Berlin It seems paradoxical: although China has long since risen to become the systemic and economic competitor of the West, the People’s Republic still gets subsidized and state-backed loans from KfW. According to Handelsblatt information, however, these are now being put to the test again as part of the development of the China strategy.
The funding has been controversial for years. But while the classic bilateral development cooperation from the federal budget was discontinued in 2009 by the then Development Minister Dirk Niebel with reference to China’s strong economic power, the support from the KfW loans continues.
“The question arises as to whether this form of “development aid” is still appropriate,” says an internal paper from the Federal Ministry of Economics, which is available to the Handelsblatt. The Federal Government is currently holding intergovernmental talks on the question of how to deal with such loans in the future, the Ministry for Development Aid (BMZ) confirms.
The Ministry of Economic Affairs is not only bothered by the fact that the development policy-related China business of the German development banks (KfW, DEG) is incompatible with “China’s de facto status as an industrial country”. The officials also criticize that the funded projects are often infrastructure projects with a “questionable climate contribution”.
Top jobs of the day
Find the best jobs now and
be notified by email.
For example, the construction of a train connection from the port city of Tianjin to the new international airport Daxing near Beijing is currently being funded. The star-shaped, state-of-the-art transport hub is a prestige project by China’s head of state and party leader Xi Jinping and is intended to multiply the capacities of the extremely climate-damaging mode of transport in the Chinese capital.
As can be seen from a list by KfW, the promotional loan from KfW for the train connection, which is intended to bring passengers to the airport, totals 70 million euros. KfW argues that the measure is intended to strengthen rail transport “in order to reduce greenhouse gas emissions from motorized individual transport and thus contribute to global climate protection”.
>> Read here: How Germany wants to win the race with China in Africa
When asked, the BMZ emphasizes that the project is an older loan. In the meantime, the BMZ has “continuously” increased the level of ambition for the targeted environmental and climate impacts in the context of the promotional loans.
Other loans on preferential terms also raise questions. Traffic control systems in the Chinese city of Huainan are being financed with a KfW development loan of over 15 million euros – here, too, the climate contribution can only be seen with a lot of imagination. The traffic flow improved by these systems leads to a reduction in climate-damaging exhaust gases in road traffic and thus to improved air quality, argues KfW.
In the years 2013 to 2020 alone, China was granted preferential loans amounting to just over three billion euros.
(Photo: dpa)
Even the projects that are explicitly labeled as environmental and climate protection seem strange from the point of view of an industry insider with whom the Handelsblatt spoke. It is therefore extremely questionable how various afforestation projects are supposed to make a substantial contribution to reducing emissions from the world’s largest emitter of climate-damaging greenhouse gases – and how their implementation is checked at all.
Viewed individually, the projects may seem like small animals – especially since, as the BMZ emphasizes, funds are being used that KfW raises on the capital market. No budget funds would be used.
But the amounts add up – and everything that is invested in China is not available in other countries: The Federal Ministry of Economics calculates that in the years 2013 to 2020 alone China will grant preferential loans amounting to just over three billion euros became.
According to the development aid ministry, KfW loans for the People’s Republic still amounted to around 81 million euros in 2021.
The Federal Ministry of Economics would prefer it if the federal government quickly agreed on expiring the loans. Representatives of the traffic light coalition are also calling for it to be phased out.
Till Mansmann, development policy spokesman for the FDP parliamentary group in the Bundestag, advocates keeping the current loan promises. “We should show that we are trustworthy partners who value contract compliance,” said Mansmann. “But after the end of the term, the loans should not be reissued so that KfW can concentrate on supporting our partner countries in traditional development cooperation,” demands the FDP politician.
>> Read here: Race for Africa – China’s influence is growing, Germany is struggling
One of the reasons why the loans are still ongoing despite widespread skepticism is of a political nature. Because the financing is counted towards the official development aid rate of 0.7 percent of GDP, to which Germany has committed itself as part of the Sustainable Development Goals (SDGs). Simply redeploying the funds is not that easy, since a number of formal criteria have to be met and projects have to be created in the target countries.
The fact that China still qualifies for development assistance of any kind is due to the People’s Republic’s classification as a developing country. This is based on criteria from the OECD, which the Ministry of Development relies on.
According to the organization, a country is considered a developing country until its citizens have an average income of more than US$13,205 per year for three consecutive years. According to the World Bank, China is currently just below that at 11,890 US dollars.
However, this is also due to the enormous income differences in the country. While very rich people live in metropolises such as Beijing and Shanghai, many are still destitute, especially in rural areas. If Beijing and Shanghai were separate countries, says development economist Andreas Fuchs from the Kiel Institute for the World Economy (IfW), they would no longer be classified as developing countries.
The Green Member of the Bundestag and development politician Deborah Düring considers the criterion for classifying a state as a developing country to be outdated. “One should discuss whether it still makes sense to determine this status solely on the basis of per capita income,” she says. Against the background of growing global inequality, this classification is no longer sufficient. However, she does not think it makes sense to revoke the status of a single country like China. The criteria would have to be negotiated internationally – and apply to all countries.
More: China’s Ambassador in Berlin Wu Ken: “Cold War mentality”