China’s Billion-Dollar Aid Appetite

Back in 2001, I was the lead U.S. negotiator in international talks meant to transform the way that poor countries fight some of the world’s most pernicious diseases — HIV/AIDS, tuberculosis, and malaria. Our vision looked like this: Instead of each country spending on its own, rich countries would pool donations into one coordinated fund that would give grants to help resource-strapped countries purchase medicines, build health programs, and prevent the diseases from spreading. We imagined the bulk of the money ending up in places like Lesotho, Haiti, and Uganda, where these three diseases have reached crisis levels. So it might surprise and concern you — as much as it still does me — to learn that one of the top grant recipients isn’t in sub-Saharan Africa, Latin America, or impoverished Central Asia. It’s a country with $2.5 trillion in foreign currency reserves: China.

Over the eight years since the Global Fund to Fight AIDS, Tuberculosis and Malaria first launched, China has applied for and been awarded nearly $1 billion in grants, becoming the fourth-largest recipient of funds behind Ethiopia, India, and Tanzania. Already, the country has drawn nearly $500 million from this credit line and soon expects to receive $165 million in new grants. China’s aggregate award from the fund is nearly three times larger than that of South Africa, one of the most affected countries from these three diseases. Moreover, China has won malaria grant money totaling $149 million (and $89 million more might be on the way) — in a country where only 38 deaths from the mosquito-borne illness were reported last year. That is more than the $122 million awarded to the Democratic Republic of the Congo, which reported nearly 25,000 malaria deaths during the same period. In fact, only seven sub-Saharan African countries receive more malaria aid than China — and 29 countries in Africa get less. Combined, those 29 countries report 64,000 deaths from the disease each year.

China has aggressively pursued Global Fund grants and has continued to win significant amounts with every passing year. Beijing does make a nominal contribution to the fund of $2 million annually, meaning that it has donated $16 million over the last eight years. By comparison, the United States, the leading donor, has committed $5.5 billion, and France has offered $2.5 billion over the same period. These contributing countries expect no financial return for their gift, but China has recouped its spending by 60 times.

Even more alarming, China’s persistent appetite threatens to undermine the entire premise behind the Global Fund. The organization’s leadership is trying to solicit between $13 billion and $20 billion to cover its next three years of operations — a tall order at a time of global recession. Donors will grow even more reluctant if they realize that substantial funds are being awarded to a country that can more than pay for its own health programs.

How did China ever become eligible for grants in the first place? In short, because of a loophole. The Global Fund decides eligibility for grants based on the World Bank’s classification system, which divides countries by income. High-income countries such as the United States, the European industrial countries, and Japan are ineligible. Low-income countries, including many in sub-Saharan Africa, are grant-eligible. In between, so-called lower-middle-income countries like China are eligible if the grants are part of a cost-sharing program through which the fund pays up to 65 percent and the country pays the rest. (China stays in this lower-middle-income category because its huge population keeps per capita figures down.) The country competes with the likes of Bolivia, Cameroon, and India in this category. But because the fund’s pot of money isn’t allocated by income group, any grants that China wins reduce the remaining money available for all eligible countries.

For a country like Cameroon, cost-sharing grants make a lot of sense. By giving part of the full amount, the fund can spur the host government into investing more of its discretionary budget in health. The extra cash can build health infrastructure and capacity, preparing the country to wean itself from foreign funds. But in China’s case, the argument for a Global Fund grant is tenuous at best. During the depths of the world economic crisis in 2008, China put forth a massive economic stimulus package of $586 billion that included new health and education spending of $27 billion. The government announced its intention to boost rural health coverage with $125 billion in spending over the next several years. Even a fraction of that promised amount would negate any need by China to draw upon the Global Fund.

This is not to say, of course, that China’s health system does not face formidable challenges. Indeed, global health policymakers worry that HIV/AIDS and tuberculosis in particular could rise dramatically as the country urbanizes and industrializes and a new middle class veers away from traditional social mores. Everyone remembers the SARS outbreak in 2002 and 2003 that practically shut down major cities in China. And beyond specific threats, the Chinese Center for Disease Control and Prevention, the chief implementer of the Global Fund portfolio and officiator of the government’s public health strategy, has hard work ahead to build up China’s health workforce and medical infrastructure.

But China might want these grants for reasons having more to do with politics than public health. The Health Ministry is the only member of China’s policymaking State Council not led by a political party member. As such, its ability to compete for domestic funds pales in comparison with other assertive, powerful ministries led by longstanding party leaders. So the Health Ministry might be driven to external funding by political necessity. Or, China might value obtaining the technical assistance of international health agencies such as the World Health Organization, UNAIDS, and the U.S. Centers for Disease Control and Prevention; Global Fund grants provide a means of securing their advice and services. China’s participation on the fund’s board might also be useful to Beijing’s global politics, confirming its importance on the world stage.

Whatever benefits China gains from seeking grants, however, stack up poorly against expensive opportunity costs exacted upon needier countries. The $1 billion awarded to China could have been used by the poorest countries to distribute 67 million anti-malarial bed nets, 4.5 million curative tuberculosis treatments, or nearly 2 million courses of anti-retroviral therapy for AIDS patients (a number equivalent to all those living with the disease in Kenya).

It is intriguing that health ministers from the poorest countries have expressed neither concern nor opposition to China winning grants. Nor has there been any substantial public challenge to or debate about the money China has received from the Global Fund. Part of the reason might be structural; the fund’s large 26-member board (which includes representatives of countries, regions, organizations, and the Global Fund itself) operates based on consensus, and its meetings are time-constrained forums that pressure members to make rapid decisions. Changing eligibility policy, for example to exclude China, would entail time-intensive negotiations that may well pit groups of grantees against one another. The board also approves grants en bloc, relying upon the advice of technical experts who review them for feasibility and public health impact, not fairness, balance, or a country’s ability to pay.

Even so, there is likely more behind the silence than just procedure. For many of the poorer countries that lose out, opposing China in international forums would risk incurring Beijing’s diplomatic wrath. Health ministers are skittish to imperil their country’s broader interactions with China, which in the case of African countries, often entails Chinese loans, grants, infrastructure projects, and investment — and indeed, even further, health aid. In turn, African countries seeking access to the burgeoning Chinese market must curry Beijing’s favor. Any country that openly opposes China at the Global Fund might see these economic links broken or be put at a disadvantage to competitors. And so the neediest countries endure a loss of grant money to China through their collective silence.

Donor governments have also been mute or reluctant to oppose China at the Global Fund, perhaps for similar reasons of not wishing to provoke a reaction that impacts other diplomatic or political equities elsewhere. In the United States, neither Congress nor the White House has voiced open concern that an amount equivalent to President Barack Obama’s entire fiscal 2011 Global Fund budget request of $1 billion has gone to a country that can afford to pay its own way.

This has left the fund’s leadership as the only front left for trying to change China’s stance. Based on China’s national income and the rate of other donor contributions, the Global Fund recommends that China should give $96 million over the next three years, amounting to 16 times its current annual donation. In 2007, prior to China’s hosting of a board meeting in Kunming, the fund asked China’s government to up its donor commitment, but the appeal went nowhere. In June, with fundraising pressures escalating, the fund’s executive director, Michel Kazatchkine, met in Beijing with Chinese Vice Premier Li Keqiang, who issued a vague promise to cooperate with international organizations to expand disease prevention and treatment, but made no announcement to refrain from taking new grants or signaled any intent to become a major donor.

Not even a rival country’s actions seem to have convinced Beijing. In recent years, nearby Russia has transformed itself from recipient to donor, and it has done so under arguably less favorable economic conditions than those in China today. In 2006, then President Vladimir Putin pledged to repay the Global Fund $270 million over four years, covering the past assistance it received, and announced $156 million in new domestic spending for HIV treatment. Now four years out, Russia has paid in $250 million to the Global Fund, essentially fulfilling Putin’s pledge.

It is audacious for China to assert that it needs international health assistance on par with the world’s poorest countries. In fact, at the same time it is drawing from the Global Fund, China is building its entire global image as one of economic growth, accumulating wealth and international stature. To boost its public profile and prestige, China spent billions to host the Beijing Olympics and the Shanghai World Expo. Surely it could spend another $1 billion of its cash on health as well. And why not take it one step further? By becoming a Global Fund donor, China could win acclaim with the West and the world’s poorest — earning exactly the kind of respect that a rising power deserves.