New ICAI information note: The UK’s aid engagement with China

28 Apr 2021

  • New information note from Independent Commission for Aid Impact (ICAI) details for the first time the “complex mosaic” of UK aid to China – which in 2019 reached a record high of £68.4 million, although majority (68.4%) went to UK research institutions or diplomatic efforts.
  • Report highlights that UK aid to China, which covered 11 areas of spending, has had a strong emphasis on promoting secondary benefits alongside primary purpose of poverty reduction, with the Prosperity Fund, which spent £25.7 million on collaborations with China from 2016-2019, claiming it created £912 million of export orders for UK companies.
  • ICAI’s report also raises questions about the government’s approach to transitioning out of the aid relationship, following last week’s announcement that FCDO would scale back some of its support, and with China due to become ineligible to receive any aid in the next four to six years.

The UK’s aid relationship with China comes under the spotlight in a new information note published today, Wednesday 28 April, by the Independent Commission for Aid Impact (ICAI).

The report from the aid watchdog – which as a factual information note is not evaluative and is not scored – sheds light on the “complex mosaic” in which UK aid has been spent by multiple government departments supporting China’s own development, pursuing mutual interests, partnering with China on global development challenges, and working with third countries, particularly in Africa, on their engagement with China. Research for the note was completed before the Foreign Secretary’s announcement last week that part of the UK’s spending – the Foreign, Commonwealth and Development Office’s (FCDO) aid to China for programme delivery – would be cut to £900,000.

The note explains that according to the latest official statistics, UK aid to China from across government hit a record high of £68.4 million in grants in 2019 – though ICAI identified additional spend engaging with China on global issues which it calculated took the total to nearly £82 million. ICAI said that more than two-thirds (68.4%) of the official spend went to UK research institutions or diplomatic efforts, and much of it included a strong emphasis on promoting secondary commercial and diplomatic benefits for the UK, alongside its primary purpose of poverty reduction. As a factual information note, the report does not make any recommendations, but sets out four areas for further review by the government, parliament, ICAI or other organisations.

ICAI commissioner Sir Hugh Bayley, who oversaw the report, said: “To date, there has been a lack of information in the public domain about the full extent of the UK’s aid spend in relation to China, which has inevitably raised concerns about how this money has been spent. Despite its dramatic growth, China is still classed as a developing country and remains eligible for aid under international rules – although that is expected to change within a few years.

“This note does not examine the impact or the value for money of this spending but by mapping out how, where, and by which department UK aid has been spent, in a factual and transparent way, we hope to support informed discussion and lay the foundations for further scrutiny. This is particularly relevant given the government now plans to scale back some of its aid to China, though questions remain about what this will mean in practice.”

ICAI’s note explains that the former Department for International Development (DFID) announced its intention to stop direct aid to China in 2011, in recognition of its economic growth and status as a rising global power, and to instead move towards a partnership in which it worked with China on global development issues. Meanwhile, other aid-spending departments “scaled up” their spending from 2015, putting in place new partnerships with China in areas such as research and innovation, health, and climate change. In total, the note maps out UK aid in and with China across 11 areas of spending.

In addition to the record official grant aid to China of £68.4 million in 2019, ICAI identified further UK aid spending including work with China to tackle development issues in third countries, and regional and global programmes implemented in China, which it calculated brought the UK’s total aid engaging China that year to nearly £82 million. Aid spend in 2019 included £12.1 million for diplomatic costs overseen by the FCDO; £10.8 million to promote the UK’s ‘soft power’ through educational and cultural partnerships via the British Council; and funding to cover the costs of scholarships for some Chinese students studying in the UK (£1.7 million). The note also includes details of the Prosperity Fund, which spent £25.7 million on collaborations with China between 2016 and 2019 and claimed as secondary benefits to have also supported UK exports to China worth £912 million.

Although the FCDO has announced cuts to the aid it spends on programme delivery, ICAI noted that it had not clarified its plans for its future spending to China in relation to diplomatic activity, work by its arm’s length bodies, or aid spent by other departments, with ICAI adding that the government announcement appeared to suggest the cuts would largely affect the Prosperity Fund. The watchdog also found that there had been little planning by the government for transitioning out of its aid relationship with China when the country becomes ineligible to receive aid in the next four to six years, and that this raised questions about how the UK would continue to fund collaboration on shared priorities described in the Integrated Review, such as climate change and health.

The note concluded that four areas of the UK’s aid relationship with China would benefit from further scrutiny – how to ensure an ongoing focus on poverty reduction; strategies for transitioning out of aid; how to improve transparency with the public about the nature of UK development cooperation with China; and the use of ‘development diplomacy’ – the use of aid funds to support diplomatic engagement on development.

ICAI will request further information from the government and plans to update the note once further details of the government’s plans for its future aid engagement with China are known.

Read the report

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