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Memorandum submitted by the Department for International Development (DFID)
April 2008
Executive Summary
1. China matters. It matters because of its size, and because of its global reach.
2. What China has done in the past, and what China will do in the future, has had and will have an important impact on whether the world meets the MDGs. Its record of poverty reduction in the last 30 years is a considerable achievement. Approximately 600 million people have been brought out of poverty, amounting to 75 - 80% of the total global poverty reduction effort. Annual per capita income has risen from $210 in 1979 to $2000 in 2006. Nevertheless around 135 and 500 million Chinese still live on less than $1 and $2 dollars a day - the latter figure almost equivalent to the population of the entire African continent.
3. China could have done, and did do, much of this by itself. But it is open to advice, and in certain areas is receptive to evidence of what works elsewhere. Providing evidence of what works in other contexts has helped on a number of occasions in improving the quality of China's own large programmes which provide services to poor people.
4. DFID's annual programme spending in China has been around £33 million over the last six years. Since 2000 it has been tightly focused on assistance to health, including HIV and AIDS; basic education; and water and sanitation. The lessons we have developed in pilot projects have been scaled up to the extent that we are now working directly with national programmes in all three sectors. We have evidence of impact through the transfer of knowledge and new ideas, and that these new ideas have been put into practice for the benefit of poor people. And this is despite aid representing less than 0.1% of GDP, and DFID assistance representing around 2.5% of total aid spent in 2006. If China continues to use the lessons from international best practice there is potential to reach many poor people.
5. Given the pace of China's development, the bilateral programme in China will end by 2011. But China also matters for the overall achievement of the UK's international development objectives. It is as important to engage with China on these issues as any of our G8 partners. DFID works in partnership with the rest of Whitehall in a comprehensive and integrated relationship with China. Our specific areas of co-operation are on poverty reduction and achievement of the MDGs in other developing countries, particularly Africa; on sustainable development, climate change and energy security; and on learning from China's own poverty reduction experience. This dialogue with China has been growing in scope and impact over the last 2 - 3 years, and will continue after the bilateral programme to China has ended.
Key Questions1. What is the appropriate size and scope for DFID's programme in China?
1.1 Country resource allocation within DFID is normally informed by DFID's corporate resource allocation model. This uses relative country need and performance in reducing poverty and achieving improvements in living standards as the basis for allocation. However, China is specifically excluded from the model because of China's overall population - 1.3 billion; and still considerable number of poor people - 135 million. The allocation for China is also constrained by DFID's requirement that only 10% of the bilateral programme can be allocated to middle income countries.
1.2 Since 2002/03, UK annual aid expenditure has been as follows (in £'s 000):
The challenge for bilateral donors in China is to generate an impact when their relative expenditure is small compared to that being spent by the Government of China. Overseas development assistance to China from all bilateral and multilateral sources amounts to less than 0.1% of GDP. The key has been to identify the best way to use aid resources to influence much larger domestic programmes. In DFID's case this has meant concentrating on those MDGs where we have a track record in China and for which the Chinese have requested international support.
1.3 In these circumstances, estimating what is a reasonable allocation for China is a matter of judgement. As noted in the Executive Summary, the UK bilateral programme to China will end in March 2011. Disbursements over the next three financial years are expected to be £35, £30 and £20 million respectively which are the amounts needed to fulfil our final already agreed programmes with China. Further detail is provided in Section 6.
2. Aid effectiveness and DFID's 'added value' compared to other donors to China (a) Background on the bilateral programme
2.1 The 1998-2001 Country Strategy Paper began major poverty-focused activities in health, education, sustainable environmental management and economic and social reform. This focus was continued between 2002 and 2005, with the addition of work on HIV and AIDS. However, in mid-2003 a DFID country office was opened in Beijing, which offered an opportunity to re-evaluate the programme. We conducted a thorough review, including commissioning three external studies. As a result we decided to rigorously focus on helping China to achieve the MDGs in basic education, health, including HIV and AIDS and TB; and water and sanitation. We dropped work on social and economic reform. The aim was to use the results from our earlier projects on basic education in Gansu, HIV and AIDS in Sichuan and Yunnan, and in water and sanitation on an increasingly larger stage by working directly with the central ministries in Beijing to introduce these lessons into China's own large domestic programmes. Our aim is modest: we are trying to improve these programmes at the margin. But if we achieve that then the consequence is that basic services could be delivered more effectively and efficiently to large numbers of poor people. The 2006-11 plan reinforced this strategy and also introduced a new focus on engaging with China on international development issues, particularly on climate change, sustainable development, China's role in Africa and on poverty-focused research and learning.
(b) Other donors in China
2.2 15 bilateral donors and 4 multilaterals (World Bank, ADB, EU and UN) operate in China. The Global Fund is also a significant donor, and the Gates and Clinton foundations are enhancing their profile. Nevertheless, foreign aid forms a very small part of China's overall resources. It is declining further as China's GDP is rising much faster than aid flows. Total official ODA disbursed by all donors in 2006 was $2.76 billion, of which 51% was grants and 49% in concessional loans. In addition, the World Bank and ADB each disbursed around $1 billion in 2006 in market-based lending. Table I and the accompanying pie charts give the details of donor assistance.
2.3 The record on coordination is mixed. Given the strong lead of the government, and the tiny share of aid relative to China's own resources, this is not really an issue. Donors share information in the China-Africa Beijing Group, which meets every four months to discuss China's role in Africa. In the health sector there is strong collaboration and coordination on tuberculosis. All partners support one national tuberculosis programme with one set of monitoring and evaluation targets. At the Government's request, DFID is leading donor activity on HIV and AIDS and aligning it with China's National Action Plan. An informal donor coordination group meets quarterly to coordinate donor activity in the water sector. UN theme groups provide important channels for sharing information on, for example, gender and migration.
(c) DFID's value added compared with other donors
2.4 Our main comparative advantage compared to other bilateral donors is our strong sense of focus. In line with the International Development Act, our reason for being in China is entirely helping China to reduce poverty. Most other bilateral donors do not have this focus. We have been working continuously in our priority sectors since 1999. As noted in para. 2.1, we are now working directly with Chinese national programmes. We have increased the scale of our interventions. For example, our two final interventions in basic education and HIV and AIDS are both £30 million over five years. As Table I illustrates, most other donors have portfolios of relatively small projects covering, typically, environment, human rights, governance, urban development, economic and social reform etc. Such interventions are of course useful, but in themselves are unlikely to effect sustainable changes in China. We have not only implemented programmes of direct benefit to the poor but we have effectively technical expertise and knowledge, which is what the Chinese really appreciate. In addition, our partnership with the World Bank in education, health and poverty reduction have greatly improved the effectiveness of much larger amounts of loan financing. Finally, no other donor has worked as intensively as DFID on China's role in international development.
(d) Impact of DFID's bilateral programme
2.5 China is unique amongst developing countries in its ability to draw on ideas and innovation from others and creatively build on them and roll them out across its vast country, pulling millions out of poverty in the process. When Deng Xiao Ping met Robert McNamara (then World Bank President) in 1978, he said: "We are poor. We have lost touch with the world. But China is a big country. If we want to do something we can. But with the help of the World Bank, we can do it quicker and better". The China country programmes in both the World Bank and the Asian Development Bank are always the most successfully performing portfolios, based on independent evaluation. This is largely because of the strong ownership and commitment of China to effective implementation of projects once they have been approved.
2.6 Because of its population of 1.3 billion, progress in China in reducing poverty has a considerable impact on global progress towards the MDGs. China's progress against the MDGs is shown in Table 2. China has large domestic programmes to provide basic services to poor people. If these can be improved at the margin, there will be significant benefits for poor people. As noted above, this is DFID's sole objective for being in China. We are trying to improve the quality and poverty focus of public expenditure. Our projects pilot new ideas and approaches which are incorporated into national programmes. There is clear evidence that this approach works. Examples of DFID effectiveness are shown in section 3 below.
2.7 Expertise provided through DFID projects also makes a major contribution to the enhanced effectiveness of other donors' resources in China. Our partnership with the World Bank in education, health and poverty reduction has helped improve the effectiveness of much larger amounts of World Bank loan financing. Most of the technical assistance, policy advice and research activities in these projects are funded by the DFID component. Our new joint project with the Global Fund which started in early 2007 makes available technical assistance, policy advice and independent monitoring to the provinces and counties accessing both Global Fund and DFID resources for HIV and AIDS prevention and care. Our funding has also meant that the joint UN programme on AIDS is a reality and not just a paper plan. In order to meet the conditions set for DFID's £2 million contribution, UNAIDS has brought 10 UN agencies together using the same unified framework for planning, monitoring and reporting.
3. DFID's support to poverty reduction in China in both rural and urban settings and especially to basic services including education, health, sanitation and water (a) Rural poverty reduction
3.1 DFID co-funds a major poverty reduction project with the World Bank. The total budget is $100 million, with a DFID commitment of $32.45 million to reduce the interest rate on the Bank loan, plus £5.5 million as a grant. It helps improve the livelihoods of 1.4 million of the poorest rural people in remote regions of Sichuan, Guangxi and Yunnan. The total population of these provinces - 183 million - is more than the combined populations of Burundi, Mozambique, Rwanda, Sudan, Tanzania, Zambia and Zimbabwe. The project supports the participation of farmers in project design, implementation, and monitoring and evaluation. It covers 328,500 households in 1,063 very poor villages, with loans for agricultural activities, improved rural infrastructure and improved health and education. At the mid-point of the project, households with drinking water difficulties have decreased by 20%. About 40% of farmers have received agricultural training. School enrolment rates have increased by 10%. More than 30% of households have received basic health education.
(b) Health (including HIV and AIDS)
3.2 Since 1949 China has made remarkable strides in improving the health status of its population. Nevertheless, China now suffers a growing double burden of diseases characteristic of lower middle-income countries. Non-communicable diseases associated with growing affluence are adding to existing high levels of communicable disease notably the threats of TB and the emergence of HIV and AIDS. Inequalities in health status exist between poor western provinces and richer eastern provinces, between urban and rural areas and among different social and economic groups. The percentage of health care costs met by individuals has increased substantially over the past 20 years. As a result of government policies, a de facto private health care market is operating within the structure of a former nationally funded and managed health system. This has weakened health systems and neglected public goods like preventive health. Many poor people cannot afford basic health care, because of the high level of out of pocket payments.
3.3 The government of China has recognised those problems especially since 2003. DFID is the largest bilateral provider of grant assistance for health in China. Our strategy in China since 1999 has been to support China's efforts to strengthen health systems in order to increase the access of the poor and their efforts to tackle TB and HIV and AIDS. We work in partnership with the World Bank, the UN and the Global Fund.
3.4 DFID support to health systems strengthening focuses on developing pilot projects to improve the access poor people have to health services. The Health 8 project (DFID contribution of £21 million, 1999 - 2007) supported interventions to increase the access of poor people in rural areas to basic health services in 10 provinces in the mid and west of China. 47 million people were covered by the project. 12 million of the poorest enrolled in the medical financial assistance scheme. Independent evaluation shows that it has supported increased immunisation and promoted birth in hospitals with skilled attendants present. This has resulted in big falls of around 40% in maternal mortality in counties covered by the project - a much steeper fall than in non-project counties with a similar poverty level. The Urban Health and Poverty Project (DFID contribution of £10 million, 2001 - 2007) introduced the concept of primary and preventative health being provided by community health service centres. It also introduced the concept of general practitioners as a first point of contact when people fall ill. In addition it piloted financial assistance schemes that provide small sums of money to the poor to enable them to use basic health services. In total 6 million people benefited in four cities in China. This work has been acknowledged by the Government as having directly influenced a national programme that now provides similar financial assistance in 86% of urban districts across all of China.
3.5 Building on the experiences of the two projects, a £6 million health policy support project (2005 - 2009) was designed to help in formulating health policies which explicitly takes the needs of poor people into account. The project is being implemented with WHO and all the key policy makers in 16 Ministries involved in health policy making. It is providing direct support to the current health sector reform process and has given DFID close access to the policy making process.
3.6 Since 2002, DFID has been supporting China's effort to tackle tuberculosis through coordinated multi-donor support to the national programme. The $100 million WB/DFID TB control project (with a £28m DFID contribution) won the World Bank President's Award for excellence in 2003. In addition, we have provided technical assistance to introduce new methods of health promotion and social assessment to better target the poor and vulnerable groups. As a consequence, we have helped to bring national detection rates up from 30% in 2000 to over 70% in 2007 in 16 provinces, covering half of China's population. Cure rates are now well above 85%. 1.5 million patients are being successfully treated. This will increase to 2 million by 2010.
3.7 On HIV and AIDS, we have been supporting the development of models of prevention and care for vulnerable groups since 2000. The project cost was £20 million. This is the single largest source of locally developed models, good practice and materials in China. We have also spent £5 million supporting the strengthening of national and provincial capacity for strategic planning for a multi-sectoral HIV and AIDS response. In 2006 we launched a new joint project with the Global Fund and the UN, targeting high-risk populations in the seven highest prevalence provinces. DFID's commitment is £30 million. This is China's largest HIV and AIDS project.
3.8 As a result of these commitments, harm reduction programmes were carried out with injecting drug users and 100% condom use was promoted with sex workers in Sichuan and Yunnan, demonstrating how these approaches could be implemented on a large scale. Direct beneficiaries included 105,000 injecting drug users, 125,000 commercial sex workers and 33,000 men who have sex with men. 8,400 people living with AIDS received care and treatment. The policy environment was initially very restrictive but harm reduction and condom promotion are now central to government policy on HIV and AIDS. Our current programme will help China scale up its response in seven provinces which are most affected by the HIV epidemic. Direct beneficiaries include 440,000 members of high-risk populations, 79,000 people living with AIDS and 4.5 million members of vulnerable groups including adolescents.
(c) Basic Education
3.9 China runs the largest education system in the world - 20% of the world's students. It presently spends around 3.2% of GDP on education but plans to increase this to 4% by 2010. In 2005, there were 170 million pupils, 9 million teachers and 360,000 primary schools. Net primary enrolment is around 99%, but the figure can be much lower in remote rural areas, where the drop-out rate after enrolment can also be high. Average years of schooling rose from 3.2 in 1964 to 8 in 2002.
3.10 We support China's efforts to achieve nine year compulsory education and improve the quality of education in the poorest parts of China. We focus on access for, and achievement by, the poorest children, particularly girls, children with disabilities and children from ethnic minorities. DFID projects focus on the enrolment and retention of poor children in school; the quality and relevance of teaching and learning; and the efficiency and effectiveness of school organisation, financing and management at the primary and junior middle school levels. Our support is in the poorest counties in Gansu, Sichuan, Yunnan, Guangxi, Guizhou and Ningxia. We also provide support to basic education in Tibet through Save the Children.
3.11 We have three on-going programmes in the education sector. Firstly, the World Bank-DFID Basic Education in Western Areas Project (£24.5 million, 2004 - 2009) focuses on improving access to education in 112 poor counties across five provinces. Secondly, the Southwest Basic Education Project (£27 million, 2006 - 2011) is a bilateral project with the Ministry of Education to support the achievement of nine year compulsory education in Yunnan, Sichuan, Guizhou and Guangxi provinces. This project focuses on poor villages and townships. It uses many of the approaches developed in the previous, highly successful Gansu Basic Education Project. Finally, to roll-out the lessons of our first project in Gansu to other counties in the province, the Support to Universal Basic Education in Gansu Project was launched in April 2006. (£6.25 million, 2006 -2010).
3.12 As a result of this activity, total school enrolment in the Gansu counties went up from 364,000 to 450,000 in 5 years. The World Bank/ DFID project will improve the quality of education for 2.4 million pupils. Our current programme will directly benefit 1,668,000 children in 27 of the poorest counties in four provinces. 220,000 children, mainly girls from the poorest townships, will receive a boarding subsidies. Investments in basic education are very profitable for society as a whole, particularly for girls as the whole family benefits from an increased female level of education.
(d) Water resources management and water supply and sanitation
3.13 China is facing a severe water crisis and current trends are unsustainable. Rapid economic growth, industrialisation and urbanisation are putting huge stress on China's natural resources, especially water. China has 20% of the world's population, but only 7% of the water. Water scarcity and pollution are constraining the sustainability of China's growth, affect public health and cause extensive damage to ecosystems. Recent research estimates that the cost of water scarcity and pollution is around 3% of GDP.
3.14 Over the past two decades, China has made great progress in creating new water management laws and regulations, with a comprehensive Water Law passed in 2002. It includes the principles that everyone should have access to safe water, and that water conservation and protection are a priority. It recognises the need for stakeholder consultation and the integrated management of both surface and groundwater resources at river basin level. It focuses on improving water use efficiencies and better managing water demand through regulatory and pricing mechanisms. DFID provided support for the preparation of the law.
3.15 Currently, over 300 million people in rural areas do not have access to safe water supply (equivalent to the total number of Africans who also do not have access to water). More than double that number lack basic sanitation facilities. Progress in China is crucial to meet the global MDG, as 25% of people without access live in China. The 11th Five Year Plan aims to provide safe drinking water to an additional 160 million rural people by 2010. It also sets targets for 65% coverage of rural sanitation by 2010 and funding has increased. However, the allocation of resources for sanitation is inadequate.
3.16 DFID assistance in the sector focuses on building capacity for planning, coordination and implementation of integrated water supply, sanitation and hygiene programmes; improving institutional arrangements for water resource planning and management at river basin level; increasing stakeholder consultation and public participation in water resources management and service delivery; supporting the use of monitoring and evaluation systems for policy development; and supporting innovation and exposure to international best practice
3.17 The Water Resources Demand Management Assistance Project (£9.4 million, 2005-2010) supports the government of China in implementing the Water Law in two water scarce river basins in Gansu and Liaoning provinces. Through seven pilots in different rural and urban settings, the project develops, tests, documents and disseminates successful approaches and tools for integrated water resources management. The project covers around 750,000 indirect beneficiaries in the Shiyang and Daling river basins and almost 20,000 in the pilot areas. The impact and dissemination of the results is being carefully evaluated. The recently approved integrated rehabilitation plan for Shiyang River Basin already demonstrates river basin management concepts introduced by the pilot, and is consequently making more efficient use of the scarce water resource.
3.18 As part of the China Watershed Management Project (£5 million, 2003-2008, DFID is building the capacity of local institutions and communities in four watersheds in the Loess Plateau in Gansu province. This has contributed to the development of national policies and guidelines for participation of poor people in watershed management. 53,800 people have benefited and 62,000 km2 has been rehabilitated.
3.19 The China rural water supply, sanitation and hygiene education programme (£15.1 million, 2007-2011) is being implemented with the World Bank and UNICEF in Shaanxi and Sichuan provinces. It targets around 750,000 people and over 400 schools. The return on investment is estimated at 27%. We will support the government to address the low priority of sanitation and hygiene through knowledge and advocacy. Lessons and evidence will be disseminated to inform policy and eventual implementation in other provinces. The programme builds on DFID's previous activities in rural water supply in Yunnan and Sichuan, which developed models for community based water supply management. These models and manuals are now used in domestic water supply projects across rural China.
3.20 We have also supported the introduction of 470 water user associations in 10 provinces, targeting around 1.5 million farmers. They have demonstrated real benefits such as the reduction of conflict, more equitable water delivery, water savings, increased transparency and empowerment of women. 25% of all leadership positions within the Associations are filled by women (up from virtually zero). Water fee collection rates have increased up to 60%; water use per acre has decreased, while productivity has increased. Water users' associations are now government policy.
(e) Supporting China's social reforms
3.21 The Start and Improve Your Business project was launched in 2004 as a collaboration between DFID, the ILO and the Ministry of Labour and Social Security. It aimed to reduce poverty by teaching economically vulnerable people to start and develop their own businesses. It was based on ILO's international curriculum and successfully adapted to the China context. The Ministry has expanded the programme from its original focus in 14 cities to a further 100. The original target beneficiaries were 50,000. But by July 2006, more than 750,000 people across China had been trained. 39% of all people trained under the project started businesses. Each year the project expanded and reached more disadvantaged groups, such as migrants, people with disabilities, former prisoners and people at high risk of contracting HIV and AIDS. The total DFID contribution was £2.4 million. This is an important example where the government has rolled out new ideas across China once they are convinced of their relevance and practicality.
3.22 A second project with the ILO focuses on elimination of labour exploitation of children and women, particularly the trafficking in girls and young women. While migration has helped many people escape poverty, it also poses risks. The project has developed information campaigns, which have reached over 1 million women and girls. It helped to establish a network of 700 female employers, which has made a commitment to follow good labour practices. 114 women's homes provide training and referral services. Further, the project has contributed to the drafting process of the National Plan for Action on Anti-trafficking.
4. The effectiveness of the UK Government's strategy to engage with China on international development, especially on Africa, climate change, sustainable development, poverty reduction and energy security (a) Overview of the UK's strategy to engage China on international development issues
4.1 China's economic growth is creating impacts well beyond its borders. Its policies and activities in other developing countries are becoming increasingly significant for the prospects for achieving the MDGs, especially in Africa. Chinese trade, investment and aid flows to developing countries are significant and growing. They will increasingly shape the incentives for good governance.
4.2 DFID first addressed the importance of these issues in 2004. At the Global Poverty Conference held in Shanghai in May 2004, Hilary Benn called for a formal dialogue with China on international development issues. DFID then started to test areas where China would be willing to have a dialogue with the UK. The Chinese were interested in issues around Africa; sustainable development and climate change; aid and aid harmonisation; and helping other countries learn from China's own experience of reducing poverty. After the establishment of DFID North and East Asia Department in 2007, DFID is now considering how to build up a dialogue with the Chinese on their involvement in neighbouring countries such as Vietnam and Cambodia. The overall objective is to maximise the impact on poverty reduction of China's increasing economic and political profile. It directly contributes to MDG 8 - building a global partnership for development.
4.3 In 2007, DFID approved a 4 year £4 million programme to support the dialogue with China. The programme funds a range of structured activities (including seminars, research, senior visits, official meetings, small projects). Other Government departments also have programmes to support the dialogue.
4.4 This work is integrated into the overall UK strategy towards China. HMG's current strategy covers 2005 to 2008. It has three elements: getting the best for the UK from China's rise; fostering China's emergence as a responsible global player; and promoting sustainable development, modernisation and internal reform in China. The overall aim of the strategy is to develop common, consistent messages to China on how it is perceived, and how it can build a productive, cooperative, and sustainable relationship with the international community. DFID fits into the last two elements of the strategy. We have needed to build relations with new partners, pre-eminently the Ministry of Foreign Affairs. We have also raised the profile of development issues in existing UK-China dialogues such the annual Prime Ministerial summits, the China Task Force and the Economic and Financial Dialogue.
4.5 There are three parts to the UK-China dialogue. Firstly, talks between the Prime Minister and Premier Wen, including annual UK-China Summits, reinforced by Ministers forging closer links with their counterparts. The most recent UK-China Summit took place in Beijing in January 2008, covering all sectors. International development was a prominent element of the summit, with China signing the MDG Call to Action, agreeing a partnership on climate change, and signing a memorandum on sustainable cities. At the Summit it was agreed to have a high-level Economic and Financial dialogue with the UK led by a Vice-Premier on the Chinese side. The first dialogue took place in Beijing on 15 April, led on the UK side by the Chancellor of the Exchequer. DFID (Gareth Thomas) and FCO (Lord Malloch-Brown) Ministers were also in the delegation. China previously had only held high level dialogues of this type with the US and the EU. 4.6 There are also several ongoing dialogues or partnerships between UK and China covering the following themes and sectors: sustainable development; climate change; energy; economics and finance; international development; health: education; science and technology; trade and investment; and culture. All these partnerships take place at Ministerial level. Earlier this month the Chancellor travelled to China to take part in an Economic and Financial Dialogue, accompanied by Gareth Thomas, PUSS for DFID and BERR and Lord Malloch Brown, Minister of State at the FCO.
(b) Africa
4.7 China is having a huge impact in Africa. In 2000 its two-way trade was $10 billion. In 2007 it reached $70 billion. It is now Africa's second largest trading partner after the US. In 2006, China's EXIM Bank committed $13 billion to Africa, over twice as much new lending as the World Bank. China invests as much in infrastructure in Africa (estimated at over $5 billion) as all OECD countries added together. China has deployed 1,400 UN peacekeepers in Africa. China's growing trade and investment with Africa and its successful poverty reduction experience offer major opportunities for African development.
4.8 But there are also important issues of concern, including the sustainability of Chinese lending to Africa. There is potential to make more use of local labour and local supply chains in big projects. There is also concern in Africa about a tendency towards bilateralism, a lack of transparency, and concerns about governance and human rights, especially in weak and fragile states.
4.9 The UK response has been to build a dialogue with China on Africa. The then Prime Minister, Tony Blair, invited to provide a representative on the Commission for Africa, which was established early in 2005. In the last two years the focus has been to build long-term relationships at a very senior level with China. The dialogue at Ministerial and official level has been expanding in the last 18 months. Development deliverables were an important part of the UK-China Summit held in January 2008. At the summit the Chinese signed up to the MDG Call to Action. DFID and FCO Ministers met with China's Special Representative for Africa in February 2008. Lord Malloch-Brown's visit to Beijing in August 2007 focused mostly on Africa. The Foreign Secretary visited China in February 2008, during which he hosted a roundtable on China and Africa. Lord Malloch-Brown had further discussions on Africa in April.
4.10 In 2006 China agreed to high-level six monthly formal dialogue with the UK on international development issues. The then DFID Director-General, Minouche Shafik, visited China twice in 2007 to lead this dialogue. There were DFID/FCO Africa Director level talks in Beijing in June 2007 which will be held again in London, by June 2008. DFID and FCO Directors also accompanied the Foreign Secretary to China and held formal discussions with the Chinese. DFID offices and FCO posts in Africa have also been proactive in contacts with Chinese counterparts. Various Chinese delegations have also been to London to discuss policy and potential collaboration.
4.11 The UK now wants to see this dialogue move into practical measures, such as joint cooperation on education and health in Africa; and on infrastructure in countries like Sudan and the Democratic Republic of Congo. Efforts continue to encourage China to join multilateral mechanisms and support standards relevant to Africa. At the same time, China's approach to engagement with some African regimes differs substantially from ours. It will require further sustained engagement in Beijing and in African capitals to make the case that Chinese and African interests will be better protected by encouraging conflict resolution and good governance, and that commercial and political factors are not divorced from development outcomes.
4.12 We have increasing dialogue with China on Sudan. The Prime Minister discussed this with Premier Wen during the UK China Summit in January, as did the Foreign Secretary in his visit in February. Immediately following the visit of the Foreign Secretary, Liu Guijin, Chinese Envoy for Africa, visited London in February for meetings with Douglas Alexander, Gillian Merron, Lord Malloch-Brown and parliamentarians on Darfur.
4.13 The dialogue between the UK and China on Africa is underpinned by a strong evidence base. DFID has earmarked over £1 million to fund strategic studies, capacity building and seminars on development-related themes. Support is being provided to African universities and think-tanks for better information, research and analysis. There is a general paucity of good research and studies, and the support is therefore filling an important gap.
(c) Climate change and energy security
4.14 China is one of the most important countries in the world in regard to climate change, in terms of its greenhouse gas emissions levels, its stance in international negotiations, and the extent to which it might be impacted by climate change. China will overtake the US as the world's largest emitter in 2008. The energy decisions China takes in the next five years will be crucial as these decisions will lock in emissions trends for the next 30 years. This is especially true with regard to coal-fired power generation - in 2007 China built an additional 91 GW of power plant, compared to a total installed generating capacity in the UK of 75 GW.
Mtoe*: million tonnes of oil equivalent
4.15 China recognises that it will need to adapt to climate change. Predicted impacts in China include increased flooding in the south and drought in the north, increased Himalayan glacial melt, significant reductions in net agricultural production and more extreme weather events.
4.16 China's over-riding domestic priority is economic growth. The Chinese Government recognises the broad threat of climate change and accepts the science, although large parts of government still perceive limits on emissions as a potential threat to continued economic growth. However, at the top level, there is now an understanding that China can, and must, contribute to the global climate change effort. China's position at the Bali meeting in December reflected that shift in thinking.
4.17 The main objective of China's energy security efforts is to reduce demand through improved energy efficiency. Energy efficiency should increase by 20% over five years to 2010, and the proportion of renewables from 5% to 15% of energy production by 2020. However, these targets, while ambitious, are probably not sufficient. The overall message that the UK would like the Chinese leadership to accept is that finding a low carbon path is not only essential for China's own security and prosperity, but is also feasible without undermining economic growth.
4.18 The UK Government works closely with China in all aspects of climate change. The overarching strategic objective from 2007-10 for its engagement with China is to promote a faster transition to a low carbon economy and China's role in delivering an international framework. At the PM Summit in January 2008, a Joint Declaration on Climate Change was signed, including the allocation of at least £50 million from the Environment Transformation Fund (ETF).
4.19 DFID is the lead UK government department on promoting adaptation in China. The UK has the most comprehensive and advanced programme of engagement with China on climate change adaptation, compared to any other country or multilateral organisation. DFID China works closely with the National Development and Reform Commission to draw up a programme to assist China's implementation of an effective national and local adaptation strategy, building on the outputs to date of the following two projects:
· Co-funding, with DEFRA, a study on the impacts of climate change on Chinese agriculture, both nationally and in Ningxia province. Conclusions are that China will get warmer and wetter, with significant decreases in crop yields. Some crops may increase their yields, but only if water resources are available. In Ningxia, by working with rural communities and local institutions the project is getting a better understanding of their vulnerability to climate hazards and their capacity to cope with and adapt to future climate change. · Disseminating the conclusions of a risk-assessment methodology to screen domestic infrastructure investments and projects, to assess how their long-term viability might be impacted by climate change.
4.20 With respect to mitigation, DFID China is involved in the following areas to help China access and make use of additional financing for clean energy, and energy efficiency:
· Collaborating with the World Bank and other multilaterals to make the Clean Energy Investment Framework and the Strategic Climate Fund operational, in order to increase investment in energy efficiency and low-carbon technology, especially at provincial level · Developing the investment areas for the ETF allocation of at least £50 million, subject to the development of the associated multilateral funds · Understanding China's needs in terms of technology transfer, and creation of the correct enabling environment for low carbon development
4.21 DFID China is also supporting a task force on energy and low carbon development within the China Council for International Cooperation on Environment and Development - a high-level advisory body to the Chinese Government. The task force will be co-chaired by DFID's Chief Scientist, Sir Gordon Conway.
4.22 DFID China is a member of the UK-China Working Group on Climate Change and a participant in UK-China Economic and Financial Dialogue, which also has a focus on climate change issues. The National Development and Reform Commission describe the UK as their most important partner on climate change.
(d) Sustainable development
4.23 China's economic performance has been impressive, but it has been accompanied by growing environmental and social costs. With increasing economic and ecological interdependence, no nation can address the challenge of sustainable development alone. International collaboration is essential to share lessons and develop solutions. China's environmental problems spill across borders and affect the global commons. Every country therefore has a stake in improving China's environment.
4.24 The Sustainable Development Strategy for the UK recognises the need to work with the big emerging economies to address global sustainable development challenges. In China, it is framed by the UK-China Sustainable Development Dialogue, which promotes collaboration, policy innovation and mutual learning. It was initiated by a joint prime ministerial declaration in 2004. It is led by DEFRA in the UK and the National Development and Reform Commission in China, and is strongly cross-governmental, with active engagement of a wide-range of departments in both China and the UK. DFID is the lead office on the dialogue in China. A joint work plan for 2007/08 sets out activities and deliverables under each theme.
4.25 The aims of the dialogue are to accelerate delivery of international sustainable development commitments; forge alliances to encourage policy convergence and joint action for delivery; establish channels to facilitate mutual learning and understanding; and to create a broad partnership that involves civil society, the scientific community, and business, as well as government.
4.26 The themes of the dialogue are sustainable consumption and production in the UK and China; natural resource management; sustainable urban development; and capacity building and governance. The dialogue builds on and enhances pre-existing bilateral collaboration. It adds value by bringing cross-Whitehall coherence and strategic direction to bilateral collaboration; establishing clear structures with reporting, monitoring and evaluation mechanisms; encouraging innovative cross-sectoral policy approaches; and stepping up ministerial attention and engagement.
4.27 More than 40 projects have been completed or are ongoing, with involvement of more than 20 UK and Chinese departments, as well as a range of stakeholders from universities, civil society, and the private sector. Several working groups have been established for the four thematic areas. The 2007-08 work plan has largely been achieved. We have been able to collaborate on sometimes contentious issues such as illegal logging and unregulated international fishing.
4.28 Some examples of achievements include:
· An innovative project with Yunnan Province to promote the exchange and recycling of wastes between industries. It is the only pilot of its kind and has attracted interest from other Chinese regions. · The launch of a cross-departmental China/UK Forestry Working Group in May 2007 addressing issues such as sustainable forest management, forest landscape restoration, forest law enforcement and governance. · Agreement has been reached to establish a China-UK Sustainable Agriculture Innovation Network to facilitate closer research collaboration; stimulate policy innovation; build awareness of sustainable agriculture issues; and translate research into policy and practical action.
4.29 The dialogue has demonstrated effective new ways of working across government. The staffing arrangements for the dialogue in China are unique. For example, two officers working on the dialogue are funded by DEFRA, but jointly managed by DFID and the FCO, and many projects across the four themes are co-funded by two or more UK departments. UK and Chinese Ministers have recently agreed to further extend the dialogue for a second phase from 2009 to 2011.
(e) Learning with, and from, China
4.30 China's record of poverty reduction can provide important lessons for other developing countries. China has highlighted South-South learning as an increasingly important objective within its growing global role, and as part of its MDG 8 commitment. DFID China supports the articulation and dissemination of such lessons, and supports Chinese researchers to enhance their contribution to international networks of policy research. It does so through a number of initiatives:
· It has provided core support to the International Poverty Reduction Centre in China. DFID has established close collaboration with the Centre, in innovative research on comparing poverty reduction in China and Africa, in a workshop on lessons from aid management, and in helping it to become a global centre of excellence. · We worked with the International Food Policy Research Institute in the production of a set of papers in which senior policy makers and researchers provided insight into key reform experiences that have contributed to China's development success, and how these may be relevant for international experience. · We are supporting Zhejiang University in strengthening their training for African officials on rural development. · Most DFID funded projects in China are developing activities for South-South learning. This involves the articulation of project experiences, and support to establishment of contact and communications between China and other developing countries
4.31 China is also becoming a global power in science and innovation. DFID China has started to explore collaboration with Chinese researchers in the production of global public goods, particularly in research and innovation that can benefit countries in Africa. This is a challenging new agenda. We are exploring whether existing UK-China research collaboration has the potential for pursuing international development goals, working closely with colleagues at the Embassy, British Council, and the UK Research Councils, which recently opened an office in Beijing. We are also actively participating in a UK/China Ministerial dialogue on health.
4.32 As part of DFID's global consultation on its research strategy 2008-13, DFID China organised a series of consultations to explore the potential for collaboration. There were two major conclusions. Firstly, engaging China in research on global development issues can help in achieving the MDGs, because China is a growing source of ideas and innovation in basic science, and lessons from China's policies in health, technology development, and energy use may be valuable to other developing economies. Secondly, Chinese collaboration in international research programs can and need to be enhanced. Identification of research priorities need to be informed by shared interests, and ways of collaborating need to be sensitive to different political and institutional incentives and constraints.
(f) Review of progress
4.33 The main achievements of our engagement with China on international development to date have been:
· A partnership on climate change was signed at the UK-China Summit, including at least £50 million for low carbon development allocated from the Environment Transformation Fund together with increased grant aid for climate change · China signed up to the PM's MDG Call to Action in January 2008. · The UK is one of only three OECD countries that have a formal dialogue with China on Africa. The next round will be in London in June 2008. · Plans are advanced for co-operation in China in the Democratic Republic of Congo · Chinese endorsement of a second phase of the sustainable development dialogue, upgraded to a partnership for 2009 to 2011. · Establishment and partial funding of a Low Carbon Task Force, chaired by Sir Gordon Conway · Business Plan agreed for the UK-China Sustainable Agriculture Innovation Network
5. China's relationship with multilateral development institutions 5.1 China's role and influence in global and regional governance and politics will continue to grow. Increasingly China is taking an active leadership role in international bodies and decision-making processes, as demonstrated in its support of the G22 at the Cancun trade negotiations, proactive stance on some aspects of UN reform, endorsement of the UK's MDG Call to Action and recent positive support for UN resolutions on Darfur. This is a relatively new phenomenon, dating from around 2004. Previously China adhered to Deng Xiaoping's "24 character" strategy: "Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership".
5.2 China has been a strong supporter of the MDGs and in particular in pushing developed countries to meet the commitments they have made in bodies such as the G8 to increase resources for international development. In 2007, China became a donor for the first time to the 15th IDA replenishment. Its $30 million contribution was modest (the UK provided £2.1 billion), but it showed China's acceptance of its global role in dealing with international poverty reduction. China also contributed $120 million to the replenishment of the African Development Fund and will participate in the replenishment of the Asian Development Bank. It is in discussions about membership with the Inter-American Development Bank.
5.3 Chinese nationals are starting to emerge in important positions in multilateral organisations. The World Bank has recently appointed Justin Lin as the new Chief Economist and Senior Vice President for development economics. Margaret Chan was appointed Director-General of the World Health Organisation in 2006.
5.4 China seems much less comfortable about joining looser coalitions such as the Extractive Industries Transparency Initiative, the International Finance Facility for Immunisation and the Infrastructure Consortium for Africa. It tends to regard these as rich-country/OECD clubs that it says are not suitable for China given that it is still a developing country. Indeed, China is developing alternative channels for international dialogue and negotiations (for example, the Boao Forum, the China-Africa Forum, Shanghai Cooperation Organisation) and is playing an increasing role in standards setting in the global economy. The scale of China's economy means it has the power to create standards that are adhered to by countries with which it has strong trade links.
6. DFID's strategy for phasing out its bilateral programme by 2011 6.1 The Chinese government have already been informed that the MDG support part of the bilateral programme will end in 2011. Indeed the Country Assistance Plan for the period from 2006 to 2011 noted that: "We anticipate that by the end of 2011 our partnership will have evolved from a donor-recipient relationship to one largely based on dialogue and cooperation with China on international development issues".
6.2 What this means in practice is that for the period up to March 2011 we will be implementing the currently approved portfolio of programmes concentrating on basic education, water supply and sanitation, HIV and AIDS and rural health. Since the main focus is to influence domestic programmes, sustainability will be evaluated by the extent to which best practice and innovation have been embedded in Chinese domestic programmes, which will obviously continue in the future. Although the resource allocation round allocations for China have not yet been fixed, the framework to which we are currently working is £35 million in 2008/09, £30 million in 2009/10 and £20 million in 2010/11.
7. DFID's support to addressing gender issues in China 7.1 DFID China focuses on mainstreaming gender across all its projects, and working with UN organisations. Over the last year, DFID China's head of office has been the gender champion for the Division, which has helped to increase the profile of gender equality within DFID China's work.
7.2 Gender is mainstreamed in different ways. For example:
· A number of projects focus on issues that concern poor women. Women's reproductive health and maternal health are prioritised in rural health service delivery. HIV and AIDS programmes include training to reduce stigma for commercial sex workers. Education programmes include scholarships for girls. Water supply and sanitation and watershed management projects address key concerns of women, for example reducing the time they spend collecting water. A project on trafficking focuses primarily on reducing risks for young women. · Partners are asked to ensure sufficient gender expertise exists within project teams. For example, in a rural development programme in Sichuan, Yunnan and Guangxi, they were encouraged to create gender focal points and produce a gender check list. · All projects ensure that sex disaggregated indicators are formulated, and data collected and reviewed frequently. · Project design ensures that women have equal opportunities to participate in decision making. In the rural development project, participatory planning and implementation ensures that women's priorities and barriers for participation are incorporated, across a range of different ethnic minorities. In the pro-poor rural water project, extensive training was provided to ensure women could enhance their role in water user associations, and several provincial water bureaux have issued guidelines referring to women's participation. · In dissemination of project lessons, we ensure that women's roles are adequately highlighted. For example, the Start and Improve Your Business project documented the story of a woman entrepreneur opening up a florist shop after receiving training, and how she helped to provide free training to other unemployed people.
7.3 Working with different parts of the UN is a central part of the way we promote gender equality. DFID China is a key contributor to the UN Theme Group on Gender, and has been among the lead agencies in promoting the China Gender Facility, which supports about 25 small projects. These have created partnerships with key Chinese institutions, resulting in advocacy events and legislative proposals on gender equality issues for migrant women, such as discriminatory practices in local governance, and domestic violence. Supplementary background information 8. China's domestic record on poverty reduction 8.1 Poverty reduction in China has been the result of rural reforms, rural industrialisation, and export-oriented production promoted by government through carefully piloted and sequenced reforms.
8.2 At the end of the Cultural Revolution in 1976, the Chinese economy was in a miserable state. More than two thirds of people lived under $1/day. Agricultural growth was stagnant, population growth high, and food in short supply. However, health and education indicators were relatively good, compared to countries at a similar level of income. Reforms started in 1978. Economic growth has been close to 10% per year since then, increasingly generated in the private sector, with supportive state policy, careful macro economic management and gradual institutional reform. After successful experimentation with contracting collective land to farmers in 1977, the household responsibility system was scaled up, significantly increasing overall productivity. Outside agriculture, relaxation of state control promoted self-employment. New ownership models like township and village enterprises kick-started non-agricultural economic activity, and absorbed labour. International trade has increased dramatically, starting in special economic zones.
8.3 As a result of these reforms and economic growth, approximately half a billion people were lifted out of poverty. The numbers of people living on less than $1 per day fell from 634 million in 1981 to 135 million in 2004.
8.4 Inequalities have increased, particularly between coastal and inland areas. The Gini coefficient of income inequality rose steadily, from 0.28 in the late 1970s to 0.47 now, substantially higher than any OECD country - the richest 10% has 35% of total income, the poorest 10% less than 2%. Over the last few years, addressing inequalities has become a corner-stone of government policy to build a 'harmonious society', through targeted poverty reduction policies and expanding programmes of social security. The majority of the current poor are concentrated in remote western and mountainous areas where the natural environment is very fragile. They tend to be heavily dependent on a narrow asset base, have insecure access to environmental resources, and suffer disproportionately from environmental degradation and natural disasters.
8.7 Migration has been a key contributory factor to poverty reduction. Approximately 200 million people have left their birth place to find work elsewhere, and migrants within China send as much as $30-40 billion a year to their families back home.
9. The 11th Five Year Plan (2006 - 2010)
9.1 China's 11th Five Year Plan forms the current basis for the Government's economic and social development efforts. In continuity with the previous Plan, it aims to sustain the rapid and steady development of China's "socialist market economy" while in addition achieving the "five balances" (between rural and urban development, interior and coastal development, economic and social development, people and nature, and domestic and international development) and making economic and social development more people-oriented, comprehensive, balanced and sustainable. It includes two key quantitative targets. Firstly, it aims to achieve annual GDP growth of 7.5%, with the goal of doubling by 2010 per capita GDP from its level in 2000. Secondly, by 2010, it aims to reduce energy consumption per unit of GDP by 20%, and the total discharge of major pollutants by 10%.
9.2. The Plan also includes a number of strategic priorities and major tasks, including:
· rebalancing China 's pattern of growth · deepening reforms and opening further to the outside world · constructing a "new socialist countryside" · promoting more balanced development among the different regions · increasing the capacity for independent innovation.
10. Human rights issues 10.1 The UK works to promote human rights by engaging with the Chinese authorities at all levels, including through high-level visits, regular sessions of the UK-China Human Rights Dialogue, and ongoing project work.
10.2 On his visit to Beijing on 18 January 2008, the Prime Minister discussed human rights concerns with China's leaders. As well as urging China to ratify the International Covenant on Civil and Political Rights, the Prime Minister pushed for progress on media freedom, reduction in use of the death penalty, and democracy in Hong Kong. He also raised the situations in Tibet, Burma and Darfur. The Foreign Secretary discussed many of the same issues with his Chinese counterpart Yang Jiechi while in Beijing on 28 February 2008, and in addition raised some individual cases of concern.
10.3 The UK-China Human Rights Dialogue brings together senior officials from a range of government departments on both sides, as well as non-governmental experts in relevant fields. The 16th round of the Dialogue was held in Beijing on 28 January, and concentrated on two main themes: the role of the police in the protection of human rights; and the rights of ethnic minorities. Officials from the UK Ministry of Justice, the Crown Prosecution Service and the Metropolitan Police led discussion on the role of the police through the medium of a case study, while non-governmental experts led exchanges on minority rights in a separate workshop. In the main talks, FCO officials raised with their Chinese counterparts the full range of human rights issues of concern to the UK. Following the talks the UK delegation went to Tibet, visiting a prison, a monastery, and a university; attending a criminal trial; and meeting with relevant authorities.
10.4 The UK also supports projects aimed at achieving practical improvements in the protection of human rights, in areas such as the rule of law. These projects are undertaken in cooperation with Chinese authorities at local, provincial and national levels. Recent examples have included work on the judicial appointments system, prison management reform, and the recording of police interviews of suspects.
TABLE 1: DONOR ACTIVITIES IN CHINA
(expressed in £'s at the exchange rate at end-March 2008)
DISBURSEMENTS BY DONOR IN 2006
TABLE 2 CHINA: MDG ASSESSMENTS
Goal 1: eradicate extreme poverty and hunger Assessment: on-track
Population below $1 per day (%): 9.9 Children under 5 who are moderately or severely underweight (%): 7.8 Population living below the national poverty line (%): 4.6
Goal 2: achieve universal primary education Assessment: on-track
Net enrolment ratio in primary education (% both sexes): 98.0 % of pupils starting Grade 1 and reaching Grade 5 (both sexes): 86.0
Goal 3: promote gender equality and empower women Assessment: possible to achieve if some changes are made
Gender parity Index in primary level enrolment (ratio of girls to boys): 1.0 Literacy rates of 15-24 years old (% both sexes): 98.9 Seats held by women in national parliament (%): 20.3
Goal 4: reduce child mortality Assessment: possible to achieve if some changes are made
Mortality rate of children under 5 years old (per 1,000 live births): 27 1-year-old children immunized against measles (%): 86
Goal 5: improve maternal health Assessment: on-track
Maternal mortality ratio (per 100,000 births): 56
Goal 6: combat HIV and AIDS, malaria and other diseases
Assessment: HIV and AIDS off track, malaria on track, tuberculosis possible to achieve if some changes are made
People living with HIV, 15-49 yrs old (%): <0.2% (>6% among injecting drug users and men who have sex with men) Proportion of population with advanced infection with access to anti-retrovirals: 38% Prevalence of tuberculosis (per 100,000 people): 208 Proportion of TB cases detected and cured: 80% and 94%
Goal 7: ensure environmental sustainability Assessment: insufficient information
Land area covered by forest (%): 21.2 Carbon dioxide emissions per capita (metric tons): 3.8393 Access to improved drinking water sources (% of total population): 78 |