China issues new framework for foreign aid

Out-Law News | 09 Sep 2021 | 12:40 am | 1 min. read

New guidelines on the administration of China’s foreign aid programme have been published.

Issued jointly by the by China International Development Cooperation Agency (CIDCA), the Ministry of Foreign Affairs (MOFA) and the Ministry of Commerce (MOFCOM) and effective 1 October 2021, the guidelines clarify the framework for China’s foreign aid programme and the division of responsibilities between the different government departments. 

Under the guidelines, CIDCA has overall policy and budgetary responsibility for China’s foreign aid programme. MOFCOM is responsible for implementation and providing support, and MOFA is responsible for making recommendations on foreign aid in line with Chinese foreign policy as well as for on-the-ground liaison and monitoring. 

Foreign aid will primarily be project based and approved by CIDCA, and the guidelines expressly provide for the possibility of collaboration with other countries, international organisations and non-governmental organisations on foreign aid. The guidelines also set out the procedures for terminating or suspending foreign aid where a project cannot be implemented for reasons such as national security, force majeure or diplomatic reasons. 

The guidelines identify the different types of foreign aid available with nonrepayable aid targeting disaster relief, public and social welfare and humanitarian assistance, zero-interest loans targeting public infrastructure and industrial or agricultural production, and concessional loans targeting productive projects with economic benefits, resources and energy projects, and large infrastructure projects.

To ensure transparency and accountability, the guidelines contain specific whistleblowing, information gathering and auditing provisions. Civil and criminal penalties may be imposed for certain acts or omissions, including corruption and dereliction of duty. 

CIDCA was established in 2018 and is China’s first independent foreign aid agency. The Export-Import Bank of China and CIDCA are the two bilateral creditors designated by China for participation in the G20 Debt Service Suspension Initiative.

The trial version of the foreign aid guidelines were issued by MOFCOM in 2014 will be terminated once the guidelines come into effect on 1 October 2021.

Finance expert Kanyi Lui of Pinsent Masons, the law firm behind Out-Law, said: “The issuance of the guidelines significantly clarifies China’s legal framework for providing foreign aid and signals the conclusion of the latest consultations and reforms to China’s foreign aid framework. How things will work in practice remains to be seen, but improvements in coordination benefits not only China but also the aid recipients, particularly those experiencing distress. ”