China’s economy has grown so fast, that even as it today towers over most developed nations, and in fact finances their budget deficits… it’s still receiving foreign aid from them:
China spent tens of billions of dollars on a dazzling 2008 Olympics. It has sent astronauts into space. It recently became the world’s second largest economy. Yet it gets more than $2.5 billion a year in foreign government aid – and taxpayers and lawmakers in donor countries are increasingly asking why.
With the global economic slowdown crimping government budgets, many countries are finding such generosity politically and economically untenable. China says it’s still a developing country in need of aid, while some critics argue that the money should go to poorer countries in Africa and elsewhere.
Germany and Britain have moved in recent months to reduce or phase out aid. Japan, long China’s biggest donor, halted new low-interest loans in 2008.
“People in the U.K. or people in the West see the kind of flawless expenditure on the Olympics and the (Shanghai) Expo and it’s really difficult to get them to think the U.K. should still be giving aid to China,” said Adrian Davis, head of the British government aid agency in Beijing, which plans to wrap up its projects in China by March.
In 2008, based on most recent data from the OECD, Japan gave $1.2 billion, while Germany gave about half this. France and Britain are the next two largest donors, while the U.S. only gave $68 million due to restrictions post-Tianamen Square. While the figures involved are small relative to each developed nation, the funny thing is that all of these developed nations are running budget deficits, while China is accumulating the amount of foreign debt it owns.
It’s almost as if Japan (Or the U.S.) gives aid money to China, but then finances this charity by taking a loan from China, then paying interest to China on the charity it provided… to China. Yes the world is a complex place, but it’s just an extremely peculiar arrangement here.