China faces reduction in aid from EU

By Andrew Beatty

Date: 09/02/06

China's rapid economic growth could soon trigger a reduction in EU development aid, a senior EU official hinted this week.

With the EU facing a budget squeeze from 2007-13, officials are re-evaluating external development assistance, with aid to China, Brazil and other emerging economies to come under the microscope.

"It is obvious that when we look at countries such as China or Brazil, the development of their economies and the geopolitical role they play, co-operation based on 'business as usual' would be naive and not at all logical," said Koos Richelle, director-general of the European Commission's EuropeAid Co-operation Office.

"This year will see an interesting debate with member states on the allocation of the external assistance budget for 2007-13 to certain regions or countries."

China has posted near double-digit growth rates since 1999, surpassing the economic output of many EU member states. Brazil's growth in gross domestic product in 2004 hit 5%.

Officials point to the need for China and Brazil to harness their economic growth and improved trade position to contribute towards reaching the United Nations' Millennium Development Goals.

Since 2000 the EU's trading deficit with China has increased from around EUR 50 billion to EUR 80bn in 2004, an average annual growth rate of 15%.

The Chinese government has said it wants to level the disparities among its regions by 2020 through promoting domestic trade.

Much of the EU's annual EUR 150 million assistance to China is aimed at poverty eradication and the country's dire environmental problems, but non-governmental groups cautiously welcomed the move.

Simon Stocker, director of Eurostep, a platform of development NGOs, said it made sense for the EU to direct funds to countries that have few of their own resources.

"China is an enormous country with poor population but the impact of the EU's resources is marginal," he said. According to data from China's National Bureau of Statistics for November, the gap in per capita household income between the richest province, Shanghai, and the poorest, Jiangxi, was around EUR 100 per month, more than the national average.

Under Commission proposals the amount of aid for development and humanitarian aid will gradually decrease over the next budget period.

The share allocated to accession countries and the neighbourhood partnership and stability instruments will increase.

The European Commission's EuropeAid Cooperation Office suggests that the EU will review which countries receive exteranl development aid in the future - and that countries such as China, Brazil and other emerging economies will stop receiving aid.