China's Billion-Dollar Aid Appetite

http://www.foreignpolicy.com/articles/2010/07/19/chinas_billion_dollar_aid_appetite?print=yes&hidecomments=yes&page=full

JULY 28, 2010

China's Billion-Dollar Aid Appetite
Why is Beijing winning health grants at the expense of African countries?
BY JACK C. CHOW | JULY 19, 2010

Back in 2001, I was the lead U.S. negotiator in international talks meant to transform the way that poor countries fight some of the world's most pernicious diseases -- HIV/AIDS, tuberculosis, and malaria. Our vision looked like this: Instead of each country spending on its own, rich countries would pool donations into one coordinated fund that would give grants to help resource-strapped countries purchase medicines, build health programs, and prevent the diseases from spreading. We imagined the bulk of the money ending up in places like Lesotho, Haiti, and Uganda, where these three diseases have reached crisis levels. So it might surprise and concern you -- as much as it still does me -- to learn that one of the top grant recipients isn't in sub-Saharan Africa, Latin America, or impoverished Central Asia. It's a country with $2.5 trillion in foreign currency reserves: China.


More... Over the eight years since the Global Fund to Fight AIDS, Tuberculosis and Malaria first launched, China has applied for and been awarded nearly $1 billion in grants, becoming the fourth-largest recipient of funds behind Ethiopia, India, and Tanzania. Already, the country has drawn nearly $500 million from this credit line and soon expects to receive $165 million in new grants. China's aggregate award from the fund is nearly three times larger than that of South Africa, one of the most affected countries from these three diseases. Moreover, China has won malaria grant money totaling $149 million (and $89 million more might be on the way) -- in a country where only 38 deaths from the mosquito-borne illness were reported last year. That is more than the $122 million awarded to the Democratic Republic of the Congo, which reported nearly 25,000 malaria deaths during the same period. In fact, only seven sub-Saharan African countries receive more malaria aid than China -- and 29 countries in Africa get less. Combined, those 29 countries report 64,000 deaths from the disease each year.

China has aggressively pursued Global Fund grants and has continued to win significant amounts with every passing year. Beijing does make a nominal contribution to the fund of $2 million annually, meaning that it has donated $16 million over the last eight years. By comparison, the United States, the leading donor, has committed $5.5 billion, and France has offered $2.5 billion over the same period. These contributing countries expect no financial return for their gift, but China has recouped its spending by 60 times.





Even more alarming, China's persistent appetite threatens to undermine the entire premise behind the Global Fund. The organization's leadership is trying to solicit between $13 billion and $20 billion to cover its next three years of operations -- a tall order at a time of global recession. Donors will grow even more reluctant if they realize that substantial funds are being awarded to a country that can more than pay for its own health programs.

How did China ever become eligible for grants in the first place? In short, because of a loophole. The Global Fund decides eligibility for grants based on the World Bank's classification system, which divides countries by income. High-income countries such as the United States, the European industrial countries, and Japan are ineligible. Low-income countries, including many in sub-Saharan Africa, are grant-eligible. In between, so-called lower-middle-income countries like China are eligible if the grants are part of a cost-sharing program through which the fund pays up to 65 percent and the country pays the rest. (China stays in this lower-middle-income category because its huge population keeps per capita figures down.) The country competes with the likes of Bolivia, Cameroon, and India in this category. But because the fund's pot of money isn't allocated by income group, any grants that China wins reduce the remaining money available for all eligible countries.

For a country like Cameroon, cost-sharing grants make a lot of sense. By giving part of the full amount, the fund can spur the host government into investing more of its discretionary budget in health. The extra cash can build health infrastructure and capacity, preparing the country to wean itself from foreign funds. But in China's case, the argument for a Global Fund grant is tenuous at best. During the depths of the world economic crisis in 2008, China put forth a massive economic stimulus package of $586 billion that included new health and education spending of $27 billion. The government announced its intention to boost rural health coverage with $125 billion in spending over the next several years. Even a fraction of that promised amount would negate any need by China to draw upon the Global Fund.

This is not to say, of course, that China's health system does not face formidable challenges. Indeed, global health policymakers worry that HIV/AIDS and tuberculosis in particular could rise dramatically as the country urbanizes and industrializes and a new middle class veers away from traditional social mores. Everyone remembers the SARS outbreak in 2002 and 2003 that practically shut down major cities in China. And beyond specific threats, the Chinese Center for Disease Control and Prevention, the chief implementer of the Global Fund portfolio and officiator of the government's public health strategy, has hard work ahead to build up China's health workforce and medical infrastructure.

But China might want these grants for reasons having more to do with politics than public health. The Health Ministry is the only member of China's policymaking State Council not led by a political party member. As such, its ability to compete for domestic funds pales in comparison with other assertive, powerful ministries led by longstanding party leaders. So the Health Ministry might be driven to external funding by political necessity. Or, China might value obtaining the technical assistance of international health agencies such as the World Health Organization, UNAIDS, and the U.S. Centers for Disease Control and Prevention; Global Fund grants provide a means of securing their advice and services. China's participation on the fund's board might also be useful to Beijing's global politics, confirming its importance on the world stage.

Whatever benefits China gains from seeking grants, however, stack up poorly against expensive opportunity costs exacted upon needier countries. The $1 billion awarded to China could have been used by the poorest countries to distribute 67 million anti-malarial bed nets, 4.5 million curative tuberculosis treatments, or nearly 2 million courses of anti-retroviral therapy for AIDS patients (a number equivalent to all those living with the disease in Kenya).

It is intriguing that health ministers from the poorest countries have expressed neither concern nor opposition to China winning grants. Nor has there been any substantial public challenge to or debate about the money China has received from the Global Fund. Part of the reason might be structural; the fund's large 26-member board (which includes representatives of countries, regions, organizations, and the Global Fund itself) operates based on consensus, and its meetings are time-constrained forums that pressure members to make rapid decisions. Changing eligibility policy, for example to exclude China, would entail time-intensive negotiations that may well pit groups of grantees against one another. The board also approves grants en bloc, relying upon the advice of technical experts who review them for feasibility and public health impact, not fairness, balance, or a country's ability to pay.

Even so, there is likely more behind the silence than just procedure. For many of the poorer countries that lose out, opposing China in international forums would risk incurring Beijing's diplomatic wrath. Health ministers are skittish to imperil their country's broader interactions with China, which in the case of African countries, often entails Chinese loans, grants, infrastructure projects, and investment -- and indeed, even further, health aid. In turn, African countries seeking access to the burgeoning Chinese market must curry Beijing's favor. Any country that openly opposes China at the Global Fund might see these economic links broken or be put at a disadvantage to competitors. And so the neediest countries endure a loss of grant money to China through their collective silence.

Donor governments have also been mute or reluctant to oppose China at the Global Fund, perhaps for similar reasons of not wishing to provoke a reaction that impacts other diplomatic or political equities elsewhere. In the United States, neither Congress nor the White House has voiced open concern that an amount equivalent to President Barack Obama's entire fiscal 2011 Global Fund budget request of $1 billion has gone to a country that can afford to pay its own way.

This has left the fund's leadership as the only front left for trying to change China's stance. Based on China's national income and the rate of other donor contributions, the Global Fund recommends that China should give $96 million over the next three years, amounting to 16 times its current annual donation. In 2007, prior to China's hosting of a board meeting in Kunming, the fund asked China's government to up its donor commitment, but the appeal went nowhere. In June, with fundraising pressures escalating, the fund's executive director, Michel Kazatchkine, met in Beijing with Chinese Vice Premier Li Keqiang, who issued a vague promise to cooperate with international organizations to expand disease prevention and treatment, but made no announcement to refrain from taking new grants or signaled any intent to become a major donor.

Not even a rival country's actions seem to have convinced Beijing. In recent years, nearby Russia has transformed itself from recipient to donor, and it has done so under arguably less favorable economic conditions than those in China today. In 2006, then President Vladimir Putin pledged to repay the Global Fund $270 million over four years, covering the past assistance it received, and announced $156 million in new domestic spending for HIV treatment. Now four years out, Russia has paid in $250 million to the Global Fund, essentially fulfilling Putin's pledge.

It is audacious for China to assert that it needs international health assistance on par with the world's poorest countries. In fact, at the same time it is drawing from the Global Fund, China is building its entire global image as one of economic growth, accumulating wealth and international stature. To boost its public profile and prestige, China spent billions to host the Beijing Olympics and the Shanghai World Expo. Surely it could spend another $1 billion of its cash on health as well. And why not take it one step further? By becoming a Global Fund donor, China could win acclaim with the West and the world's poorest -- earning exactly the kind of respect that a rising power deserves.

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China Photos/Getty Images

Jack C. Chow served as U.S. ambassador on global HIV/AIDS from 2001 to 2003 and was the lead U.S. negotiator at talks that established the Global Fund to Fight AIDS, Tuberculosis and Malaria. He is currently distinguished service professor of global health at Carnegie Mellon University in Heinz College's School of Public Policy and Management.
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SUBJECTS: CHINA, POLITICS, AIDS, PUBLIC HEALTH, DEVELOPMENT, U.S. CONGRESS, HEALTH, FOREIGN AID, INTERNATIONAL ORGANIZATIONS, OBAMA ADMINISTRATION, AFRICA, EAST ASIA


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PUBLICUS
1:26 AM ET
July 20, 2010
Absurd
We know that the PRC is not a responsible member of the international system, as this piece mightily documents in yet another way.

Beijing has little give and a lot of take.

The CPC leadership in Beijing continues to hold and practice a world view that is selfish and too self-centered to expect any changes to China's low international standing any time soon. There's the bully pulpit and then there's simply the bully.
REPLY KASEMAN
9:54 AM ET
July 20, 2010
damn clever these Chinese, eh?
And the place is run by engineers not lawyers! When was the last time we heard of our engineers outsmarting our tribes of perfidious Lawyers?
Engineers construct, lawyers destruct.
REPLY VILKSSWEDEN
11:55 AM ET
July 20, 2010
and assholes make irrelevant comments about
lawyers and engineers. Point is, China is taking the money from more needy countries, when it can more than easily foot the bill itself, at no harm to its economy or policy.
REPLY COOL_HEAD
5:40 AM ET
July 20, 2010
What about India
China has applied for and been awarded nearly $1 billion in grants, becoming the fourth-largest recipient of funds behind Ethiopia, India, and Tanzania.

What about India -- the 2nd-largest recipient?
REPLY NORBOOSE
10:15 AM ET
July 20, 2010
India isnt oppressive
First of all, I am writing from an American perspective, about why I think America should give lots of aid to India. If youre from some other country, then this is irrelevant.

India has problems, like any country (Kashmir, overeaction to the Naxalites), but all in all, its a pretty free country. China is ruled by a clockwork system of oppression. India will probably be a close US ally untill hell freezes over, as almost all of our long-term interests align perfectly. It is in our own interest to help India modernize as rapidly as possible.
REPLY SAM FROM CALIFORNIA
4:52 PM ET
July 20, 2010
Uhhhh
India is a lot poorer than China, and it may have a worse AIDS problem (both countries do have an AIDS problem, i'm too lazy to check which is worse.) China is now wealthy enough to provide the universal, national health care its socialist system promises, without taking aid money. Or at least it should take less.

But perhaps there is a problem with a time lag; ie, China is traditionally a poor country, and has yet to really reorient its foreign policy in line with its newfound wealth. I think the Chinese still think they are a third world country like any other; they are, but they are also the country with the world's largest and most profitable businesses and many broken or unfulfilled social promises.
REPLY MINDALAY
12:05 PM ET
July 23, 2010
If the very wealthy Chinese
If the very wealthy Chinese state doesn't care about its citizens, why should anyone else? You are right: nation-state power is not the the same as the wealth of individual citizens. So where are the Chinese donations to American citizens in Appalachia and the South Bronx? The moment China started a space program is the moment they no longer deserved any foreign aid.
REPLY BOBCHEN
8:34 AM ET
July 20, 2010
I don't understand.
Why couldn't the Global Fund make the requirement for nations with low-to-middle income AND the largest population with AIDS/tuberculosis/malaria.

This loophole has been around for 8 years, and nobody at Global Fund thought to close it?
REPLY KASEMAN
9:51 AM ET
July 20, 2010
HIV is racially blind
All humans are the same altho some more so than others
REPLY FIRST ADVISOR
6:13 PM ET
July 20, 2010
American Jingoism and China-Bashing
As the brainless bigotry of many comments demonstrate, this essay is merely more US China-bashing, with no purpose or conclusion at all. Some posters proudly display their utter innumerancy by arguing that China is wealthy, apparently incapable of performing the Grade 4 artihmetic of dividing GDP by population. Monkeys in a cage in a zoo have more common sense.

What is immediately obvious, and most important to an intelligent, educated reader, is the astonishing rudeness and inexcusable offensiveness of a supposed professional diplomat publicly criticizing and complaining about the national government of any country. Dr. Chow confesses that as far as he can tell, no one in the entire world cares about China's so-called 'scam', not even his own government.

He makes up, out of his own head, highly questionable speculation and extremely dubious conclusions, trying to explain to himself and the reader WHY no one else in the world seems to care but him. This is elementary school fights nonsense. It is shocking, and deeply embarrassing, to see a supposed diplomat make a public fool of himself, ranting and raving and foaming at the mouth over an imaginary bugaboo that only he can see.

It would be folly for any nation not to take advantage of any cost-savings they could find in healthcare, particularly in the realm of prevention. The claim that China can afford healthcare for 1.3 billion people isn't just shocking and ludicrous, it is flatly, factually false and untrue. As amateur propaganda, the allegation is outrageous -- defamatory, slanderous, and libelous, against every member of the State Council.

Dr. Chow appears to have a mean, petty, spiteful, and vindicative pet peeve against one specific country, for doing exactly what any and every country in the world would do in similar circumstances. We can only speculate over the reasons for his prejudices and bigotry. But try as we might, nothing can justify his exposure and deliberate exhibition of his obnoxious envy and resentment in front of the whole planet. This is unforgivable, intolerable, unacceptable behavior in any would-be diplomat.
REPLY AMOSYARKONI
7:53 PM ET
July 20, 2010
Yeah First Advisor -
"The claim that China can afford healthcare for 1.3 billion people isn't just shocking and ludicrous, it is flatly, factually false and untrue."

Yeah, instead China has to make room in its budget to spend billions on the Olympics and the shanghai expo. I mean it's "ludicrous" that we expect them to use that money on their own health care! Or that they use money from their huge budgetary surplus! Instead, let them take it from poor Africans. I mean those African countries must be having surpluses from their booming economies, right?.....right?......crickets......
REPLY FIRST ADVISOR
10:41 PM ET
July 20, 2010
Zany and Incoherent Reply
Do you know what a return on investment is? The ROI on a nation's first ever Olympics, and a nation's first ever World Expo, is incalculable in both income plus the abstracts of prestige, status, goodwill, future contracts, and so on. Try and figure out the return on investment, with a calculator, pen and paper, of healthcare for HIV/AIDS patients, who in China are virtually all hard drug addicts, with a sprinkling of homosexuals and prostitutes. What is the benefit to China in providing treatments to those people, exactly? Show me the money, in dollars and cents. Condoms don't do much good for people shooting up heroin with a dirty needle. The same is true of the majority of the incidence of TB in China; nearly all the sick people are hard drug addicts.

Now read very carefully, because this involves arithmetic, which is clearly not your strength. If China tries to sell any -- ANY -- of its holdings in the bonds currency of other nations, such as USA six-month Treasury bills, the value of the treasury bills and the US dollar will plummet, the value of China's holdings would collapse, the global market would be flung into turmoil, America would certainly be plunged into a second recession, and quite possibly a second Great Depression would begin. Selling those T-bills is the very last thing China can do. Their holdings in US debentures are worthless to them. They simply have no other choice over buying them, because there is nowhere else to put their money. If you think the Chinese don't resent this dilemma, you are incorrect.

No one is taking anything from African nations. Don't you grasp the simple fact that Dr. Chow is not a reliable source of information? Look at the dishonesty and deceit of his essay. Are you telling the world you actually believe the silly fairytales he writes? Even Mr. Chow's own US government doesn't agree with his hysterical obsessions; don't you get it? In fact, HIV/AIDS is a trivial disease, of no concern to any national government. Heart and stroke harm is 10 times worse, at least, and smoking, obesity, diabetes, mental illness, autism, and dozens of other medical conditions are all hugely more important and serious. You really should stop letting newspaper reporters tell you what to think, and what not to think about.
REPLY MERVYN
8:59 PM ET
July 20, 2010
juxtaposition of the world we live in
There is no white man's burden with the Chinese.

Why sub-Saharan Africa, Latin America, or impoverished Central Asia are on the first list when HIV/AID spread is concerned? I might add Indochina to that list. China and few others are now getting out of name and shame list. The vaccine used are exclusively made from Western Phama companies, thus the high cost.

I don't disagree that China should get less of the fund allocation, but only few countries can afford the vaccination without subsidies. I'd suggest let the big phama to phase out rights on most demanded drugs and make licensing available of generic version to India or China phama. Then push the Chinese and Indian to donate these generic drugs to where it is required, domestic and overseas.
REPLY HERA
4:47 AM ET
July 21, 2010
who get the money at last?
What we should be concerned with shouldn't be whether the Global Fund should provide China great amount of aids, but how can they ensure that the money really arrives at people who are in need. It is undeniable that among 1.3 billion Chinese people there must be some one suffering from various diseases, especially in undevelopement area such as the Mid-Western countryside. The real tragedy is that bureaucrats safisfy themselves from corruption instead of giving this money to those who need it.
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July 21, 2010
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REPLY XTIANGODLOKI
3:02 PM ET
July 21, 2010
It's all funny money anyway
When America gives $1 Billion to Africa for AIDS most of the money is going to fat consultants who sit around and do nothing anyway. Dr.Chow who came from the upper echelons of McKinsey probably knows this well; getting paid hundreds to thousands of dollars per hour to BS about the non-existent magical bullet which would solve the hardest problems in an instant. Whatever.

The reality is that money going to 3rd world nations do not generally help because that money never gets to the right hands anyway. This is why after spending billions after billions places like haiti still stand on their own.
REPLY CANADALEX
4:48 AM ET
July 22, 2010
flawed reasoning
The article correctly presents the issue, but uses specious reasoning and arguments to make a china=bad guy case.

"(China stays in this lower-middle-income category because its huge population keeps per capita figures down.)"

It presents this fact as if China were gaming the system by having a huge population. No, in fact there is a reason we use per-capita figures to judge income. Otherwise we can make claims like India is over 2x as rich as Switzerland (GDP). This issue seems very simple. Chinese gov't realizes they can get grant money through Global Fund, so obviously they're going to take it. I highly doubt many countries would pass up an opportunity for free money. Yes we can blame China for using a loophole, but we should also blame the fund for being unable to properly disburse its funds, and allowing China to do this. The fund is clearly aware this is happening and could easily put an end to this. But it hasn't, (and as the article touched on) the reasons (as they most often are) are likely political. This isn't a transfer to help China with Malaria its another political tool to transfer funds to China.

We can get mad at China for taking free money, but we should be at least as critical of an aid system which is funneling money inefficiently to countries which don't stand the most to gain.
REPLY LIONEL
5:02 AM ET
July 22, 2010
China remains poor!
In the article, Jack Chow notes, parenthetically, that "(China stays in this lower-middle-income category because its huge population keeps per capita figures down.)" This is true. China remains a low-middle income country for a simple reason -- because most people in China remain poor.

As of 2009, PPP-adjusted GDP in China puts the country on par with Namibia and Algeria. China's economic power is mostly a function of its population size. China is still not rich.

In 2007, the World Bank reported there were over 300 million Chinese living on less than $1.25 a day. Despite China's rapid progress, it's hard to imagine that number is much less than 100 million in 2010. In any event, by the more stringent measure of $1.08 a day, China currently has about 50 million poor. China is still not rich.

China's county governments, which are responsible for most health spending and collect most taxes, are so cash strapped that they sell land to meet about 50 percent of their revenue needs. Selling off the currency reserves is not an option -- it could lead to economic implosion and misery. China is still not rich.

China has made remarkable progress but remains a country with a serious poverty problem, and needs serious assistance.
REPLY FASHIONLOVE
3:06 AM ET
July 23, 2010
China is still a poor country
All information as mentioned is very useful for us to catch up the updated news and knowing many facts around the world. China even though a big country, many parts of it remain poor and life is still hard for many people. Still, this is somewhat unreasonable when China received so many aids every year more than countries who need it.

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REPLY CITIZEN8
5:57 PM ET
July 25, 2010
First Advisor-huh????
First Advisor, if China is a world player, then like the US and other world players, its actions are subject to scrutiny and praise or criticism as the case may be. Observers are free to agree or disagree to criticisms they wish. However, what is the point in slamming a piece that you don't like by throwing around words like "brainless China bashing," "bigotry," "mean," "petty," spiteful, and "vindictive," "amateur propaganda," and nasty personal attacks, etc.? "American jingoism" in an article that hold Russia up as a model of behavior? Your posts may make you feel better, but it reads like a hysterical, hypersensitive, nationalist rant as do your rude comment to another poster. Rather, it would have advanced the discussion if you actually countered with a fact-based reply. Show me the bigotry and vindictiveness, etc. Instead, you bash and distort the article to such a degree that one has to wonder if your real intention is simply to stifle any examination of Chinese behavior.

You say in your second post that China can't possibly afford providing health care to all its citizens. Well, yes, that is an enormous undertaking, and you could have mentioned that China gets aid from countries like Japan to provide aid in the health sector. Even so, one has to wonder about China's acceptance of finds from the Global Fund or from Japan when it is sitting on enormous currency reserves and spending ever-increasing billions of dollars in aid overseas, with a new pledge of $10B in loans and $1B fund for business development to Africa made in November 2009. Given China's foreign aid program of several billion dollars a year and its spending on assets around the world, surely it could rustle up a $1 billion somewhere for more funds for health care in China, couldn't it? Using $1 billion of foreign currency for spending of home is not going to cause worldwide financial turmoil.

(BTW,why aren't you chiding China for taking money from the Global Fund if it is such a wasted effort to you? it's interesting that you see no need treating people with HIV/AIDS in people you consider worthless, even though TB is spread through proximity, and HIV+ prostitutes could spread the disease to their customers who refuse, or don't have access to condoms?)

Instead, it sure does seem like that on one hand, China is extending a hand to other developing countries while on the other, through its actions vis-a-vis the Global Fund, harming the poorest countries by taking aid resources that could have gone to them. Is this part of China's effort to keep its aid and investment front and center in the minds of people in the recipient countries while diminishing the Global Fund's presence? That may not be China's intention at all, and the author notes that China's Health Ministry may have various reasonable reasons for taking money from the Global Fund, whether it might be domestic budget considerations or the desire for technical assistance. (Even the author, whom you attack so viciously, notes that Beijing faces funding issues in health and that the Chinese health system faces "formidable challenges.") Whatever the reason, China's behavior vis-a-vis the Global Fund creates a perception problem. Such a problem could have been avoided if, for example, China donated the equivalent of the grants that it received, thereby getting the technical assistance without depriving other nations of grants from the Global Fund.

You criticize the article for singling China out. Well, are there other donors to the Global Fund who are also taking more out the fund than they put in? In fact, are they are any other donors who are currently receiving funds? (I don't know; I really am asking.) If not, then China's behavior is worthy of notice.

You also didn't seem to understand Mr. Chow's position or that of the US Government. "Supposed professional diplomat" and "would-be diplomat"? He worked --past tense--in the US Government, He is not part of the USG now. He is a private citizen, and in the United States, private citizens are free to voice their opinions, according to the First Amendment of the US Constitution. As for the US Government's official position on the subject of this article, the only mention is that there has been no "open," that is, publicly mentioned, official concern about this development. Why is that? Maybe it is because there is no official concern, and you're correct on that point, though you don't provide any evidence supporting your claim. Maybe because until this article, no one has drawn people's attention to this situation. Maybe it is because it is a concern that the US doesn't want to air publicly because as the author notes, donors don't want "to provoke a reaction that impacts other diplomatic or political equities elsewhere." Similarly, it is not at all clear, as you claim, "no one else in the world cares." The billions that China is spending in poorer countries, and those countries' need for markets may be the causes of the silence. Moreover, Mr. Chow does offer ideas why there has not been much public discussion. Unless they work directly on this issue and are somehow involved in the Global Fund as a recipient or a donor, people would not learn about this issue if not for an article like this.

If anyone owes anyone an apology for being offensive, it is you, First Advisor, with your attempts to intimidate anyone who might not look at everything China does through rose-colored glasses. No country is perfect, and in the United States, individuals are free to express their opinions. (I would not be surprised if you now attack me with another venomous tirade on this board, which will only prove my point that you are a bully attempting to stifle discussion. How about proving me wrong and providing an evidence-based reply to Mr. Chow's article?)