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TABLE 1.-CHINA: ECONOMIC AID EXTENDED TO THE THIRD WORLD, 1956-77-Continued

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TABLE 2.-China: Economic aid deliveries to the Third World

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TABLE 3.-China: Economic Technicians in the Third World1, 1977

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TABLE 3.-China: Economic Technicians in the Third World1, 1977—Continued

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1 Minimum estimates of the number present for 1 month or more, rounded to the nearest five. Includes laborers in some countries.

2 Excludes up to 20,000 Chinese personnel working on a border road project.

III. EVALUATION OF ECONOMIC AID, 1975-77

There were no surprises in China's aid offerings in 1975-77; most of them focused on Africa and only four agreements exceeded $50 million in value. The moderate size of China's recent agreements is more in keeping with China's economic capability than the commitments earlier in the decade.

As for those earlier programs, Peking's $400 million commitment to the Tan-Zam railroad, accounting for over half of the record extensions of 1970, remains the exception to the usual Chinese practice of providing lines of credit spread over a number of development sectors within the recipient country. The typical Chinese aid package of the early seventies was in the $40 to $100 million range, allocated to a variety of projects. Since 1974, individual new offerings have shrunk in size, and some agreements call only in general terms for economic coopera

tion without specifying the value of credits. Recent agreements continue to stress labor-intensive light industrial and agricultural projects, with a high technical assistance component. Peking has turned down several African requests to provide assistance to railway construction and other major infrastructure projects.

China's economic aid program maintained a brisk pace in 1975-77 when measured by actual disbursements. Thirty percent of the $2.3 billion in total aid deliveries to LDC's came in these 3 years. (See table 2, p. 854.). Whereas deliveries in 1971-74 were dominated by the needs of the Tan-Zam railroad project, deliveries in 1975-77 were more widely distributed. Major project starts included a $55 million deep water port project in Mauritania, studies for a $90 million canal project in Tunisia, a road in Madagascar, expansion of a heavy machinery complex in Pakistan, and a $30 million irrigation project in Sri Lanka. Road construction projects costing $400 million neared completion in Ethiopia, Pakistan, Rwanda, Somalia, Sudan, and the Yemens.

Chinese agreements to finance local project costs in the Third World have enabled China to cope with shortages of local funds and skills that often jeopardize the success of undertakings by other aid donors. Chinese commodities and consumer goods for sale on LDC markets usually take up about one-third of Chinese credits. The proceeds are used for the purchase of land, local building materials and equipment, and salaries of local workers. While some LDC's have complained about the difficulty in disposing of some Chinese goods because of poor workmanship and high prices, most agree that local funding contributes heavily to the success of Chinese programs. The Chinese maintain tight control over aid projects, providing administrators, skilled personnel, and often unskilled laborers as well.

More than 24,000 Chinese technicians were employed in Third World countries in 1977, the highest number since the beginning of the program. The departure of 10,000 technicians from the Tan-Zam railroad construction site was offset by an influx to other African projects. Sub-Saharan Africa continues to account for about 85 percent of the Chinese aid personnel abroad.

In 1977, about 40 percent of Chinese personnel stationed abroad were working on transportation projects, 30 percent on agricultural projects, and 5 percent on medical projects. China's low-cost technical services program has been the most widely praised aspect of the PRC development effort. China does not charge hard currency for technicians; LDC's pay only a local subsistence allowance (the equivalent of about $1,200 a year), for housing, food, and transportation costs within the country. In some cases, particularly for medical teams, China probably defrays even these modest local costs. (See table 3, pp. 854-855.)

Medical services have proven one of China's most effective economic aid programs in the Third World. The $50 million of known Chinese assistance to public health has gone largely to construct hospitals in 16 countries; this sum does not include the wider effort that has brought Chinese medical teams to at least 35 developing countries. About 1,500 Chinese medical personnel were working in developing countries in 1977. Most of them operate rural clinics that in many cases have brought the first medical services to patients in outlying areas. Chinese medical assistance has attempted to address a priority need of poorer LDCs' for a basic health services program, not limited

to urban centers. Chinese medical teams typically are composed of 10 to 15 physicians, laboratory technologists, and assistants who bring their own equipment and medicines with them.

IV. GENERAL ASSESSMENT OF ECONOMIC AID PROGRAM

China's reputation as aid donor among poorer nations is unmatched. The provision of well-balanced aid packages that effectively promote both economic and social development has enabled China to escape criticism often levied against Western programs for ignoring basic human needs. Chinese aid packages have allowed for improvement of welfare and productivity while attacking basic deficiencies in infrastructure and agriculture.

For example, Mauritania's President, in a recent newspaper interview,' identified Chinese aid as most important because "China's involvement in health, agriculture and construction leads to the establishment of an economic infrastructure." Chinese skills and technology have been particularly pertinent to the poorest LDC's; countries with annual per capita incomes of less than $200 have received more than half of China's aid pledges since the beginning of the program.

Chinese economic aid always has been directed toward the development of infrastructure, primary industries, and agriculture. The most prominent contributions are still to railway, road, bridge and port construction (35 percent). Aid to agriculture, irrigation and multipurpose projects accounts for 20 percent, and aid to light industry for another 20 percent. Only 5 percent has gone to heavy industry, all in Pakistan. The balance has been channeled to urban development, to geological surveys, and to tourist, sports, educational, cultural, and medical facilities.

Chinese roads and other transport projects open new areas to development and ease bottlenecks in the transport of goods and personnel. In North Yemen, for example, China has built half of the nation's road network, and in Somalia and Sudan, about 10 percent. The Tan-Zam railroad, now operating at partial capacity, has speeded up delivery of goods to the interior and to Zambia, easing congestion at the port of Dar es Salaam.

Industrial and agricultural projects are adapted to the needs of the particular LDC. Profiting from its own post-WWII experiences, China has emphasized low-cost, easily operated projects that will save on imports. Projects often provide simple processing facilities for raw materials. Such light industrial projects as textile, plywood, paper, food processing, and, agricultural implements plants are constructed at low cost and are put into production rapidly. They draw on readily available local resources of manpower and materials. Usually minimal skills are required for their operation and maintenance.

Commodities and cash transfers-sometimes as outright grants-are an important component of the program. China has provided almost half a billion dollars in hard currency and commodities as direct Dalance of payments support, in addition to the goods that move under credit arrangements to generate funds for development projects. Chinese aid to the Third World ranks among the most concessional offered by any donor. China has provided nearly half a billion dollars in outright grants during the 1970's, for an overall total exceeding $800

1 CHAAB (Mauritania), February 8, 1978.

million since the start of the program. In recent years, Peking has further softened the terms of its credits to the Third World. The typical Chinese development agreement of the 1960's was interest-free and allowed repayment over 10 years after 10 years grace. Now, grace periods range up to 20 or 30 years, and amortization periods often are longer than before. These compare with average Western repayment periods of 33 years, including 9 years grace at 2.6 percent interest.

V. TRADE RELATIONSHIPS WITH THIRD WORLD

China's expanding aid activities in developing countries have created conditions for initiating and consolidating trade ties. Along with its vigorous aid program, in 1970 China launched a major export drive in LDC markets to assure a long-term return flow of industrial raw materials. In 1976, Chinese trade with the Third World (excluding Hong Kong) totaled $2.5 billion-$400 million below the record established during the price boom in 1974, but still triple the 1970 level. Trade levels turned upward again in 1977.

While China conducts only about one-fifth of its trade with the Third World, these countries have become an important source of foreign exchange earnings. LDC's are helping to pay for Peking's imports of machinery, technology, and industrial materials from the developed world. From an average of $235 million annually in the early part of the decade, the Chinese trade surplus with LDC's rose to $925 million in 1976, compared with an overall deficit of $1.4 billion with the non-Communist industrial countries.

In recent years, LDC's have enhanced their positions as both buyers and sellers on the Chinese market. Third World consumers have become increasingly receptive to Chinese manufacturers, taking about onethird of Peking's industrial exports in 1976; for example, one-half of China's exports of machinery and transport equipment, 25 percent yarn and fabric exports, 25 percent of clothing exports, and more than one-third of grain exports. At the same time, Third World raw materials suppliers captured almost half of the Chinese market for crude mateials in 1976. They provided all of China's $45 million in petroleum imports, more than 90 percent of its rubber and cotton, 75 percent of its crude fertilizers, and half of its nonferrous metals.

VI. MILITARY AID DEVELOPMENTS

China's total military aid commitment to LDC's is a little less than $800 million, largely for small arms, ammunition, vehicles, and training. Though spread among roughly 40 countries, more than 75 percent of the assistance has gone to Pakistan and Tanzania.

The small size of the Chinese military aid program stems from inability to compete with Western or other Communist suppliers in arming Third World establishments. China's military production lags Western and Soviet technology by about 20 years. To overcome its current serious military deficiencies, Peking itself is shopping in Western countries for late model military technology and equipment. Peking's plans for self-sufficiency in producing late-model weaponry depend on revitalizing its industrial sector and only after China can modernize its own forces, will it be willing to share more of its military output with Third World clients.

Regional arms balances have been rapidly changing in the Third World, for example, in the Horn of Africa. These changes are the result

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