Is China Rich Or Poor? Does It Deserve Foreign Aid?

November 9, 2011

It’s been a while since I studied economic development, and these days I’m only likely to glance at some basic indicators, like GDP per capita. But I saw this article today on Vox, and it kind of blew me away. I was really surprised at these numbers:

In 1990, 93% of the world’s poor lived in low-income countries (LICs). Now, more than 70% – up to a billion of the world’s poorest people or a “new bottom billion”– live in middle-income countries (MICs) and most of them in stable, non-fragile middle-income countries.

This is really important when you consider how foreign aid works, whether it’s money coming from individual nations, international bodies, or philanthropic organizations.

So we have a lot of countries now, including India and China, that have “graduated” from low income status to middle income (China is at the high end of that category already). The problem is obvious and relates to the way foreign aid works:

This new geography of global poverty raises some basic questions about aid to help the poor of the world. Although the details vary from scheme to scheme and agency to agency, the current architecture of development assistance, especially grants and concessional loans, ‘graduates’ countries from assistance when they transfer from LIC to MIC status. As a result, all major forms of global official aid are rapidly disengaging from the bulk of the world’s poor.

If the subject interests you, read the entire article, which includes policy suggestions. I confess to never having thought of this problem before, even though I am quite familiar with the variance in income in China.

The other issue that comes to mind from reading this is that income level, not geographic location, ethnicity or even language, is becoming a group identifier. Think about this: very soon, your average rich dude in Shanghai will have more in common with a rich dude in New York or London than his fellow countryman living in rural China. Maybe this has already happened? Certainly multinational companies have already figured this out from a marketing perspective.

Globalization is not just about international consumer markets and luxury goods. We now have pockets of poor folks that need to be assisted not on a national basis, but using alternative criteria.

Very thought provoking stuff.

2 thoughts on “Is China Rich Or Poor? Does It Deserve Foreign Aid?

  1. Chris

    The critical issues is that middle income countries have a much greater capacity to help themselves. In the case of China, it urgently needs to reform the way poverty alleviation, social programs and NGO charity organisations work. Ongoing support from foreign aid is not particularly useful at this stage as they provoke a high level of paranoia at government level, thus will be endlessly forced to partner with Chinese governmental and quasi government organisations who will subsequently not change. China already spends far, far more on social development than incoming foreign aid. It already has strong capacity to develop and deliver aid and poverty alleviation programs.

    Its own NGOs exhibit the same lack of accountability as government organisations. There is huge internal pressure for both governmental organizations and Chinese NGOs to become more transparent and accountable for the way funds are spent. This internal pressure will result in major improvements. The Guo Meimei, Nanjing Red Cross, Henan Song Qingling Foundation scandals are healthy signs that the Chinese public wants reform and the responses from these organisations and the government have been reasonable. It is likely that there will be huge improvements in accountability for aid and poverty alleviation programs moving forward because the primary source of aid is either Chinese taxpayers money or Chinese donors to Chinese charities.

    Foreign aid in many senses is a distraction, though many of the projects themselves are valuable. China has the capacity, the funds and the infrastructure to deal with all of these issues internally. It has a robust and sophisticated social and government infrastructure, significant financial resources and plenty of highly trained and educated people.

    Aid resources should be shifted to regions where local capacity is far more limited and should focus on developing that capacity.

    Your points on a rich Shanghainese having more in common with a ‘rich dude’ in New York or London is astute. However, the rich Shanghainese, as a Chinese taxpayer, has a moral and legal responsibility to support the poor in China. Hopefully they will also develop an interest in how their taxes or donations are spent.

  2. Joyce Lau

    I just saw a friend who returned from a volunteer trip in rural China. He’s an overseas Chinese doctor who works with an organization to perform surgery on poor children.

    We looked at his photos of officials in nice cars, pretty nurses lined up like it was a beauty pageant, and hospitals with big impressive lobbies (but, reportedly, pretty poor infrastructure inside). The kids were from poor families, and some were orphans, but most were dressed in colorful new clothes. (I suspect this was in part to give foreign visitors “face.”) We both wondered if there was some sort of government pre-vetting of patients before the foreign delegation got there.

    My doctor friend said that they had to turn down some children, since his team only had a few days to do surgeries, and there was more demand than there was time. Almost all the kids were terribly disfigured, and it’s heartbreaking to think that some would be left behind that way.

    Looking at his photos, I couldn’t help but wonder if this province could afford to help its own disfigured children, if it really wanted to.

    That said, money can’t buy everything. My friend said that many places in China simply lacked enough skilled surgeons — and that takes education, expertise and practice that doesn’t come overnight.

    The work this charity does is great, and it’s not the poor childrens’ fault that there is such a big economic divide in China. But your blog post points out an interesting dilemma. Would this charity be better off helping kids in really poor places, like in sub-Saharan Africa? Does a rising economic superpower really need foreign charity?