Created: 5/1/1984

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ts referred to in tanOf SouU)O of the Ctaima-

lastrahr^re. UQs^alta. Portugal, andJiofTjQgi America except Cuba;ll of the Middle East anil

C hinese Military sjk! hcnaomk-Profrasas iathe TUrdowing Coinmociml 1

Keyeconomic aid and military transfer programs In the Third World

changed draimrjcaily (TO the past five9 Beijing

Io emphasize militaryo earn hard correacy and to reduce

ecooomic aid to conserve rcsoarees for its economic development. Since then. Beijing baa'cmpaasuted coeameraal payoffs in almost all of its dealings with devesdesag countries by:

Increasing its anus saka almostimes over those of tbe previous four year*9 Chins haa signed agreements to2 bUlioo of5 percent of them to Egypt, Libya, Iran. Iraq, and Pakistan

The new policydical departure for Beijing in tbi Thud World. Earlier. China had provided both economic and military aid on generous terms to poor clients who often could notore costly Western presence- China never at tempted to compete with other military suppliers in the quantity or sophistication of weaponry. Military uroe-monU featured mostly small arms and. for tome clients, old-model tanks and aircraft The economic program highlighted showy projects, sach as the Tan-Zam Railway ba Africa, andstadiumsumber of countries.

It may be difficult for Beying to maintain existing levels of miliary isles once the Iran-Iraq conflict is resolved- More aggressive Cmocsc anna sales policies could have only margiaa] results because of increasing competition among suppliers and LDC demands for more modern military equipment. Chins could offset some of these factors by.

Specializing in the export of basic military equipment, rapport facilities, and spare parts and ammunition for Soviet-made equipment.

Aggressivelyew more advanced weapon systems, such aset fighters and improved medium tanks.|B

services appearajary rates and China's reputationbostfbmioi frQrfow- inexperience withnrpmcnl often wed on projects where China is r. China horaining program thathta obstacle. We believe that economic and technical exchanges will continue to be the mainstay of Chinas program through the end of tbe ccntury^^

hard currency. Chinaedto scu ':hulion of weapons to LDCsecord


x% mJiUryla the previousyesifcTTi*.

Iran-Iraq'war has propelled China intothe UKRL'lttiflilmon to Iran, Beying :

The new cmphuis onv, direcuon-ofwW^iirTlZ


'^awayfroiu'tridro'dnal Asian and African"wca'aW Middle Pastern LDCs (figure ?M HP

'^.The Soviet Union's,upplythe'.sratflraq warwith^^


StmmU Mltltmrj Teekaieml Pmence. Unlike tbe case* of ihe Soviet Union ud un East European countries. Chiaa'i opaadiai arm taka hate aot ledamer iocrcaac ia military technicians aad adviicri. Onlyhinese military pertoaocl were la LDCi inabout uk lame number ai over the paH decade. China generally baa brca reluctant tolarge number, of military tecJuaciam to IIXtacy Tear ia*oliuucet in conflict. China, as oceuwo, has era denied rcqwem to angmgni rti military presence ia client iibIcj

fAddiiiqnally. tho umophiatieat-

ed CbiocseTuLtary equipment eliminates the need for


China does Hill seek political gains. Beijing isgrant aid for dissident groups that havef buying eQuiptnenl elsewhere.

Relartona: DcTckeUa Coanoereili Potential

Entering tke Intenmtlennt Camancfimn Field. As with the military program, China is catting down on giveaways in its economic aid and is now emphasizing commercial returns and hard currency earnings from technical services. The economic program has evolvedodest effort featuring liberal amounts of grant aidajor campaign to sell technical services and equipment for profit. Iscijing's current leadership is trying to posh China into tho world economy by introducing its most salableas cheapthe international marketplace. In its aid program.eeking to combine enhanced hard currency earnings with benefits to LDC economics. gaW

New Aid Hia Record Lows.0id pledges have fallen dramatically*^^

fa victim of China's economic retrenchment inao period.ew traditional recipients have received significant new commitments toprograms. Agreements inomprise less

Economic Aid

ts old tffonshird World6ew scattered teoaemlc commitment! to iu Eon Allan neighbors, the program escalated rapidly In ihe, as China competed with Ihe Soviets for influence by extending aiiiitanct to newly Independent countries In Africa. Over Iht pastean. China has used lit So billion aid program loumber ofpolitical ends.ompeilng with the Soviets for leaderthlp of ihe in ihe Thud World Us membership In the United Nationser worU orgamHettoms

Compeilng/or leadership among Third World countries.

Rewording Soviet clients that have mad*oscow.

China 'i economic program historically has been mort important than military sales as an Instrument of Influence la the LDCs.hina's total economic Old pledges outweighedo I. Several characteristics set Chinaeconomic old program apart from that of Other donors:

More than half of lit aid has been concentrated on Africa, an area generally neglected by other donors

Project Implementation Is fast. About two-thirds of China's total eommilment4 has been delivered.

Aid has been focused on infrastructure, primary Industries, and agriculture prominent deficiencies

in LDCs.

Projects art easy in operate and art import saving, such at limpltcs for food and ra* materials, textile plants, and agriculturefactories.

Arf/fflf provides adequate technical support and finances local costs of projects throughor cash trantfert under credit or gram agree-menis.

Chinasaf competing domtt-tic priorities -to provide economic aid as it had before marks the demise of one of the most generous and most popular aid programs la the Third World. China has never had the resources nor the inclination toajor aid patron: Its economic old to the Third World has accounted for lestercent of total aid to LDC, over the past twoalf decades. Chinese officials have always Mretted that self-help programs are the only wcy that LDCs can Improve their economies and care for their growing populations. Stilt. China Is the most popular donor In many countries, particularly in Africa,as focused on LDC development objectives often Ignored by other countries. China's assistance has beenand relevant to LDC needs Most af the aid wets Interest free, repayable overoearsyear trace period tMU

thanercent of Chinas total economic aid5rowntrend taat began in tbe. Chinese economic aid increased3ost was provided on somewhat harder tenns thanrepayment periods, krw interest cbarfoa. aad almost no grant aid. Tac terms of Chinese assistance still are far more leecrou than those of most other Commaaist and some Western dooonffl

ard Corrency Rnouree


The provision of project personnel has become the mainstay of China's economic program la LDCs as commit ate nu of capital to aid projects dwindle. The ana ber of Chinese employed in the Third World10 aaowuy ha Iraq. Jordan, and North Yemen. Beijingmall technical presence lo build relationships with such Soviet-oriented Marxist states aa Angola and Mozam-

Technical services, which formerly were provided free by Beijing lo almost all aid recipients, are now being promoted to earn foreign exchange About half of0 Chinese economic technicians employed

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