a major
provider of project finance as well -- and has begun training
EXIM officials. According to Xu Yan, EXIM's Deputy General
Manager for International Business, EXIM has detailed two
officials to the World Bank in Washington, where they are
working in Africa-related offices. Ms. Xu said that EXIM is
planning a similar program with the Africa Development Bank
(AfDB) headquartered in Tunis, something that visiting AfDB
officials confirmed (para 9). Dollar said (and Ms. Xu

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separately confirmed) that EXIM now frequently uses reputable
international consulting firms to perform environmental
impact assessments for projects in developing countries like
the Democratic Republic of Congo. (Note: EXIM's growing
sensitivity to environmental issues mirrors that of the
China-Africa Development Fund and other central government
agencies, as per REF A. End note.) Dollar also pointed out
that, to his surprise, the World Bank's January 2009 decision
to debar several Chinese construction firms from bidding on
World Bank projects for up to eight years due to involvement
in collusion on a Bank-funded Philippines road project had
generated not a single protest from the Chinese government.
He attributed China's equanimity to its growing acceptance of
the way international financial institutions operate in
general and the World Bank's tough but impartial internal
integrity mechanisms in particular.

But Project Cooperation with EXIM Stalled
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7. (C) According to Dollar, the World Bank has worked well
with China on information exchanges, i.e., facilitating the
sharing of Chinese experience with African peers in areas
like agriculture. Trying to identify actual projects that
the World Bank could jointly implement with EXIM has proven
much harder. In theory, the two bring complementary
strengths to the table. EXIM funds much of China's
prodigious infrastructure work in Africa and other parts of
the developing world, while the World Bank has expertise in
making sure that new infrastructure projects fit well with
existing networks, as well as with projects being funded by
other donors. However, to date the cultural differences
between the Bank and EXIM have loomed larger than any
theoretical complementarity. EXIM and the Chinese
construction companies it supports move much faster than the
Bank can from signing an agreement to actually starting and
completing work. The Bank empowers its country officers in
the field (few of whom relish the additional hassles that
working with Beijing would entail),while EXIM has a highly
centralized management structure based in Beijing. EXIM
focuses more on the commercial viability of projects, whereas
the Bank's first concern is the developmental impact. This
in turn affects the respective views of when
concessional-rate finance is appropriate. Finally, in any
particular aid-receiving country, China is prickly about
joining the extant donor group and thus "giving up" its right
to speak for itself with the host government. CASS' He
Wenping reinforced this point, saying Beijing has a
long-standing preference to operate in bilateral channels.
The Chinese bureaucracy is used to operating this way, and it
allows Beijing to take full credit for (and extract maximum
leverage from) every dime it spends. Despite this catalogue
of differences, Dollar said the Bank and EXIM are considering
joint action on an agricultural project in Rwanda, where
China has posted a particularly forward-leaning Ambassador.
Ms. Xu, with whom EconOffs spoke more recently, said a road
project in Ghana was also a possibility. Dollar asserted
that however slow the progress, the MOU was helping move EXIM
in the right direction. He noted that the Bank's desire to
sign a similar MOU with the China Development Bank (CDB) was
rebuffed by the Ministry of Finance. CDB, which used to be a
policy bank like EXIM, was recently converted into a
"commercial" bank, though it is still state-owned and appears
to receive substantial "policy guidance" from the central
government. According to EXIM's Ms. Xu, CDB does not offer
concessional financing, but over the last several years has
become increasingly active in supporting Chinese companies
overseas.

Technical Agencies More Receptive to Africa Cooperation
-------------- --------------


8. (C) The UK Embassy's George and Ward echoed Dollar's
appraisal of slow but steady progress in moving China toward
the rest of the international donor community engaged in
Africa. Despite the obstacles encountered in trying to work
via MFA and MOFCOM (para 3),DfID has had more success in
working with the Ministries of Agriculture and Water
Resources. With the former, DfID did a knowledge exchange on
food security that brought a number of African officials to
China. With the latter, DfID hopes to do a similar program
aimed at disseminating lessons learned on China's arid loess
plateau about efficient water use. George commented that
these projects are small bore, but make Chinese officials
increasingly comfortable discussing their work in Africa with
others. Similarly, we succeeded in reaching agreement with

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the State Forestry Administration at the December 2008
meeting of the Strategic Economic Dialogue (SED) to undertake
a joint training project on fuel wood alternatives, with the
United States providing funding for Chinese experts to travel
to Africa to share China's experience in this area.

Infrastructure Consortium for Africa
--------------


9. (C) In mid-February 2009, Mandla Gantsho, the Vice
President for Infrastructure of the African Development Bank
(AfDB),led a mission on behalf of the Infrastructure
Consortium for Africa (ICA) to China to drum up PRC support
for ICA projects and enlist China as an ICA member,
especially as private sector investment in Africa dries up
due to the financial crisis. The ICA was created after the
2005 G8 Summit. It is made up of the G8 bilateral donors and
multilateral agencies, which have donated $12.4 billion to
date, and is housed at the AfDB headquarters in Tunis. Its
mission is to accelerate development of Africa's regional
infrastructure, linking together multiple countries in
economically rational ways. After meetings with MOFCOM,
EXIM, CDB, the China-Africa Development Fund, the People's
Bank of China, and China's leading state-owned construction
companies, Mr. Gantsho debriefed G8 embassies and
multilateral development bank representatives. He said the
Chinese had all emphasized the government's commitment to
African development, regardless of the global economic
crisis, and in fact had predicted that new targets to be set
at the Cairo FOCAC ministerial this fall would surpass those
made by Hu Jintao in Beijing in 2006. They declined to join
the ICA, given their preference for working bilaterally and
their aversion to being lumped together with Western donors,
but were happy with their observer status and welcomed
collaboration with ICA members using the Consortium as a
platform. Gantsho acknowledged that information exchange
with China was already in the works, noting the plan for EXIM
officials to be detailed to AfDB (para 6) and CADF's
eagerness to compare notes with the AfDB Chief Economist's
office.

ICA, AfDB Lobby Beijing to Support Regional Projects
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10. (C) With regard to project cooperation, Gantsho said he
had lobbied vigorously for Beijing to concentrate more on
Africa's regional needs, rather than on purely bilateral
projects, noting the inherent imbalance in all of China's
bilateral relationships with individual African countries as
well as the clear economic benefits of more closely tying
together the markets of neighboring African nations. For
China to play in this game, closer coordination with the
international donor community was required. The Chinese, he
said, showed some receptivity to this argument. He then told
them that the African Union had concentrated on regional
infrastructure at its February 2009 summit and had drawn up a
short list of critical cross-border projects to address gaps
that were holding up investment. He said the Chinese
(especially from EXIM) had asked the ICA to identify two or
three pilot projects from this list where Chinese
participation would be most welcome, which he took as a very
positive signal. Parallel financing, as opposed to
co-financing, was the likeliest mode of Chinese involvement.
Gantsho said the ICA hoped the Chinese would provide
concessional financing for any such projects they eventually
agreed to participate in, but he had not raised that issue
with his interlocutors during this visit. A number of the
donors being briefed asked about the possible impact of
commercial Chinese loans on the balance sheets of
heavily-indebted poor countries that had undertaken
commitments in return for debt relief from traditional
donors. Gantsho said that would have to be handled on a
case-by-case basis. He assessed that China's ICA
observership and potential collaboration on specific projects
was an excellent entry point into the multilateral donor
community's engagement with Africa, and noted the importance
of African capitals presenting a unified front vis-a-vis
China via organizations like the African Union and the AfDB.
Several of the donor country representatives at the briefing
asserted the importance of the AfDB taking the lead on the
ICA, remarking that China would listen to Africans speaking
on behalf of African institutions but not to G8 countries
that tried to do the same.

PRC Support for NEPAD an Uphill Battle
--------------

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11. (C) Another potential pan-African forum for engaging
China on African development issues is the New Partnership
for African Development (NEPAD),an initiative launched and
championed by former Nigerian and South African Presidents
Obasanjo and Mbeki and intended to guide the continent's
relationship with aid donors according to principles of
sustainability and good governance, an approach somewhat
incongruent with Beijing's professed allegiance to
non-interference and unconditional aid. Gantsho ruefully
opined that NEPAD had lost significant steam since Obasanjo
and Mbeki had left the political stage. In a separate
meeting, South African Embassy Minister (and former head of
the NEPAD Secretariat's Office of International Cooperation)
David Malcomson told PolOff his country still wanted NEPAD to
be the "focal point" of the AU-China assistance relationship,
rather than China's preferred bilateral approach, but that
gaining support for the AU development program was "an uphill
battle." China has been hesitant to support NEPAD because
four AU members - Swaziland, Gambia, Burkina-Faso and Sao
Tome and Principe - recognized Taiwan rather than the PRC.
Another "stumbling block" was the lack of unanimity among AU
members. Malcomson said the Southern Africa Development
Community (SADC),East African nations, and Nigeria were all
pushing for greater Chinese buy-in to NEPAD. However, the
countries of North Africa (except Algeria) "are ambivalent"
and west African and central African countries preferred to
deal with China bilaterally in hopes of getting greater
assistance. Despite the difficulty, Malcomson said NEPAD
would be on the agenda of this year's FOCAC ministerial. In
a similar vein, our UK diplomatic colleagues told EconOffs
that London encourages African leaders to use FOCAC as a
lever to mold Chinese engagement to better meet African needs
as embodied by pan-African initiatives like NEPAD. Malcomson
noted that officials from the NEPAD Secretariat and Business
Foundation would visit Beijing later this year to discuss
concrete projects to promote NEPAD's goal of AU regional
integration. Regarding the Africa Partnership Forum (APF),
Malcomson said "it makes sense" to invite a large donor
nation like China to join but argued that some G8 countries
were resistant to expanding the APF to include China.

Advice from a PRC Africa Expert, and the Cousins
-------------- ---


12. (C) Comment: The overall trend line is clear. China is
slowly easing its way toward the rest of the international
donor community in its approach to development aid. He
Wenping from CASS told EconOff there was ample overlap
between U.S. and Chinese interests in Africa to justify
cooperating on assistance in areas like energy,
infrastructure, and trade facilitation. As we consider
pressing for stronger engagement with China on our assistance
programs in Africa and elsewhere, we should be aware that
sentiments expressed by Premier Wen do not automatically
translate into corresponding commitment by the rest of the
Chinese bureaucracy. To expand from scattered cooperation on
narrow technical areas to a more comprehensive dialogue on
this subject, we need to make it a leading agenda item of the
Strategic and Economic Dialogue and the relevant regional
sub-dialogues. End comment.
WEINSTEIN