Comparing PRC and USG Foreign Assistance Approaches

This policy brief aims to provide a comprehensive comparison of PRC and USG foreign assistance approaches, focusing on both qualitative and quantitative differences. The PRC's foreign assistance is often targeted at expanding developing countries' infrastructure to develop stronger export markets for PRC products. In contrast, the USG's foreign assistance is primarily focused on public health, economic development, and democratic governance. Furthermore, the PRC's overseas projects are often financed through loans with onerous repayment terms, whereas the USG's assistance is typically grant-based. A quantitative analysis of PRC and USG foreign assistance reveals distinct strategies across the two nations. While PRC assistance has increased substantially in recent years, spiking in 2013 when President Xi Jinping first announced the Belt and Road Initiative, the assistance is most heavily concentrated in dozens of countries that receive billions of dollars in economic assistance from the PRC each year. In contrast, USG assistance between 2001 and 2017 was more evenly distributed to developing nations based on need. The PRC's assistance portfolio has been shaped by its economic growth and outward generosity. Since its inception, the PRC has provided bilateral assistance to developing countries, with the eight major principles for foreign assistance first articulated by PRC Premier Zhou Enlai in 1964. However, the PRC's assistance differs from the common conception of aid, as it often falls under the OECD's "other official flows" (OOF) category, which includes grants for commercial purposes and funds that directly support private investments in risky regulatory environments. The PRC's lack of transparency on foreign assistance has made compiling development assistance notoriously difficult. In addition to traditional development assistance, the PRC heavily provides semi-concessional and non-concessional loans, which are presented as attractive options to borrowers. The PRC has also made repayment of debts easier by allowing borrowers to use natural resource exports as a sufficient form of repayment. The USG's modern approach to assistance began with the Marshall Plan following World War II to help rebuild war-torn Europe. This approach was codified into policy with the Foreign Assistance Act of 1961, which established the United States Agency for International Development (USAID) as the USG's primary aid donor organization. Through this act, aid was originally intended to be sourced from the foreign operations and agriculture appropriations measures. However, by the 1990s, aid from individual departments had become a substantial portion of the USG's overall assistance. The quantitative analysis of PRC and USG foreign assistance utilizes the AidData project by William and Mary, which measures both PRC Official Development Assistance (ODA) and the PRC's "Other Official Flows" (OOF) to compare PRC foreign assistance commitments with USG foreign aid obligations tracked by ForeignAssistance.gov. The resulting comparison reveals distinct strategies across the PRC and the USG, with the PRC's assistance being more heavily concentrated in a smaller number of countries and the USG's assistance being more evenly distributed to developing nations based on need. Overall, this policy brief provides a comprehensive comparison of PRC and USG foreign assistance approaches, highlighting both qualitative and quantitative differences. The findings of this brief can serve as a basis for more targeted research moving forward, providing insights into the complex landscape of foreign assistance and its implications for developing countries.