Development and China report

• Report: DFID and China
• International Development Committee

China is now a middle-income country with significant financial reserves. DFID therefore currently plans to withdraw financial support to aid projects in China in 2011. The Committee acknowledges that China has made huge progress in poverty reduction. However, around 16 per cent of China’s population—equivalent to nearly one-third of the population of sub-Saharan Africa—still lives in poverty. Just under half of China’s population has no access to basic sanitation and a quarter lack clean drinking water. Affordable healthcare is beyond the reach of many and, amongst vulnerable groups, HIV/AIDS is spreading fast. Millions of people have been pushed into poverty by the May 2008 earthquake and the global financial crisis.

The Committee therefore believes that the UK’s development relationship with China should continue and that it should be funded by DFID—but at a reduced level of between £5 million and £10 million annually from 2012 and 2015. This would be for specific projects and would bring substantial returns in helping to ensure that the Millennium Development Goals for health, education, sanitation and water are met by their 2015 deadline. Just as importantly, it would also promote UK influence on China’s approach to development not just at home but overseas, including in relation to China’s engagement with African countries.

The Chairman of the Committee, Rt Hon Malcolm Bruce MP, said:

"DFID has one of the most successful aid programmes in China. But its work there is not yet complete. Despite recent rapid growth, there is still substantial poverty in China. The global financial crisis and the 2008 earthquake have exacerbated existing poverty. The Department has built influential relationships through its support to health, education, sanitation and water. Representatives of international agencies told us, when we met them in Beijing, that DFID would struggle to maintain these hard-won relationships without providing some funding. We believe it would be wrong for DFID to risk this, just four years before the 2015 Millennium Development Goal deadline."

The Committee criticises DFID for failing to publish a new Middle-Income Country Strategy to replace the one which expired last year. The Department has, however, made clear that it plans to continue to spend 10 per cent of its budget on middle-income countries like China which can have a global impact on poverty reduction. The Committee’s recommendation to continue funding for China therefore fits into DFID’s overall approach to emerging economies.

DFID’s approach to date has been to introduce small-scale pilot projects in basic services which, once their success has been demonstrated, have then been scaled up and expanded by the Chinese Government. The Committee concluded that this strategy has been highly cost-effective in gaining the maximum effect from limited resources and believes that it should continue.

The Committee also believes that continued DFID support would help China develop sustainably. It argues that the path that China chooses in terms of carbon emissions, energy use and its sourcing of natural resources will have enormous implications for the international community’s efforts to address climate change. DFID currently leads UK Government support to adaptation to climate change in China and is the lead department in China for the successful UK-China Sustainable Development Dialogue.

Malcolm Bruce MP said:

"DFID has built influence and expertise on development aspects of climate change, such as agriculture, that other UK Government Departments would struggle to replace. The costs of not helping China to continue to develop, and to develop sustainably, are likely to be higher to the UK taxpayer than providing limited funding for an ongoing development partnership."

The Committee believes that a continuing development partnership would help DFID transfer lessons from China’s own development to other developing countries—and enable it to draw on its own innovative work in China to inform its programmes elsewhere.

Malcolm Bruce MP said:

"DFID’s relationship with China provides a learning experience which benefits both countries. Continuation of DFID support in China would transform the relationship into a co-operative partnership in which the amount of funding was secondary to the exchange of ideas and expertise, with the potential to bring enormous mutual benefit."