On April 17, Japan's government decided to cease its grant aid to China. The policy will become effective this summer. Japan has long provided grant aid to China under the government's Official Development Assistance (ODA) program.
However, in light of China's rapid economic development in recent years, the Japanese government believes that China is no longer an appropriate aid recipient -- not to mention the fact that the two are involved in a dispute over oil in the East China Sea.
As a result, Japan has decided to divert most of the aid money orginally earmarked for China to India.
So what is grant aid? According to the ODA White Paper, published by Japan's Ministry of Foreign Affairs, the country's development assistance overseas can be divided into three major forms: donations, yen loans and technical aid.
Grant aid refers to the donation of money, materials and technical aid that the recipient state does not have to pay back. Yen loans refer to low-interest loans from the Japanese government that the recipient state has to pay back in yearly installments. Technical aid refers to industrial upgrades and technical cooperation under the direction of Japanese enterprises.
Next, what are the policy considerations behind Japan's ODA? First, much of Japan's foreign economic aid is actually based on commercial interests. The Japanese government believes that such assistance should be coordinated with the overseas business activities of Japanese companies, so as to maximize the impact of the government's assistance -- killing "two birds with one stone," so to speak.
Comparing figures provided by the Economic Cooperation Bureau under the foreign ministry and the Japan External Trade Organization, we find that the greater direct investment by Japanese companies in a foreign country, the higher the value of yen loans and technical aid it receives and the lower the value of grant aid.
Japan's Ministry of Economy, Trade and Industry believes that commercial interests are the foundation for overseas economic assistance. The premise is that aid recipients must receive a great amount of direct investment from Japanese companies before concessionary money is granted.
Japan's development aid is also coordinated with the government's overall strategic planning. The Japanese people believe that government aid should accommodate not only the nation's business interests, but also the nation's strategic and political priorities.
The publications of the Economic Cooperation Bureau also talk about the changes in Japan's aid to China after 1982. Whenever Sino-Japanese bilateral relations have been tense, the amount of aid in that year has decreased.
Examples of this are the decreases in 1989 and 1990 due to the Tiananmen Square massacre, and later in 1995 and 1996 due to the missile crisis in the Taiwan Strait, when the total value of its aid decreased year by year. It is thus evident that Japan's overseas aid is based on political considerations, but these considerations are also dependent on the US' East Asia policies.
Japan's economic and political interests reside just beneath the humanitarian face of its ODA program. Hence, it is not surprising that Japan is using its ODA policy to constrain China's rapid military expansion and strengthen its relations with India.
Tsai Zheng-jia is an associate research fellow in the Institute of International Relations at National Chengchi University.
Translated by Eddy Chang
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