Official Development Assistance (ODA)
Economic Cooperation Program for China


1. Recent Political, Economic and Social Developments

(1) Political developments

In 1978, the 3rd Plenum of the 11th Chinese Communist Party Central Committee declared, "The priority policy for the party and the state will move to modernization." This marked the end of the "political season" in China and a reorientation towards the "economic season", as the country embarked on "Open and Reform Policy" taking modernization as their highest priority. In 1987, the "Theory of Primary Stage of Socialism" (*1) provided rationale justifying the introduction of private enterprise and joint-stock systems. Political reforms were also discussed at this time, but the "June 4th" incident (*2) of 1989 (the "Tianamen Square" incident) resulted in the stagnation of political and economic developments. In response, in January 1992, Deng Xiaoping made an important speech while on a tour of Shenzhen and other southern provinces ("Southern Tour Lectures" (*3)), and this provided the impetus for new acceleration of Open and Reform Policy. In October of that year, the fourteenth National Congress of Chinese Communist Party of proposed the new concept of a "socialist market economy," and this was incorporated into the Constitution in March 1993 at the first session of the eighth National People's Congress. These events set the Chinese economy firmly on the course of marketization. Since the fifteenth National Congress of the Chinese Communist Party held in September 1997, and the subsequent first session of the ninth National People's Congress in March 1998, the "three major reforms" (state enterprise reform, financial system reform and government administration reform) have been actively promoted under the leadership of Premier Zhu Rongji.

Many problems emerged as marketization of the economy moved forward, including growing domestic unemployment, expanding various social and economic differences, and chronic graft and corruption in the party and government. The central leadership had a keen sense of crisis in the face of these situations, and launched "the education about the importance of the studying, being political-minded and being honest and upright" (*4) and "Three Represents" (*5) campaign to provide ideological reinforcement and bolster the authority of the Communist Party. However, little progress was seen in the reform of the political system, even though political reforms were indispensable to Open and Reform Policy.

On the diplomatic side, in pursuit of a peaceful international environment and friendly, cooperative economic relations with other countries which China has felt necessary, China launched an active, working-level "Omnidirectional Diplomacy" (*6) campaign for the countries of Europe and North America, its neighbors in Asia, and its allies in the third world.

In relation to Japan, China normalized its diplomatic relations with Japan in September 1972 by the "Joint Declaration" issued during the visit of then-Prime Minister Tanaka to China. In August 1978, the "Japan-China Peace and Friendship Treaty" was signed. Since then, the two countries expanded their political, economic and cultural exchange and deepened their interdependence. The "Joint Declaration" announced in November 1998 during Premier Jiang Zemin's visit to Japan, promised to build a "friendly and cooperative partnership for peace and development." The "Joint Press Release" was also published, containing 33 specific items for cooperation, through which the countries established a framework to work together towards their common goals.

Closer relations between Japan and China did not necessarily mitigate friction. In recent years, Chinese marine research ships have conducted survey in Japan's exclusive economic zone without Japanese permission, and naval information gathering ships have patrolled the waters off Japan. This has caused growing domestic resentment towards China. In order to resolve this situation, on the issue of the marine research ships, a mutual prior notice framework was established in February. Under this framework efforts are being made to ensure that Chinese marine research activities are conducted in an appropriate manner.

(2) Economic developments

The start of Open and Reform Policy marked the move from what had been a closed, planned economic system to the phased-in introduction of market mechanisms and opening of trade and investment. As a result, in the 21 year period from 1979 to 1999, China achieved a real GDP growth rate of on average 9.6% a year, and emerged as the seventh largest country the world in terms of GDP. Deng Xiaoping set a goal of quadrupling 1980 GDP by 2000. China achieved this goal five years early. Its living standards have improved and its foreign economic relations have expanded dramatically.

Though the economy did experience a temporary slump, the "Southern Tour Lectures" of Deng Xiaoping provided the impetus for new acceleration of Open and Reform Policy and brought increased economic growth and substantial gains in trade and direct investment. However, one of the by-products of rapid growth was economic overheating. In 1994, China recorded a 12.6% GDP growth rate, with an inflation rate of 24.1%. The Chinese government responded to this by bolstering its ability to use fiscal and monetary policies to exert macroeconomic control. In 1997, the inflation rate dropped to 2.8% while GDP maintained a growth rate of 8.8%.

In 1998, the Asian currency and economic crises caused foreign demand to slump, which combined with natural disasters to blunt the growth rate and allow deflationary trends to emerge. The government responded by issuing bonds and implementing an active fiscal and monetary policy that stimulated the economy and provided necessary support to economic activities. The effects of these policies, coupled by the rapid recovery in Asian economies, have given China a brighter outlook since 1999.

For economic structural adjustments, the Ninth Five-year Plan, which extended from 1996 to 2000, sought the initial establishment of a "socialist market economy" rooted in market mechanisms. Since Premier Zhu Rongji took office in March 1998, he advocated the three major reforms (see above) and went on to achieve significant results in economic reform. Substantial progress was also seen in negotiations for China's accession to the World Trade Organization (WTO), a long-standing issue. One of the challenges facing China is the building of an economic system that is more coherent with international rules as it prepares for its accession to the WTO.

There are many other challenges that China must address as a result of economic growth. With a population of more than 1.2 billion people, China has more than 200 million people living in poverty with incomes of less than one dollar a day (according to World Bank sources), it lacks a social security system able to deal with the growing numbers of unemployed and temporarily laid-off workers, rapid economic growth has degraded its environment, and the disparities between the coastal and inland regions have widened.

(3) Social developments

China has the world's largest population, and among its highest policy priorities have been the mitigation of poverty by restraining population growth with the improvement of food supplies. Sustained high growth has produced larger numbers of affluent people, but the absolute number of those living in poverty remains high. Population issues also require more difficult task to deal with in view of the emergence of ageing society in China. Meanwhile, Open and Reform Policy has widened and made more visible the disparities between geographical regions and different strata of society, resulting in mounting dissatisfaction among those regions and groups left behind by growth. The problems that have the potential to be factors for social instability over the long term are emerging as follows.

A. Regional disparities

Differing paces of economic growth have widened the disparities between the coastal and inland regions. For example, in 1999, per-capita GDP exceeded the 30,000 yuan in Shanghai, and was over 10,000 yuan in eastern coastal areas like Beijing, Tianjin, Guangdong Province, Zhejiang Province, Jiangsu Province, and Liaoning Province. By contrast, most of the provinces and autonomous regions in the middle and western inland region still have per-capita GDPs under 5000 yuan (from "China Statistical Yearbook 2000"). The expansion of these regional disparities is causing population to flood into the large cities, worsening the crime rate thereof and exacerbating poverty in rural areas.

B. Jobs

The number of registered urban unemployed was 5.75 million people in 1999 (3.1% of the urban population; "China Statistical Yearbook 2000"), but when the number of temporarily laid-off workers and the surplus labor force in rural areas are factored in, the actual unemployment rate is much higher. There are reports of labor disputes and riots among farmers. As further reforms to state enterprises progress, it will become increasingly urgent that China solve its jobs problems, including providing reemployment programs and safety nets for the temporarily laid-off and unemployed.

C. Population

China's "one child per person" program and its advocacy of "late marriages and late births" have reduced the natural population growth rate from 2.6% in 1970 to 0.9% in 1999. However, the government forecast (*7) predicted that, not only China would have a total population of 1.26 billion at the end of 1999 (not including Hong Kong, Taiwan and Macau), making it the most populous country in the world (21% of total world population), but population policies would not prevent the population from growing in absolute terms. By 2005, China is predicted to have 1.33 billion people; by 2010, 1.40 billion; and by the mid-century it will reach a peak of 1.60 billion. Only after hitting this peak will the Chinese population gradually begin to decline, so population will continue to be a major social issue over the near term.

2. Development Issues

(1) China's development plan (Tenth Five-year Plan)

The fourth session of the ninth National People's Congress in March 2001 reported and adopted an outline of the "Tenth Five-year Plan for National Economic and Social Development" covering the years 2001 through 2005.

The Tenth Five-year Plan lists several priority issues for Chinese national economic and social development over the five-year period: growth, structural adjustment, reform and openness, scientific and technological advances, improvement of living standards, coordinated economic and social development, and so on. The plan also contains targets to be met in each of these issues. (*8)

More specifically, in the area of economic structure, the plan advocates, among others, the strengthening of the primary status of agriculture including poverty alleviation programs, and full development of rural economies; optimization of the industrial structure and reinforcement of international competitiveness; development of service industries; development of information industries; reinforcement of infrastructure construction; pushing forward of Western development strategy and promotion of coordinated development of local communities; and promotion of urbanization strategies and joint progress by cities and rural communities.

In the area of science, technology, education and human resources development, the plan calls for promotion of science and technology progress and innovation; development of multifaceted education; and promotion of human resources development strategies.

In the area of population, resources and environment, the plan points out restraint of population growth; improvement in the quality of human resources; conservation, protection and sustainable use of resources; and conservation of ecosystems and prevention of environmental pollution.

In Open and Reform Policy, the plan seeks an orientation towards the building of a socialist market economy, and within this context takes up promotion of state enterprise reform, enhancement of market systems, and reform of the financial, investment, fiscal and tax systems. It also mentions greater openness to the outside, including foreign trade, investment and business activities abroad.

In living standards, the plan indicates expanded employment opportunities and enhancement of the social security system and services.

(2) Priority issues in development

The following is priority issues in social and economic development in China in light of the ideas and targets of the Tenth Five-year Plan.

A. Formation of market economy systems and maintenance of growth

In view of the progress on reform and openness of China to date, the maintenance of growth, as well as the formation of market economy systems and the ensurance of smooth management of these systems have been urgent issues for future China. Particular emphasis in this regard has been on a continuing reform of state enterprises in order to create enterprises that are suited to market competition. Other issues to be addressed in maintaining economic order within the market and enhancing markets systems include further development of economic legislation and its faithful implementation, and improved enforcement against illegal activities. China also requires institutional reforms in areas such as fiscal policy, monetary policy, investment and taxation in order to provide appropriate means for macroeconomic management. Furthermore, China must reform its foreign trade and investment systems in line with the globalization of the economy and its accession to the WTO.

B. Sustainable development

The environment of urban cities in China has improved mainly through stricter enforcement against pollution sources, but economic growth has made long-term environment conservation policies a vital issue for the country. Acid rain now falls on 30% of Chinese territory, and major issues from the perspective of pollution include prevention of water pollution in major rivers and lakes, prevention of air pollution, prevention of pollution from waste and industrial production, and improvement of environmental awareness.

China's forest cover rate is 13.9%, which is about half the world average (26%) and desertification has encroached on 18% of the country's land (both figures from "1999 China Environment Status Report"). Large-scale movement of yellow sand and other degradation of ecosystems are now critical issues. Large-scale flooding in the Yangtze Delta in 1998 resulted in widespread recognition of the importance to conserve and replant forests. Among the issues to be addressed by China in this area are forestation to conserve the natural forests in the upper reaches of the Yangtze River and the middle and upper reaches of the Yellow River, and to prevent flood in every regions, dust prevention measures, protection of endangered species, and conservation of biodiversity. (*9)

Sustainable use of water resources is directly related to environment issues, and has become increasingly important as the population grows and the urbanization proceeds. The challenge before China is to develop a water-conservation society by promoting rational use of rivers, aquifers and other water resources, enhancing sewage and encouraging reuse of water.

C. Rectification of inter-regional economic disparities

The gaps in economic development between the eastern coastal regions and the inland regions of the center and the west are expanding, and the problem of poverty, particularly in the inland regions of the center and the west, has become a major issue. China has an estimated 200 million or more people at the absolute poverty level (a living standards of less than one dollar a day). The government of China has been positively implementing anti-poverty programs, but this is an issue that requires long-term efforts. "Development-oriented poverty programs" have thus been proposed.

D. Education and human resources development

One of the reasons for the large population in poverty in the inland regions of the center and the west is the lack of appropriate educational opportunities. The government of China emphasizes the role of education from a viewpoint that it can contribute to economic and social development. There are manifold issues to be addressed in this area, including the spread of compulsory nine-year education, enhancement of secondary and higher education and vocational training, and improvement of scholarship programs. In order to promote market economy and respond to globalization, China will also need to enhance its human resources development and study-abroad programs in order to provide people with appropriate levels of expertise.

E. Enhancement of employment insurance and social security

In recent years, the urban registered unemployment rate has hovered around 3%, but the actual unemployment rate is probably much higher when the temporarily laid-off workers and latent surplus labor in rural areas are factored in. The creation of new employment opportunities will become even more urgent as the reform of state enterprises and other economic structural adjustments proceed. At the same time, the reform on social security programs that have to this point been operated internally by enterprises and other organizations are also being promoted. Thus China will need to enhance its social insurance systems such as old age insurance, pensions, medical insurance and unemployment insurance as well as to improve a wide range of social security programs, and medical and health systems.

(3) Relations with major international institutions and assistance from other donor countries

A. Relations with international institutions

Between 1994 and 1998, China accepted a total of US$800-900 million ODA a year from international institutions, primarily from the International Development Association (IDA) and the United Nations Development Program (UNDP). Since 1999, however, China lost its eligibility for concessionary IDA lending under the lending guidelines of the World Bank, and is now eligible only for lending only from the International Bank for Reconstruction and Development (IBRD). In 1998, the IBRD lent China approximately US$1.6 billion (net disbursements [gross disbursements - repayments] basis), although this is not ODA. The Asian Development Bank (ADB) has never provided China with concessionary ADF (*10) since China joined the institution, but lending at market interest rates from the ADB is growing steadily, and in 1998 reached approximately US$500 million (net disbursements basis). The ADB is increasing further its presence and activities in China; in 2000 it opened the representative office in Beijing.

The United Nations Children's Fund (UNICEF) also provides aid, primarily for child health programs.

B. Assistances from other donors

China's major donor countries in 1998 were Japan, Germany, United Kingdom, Canada and France in that order. Japan is the largest donor country and accounts for over 60% of all bilateral aid provided to China.

The priority areas in German aid are vocational training, environment conservation, poverty alleviation programs, economic structural reform, and transportation infrastructure.

UK has traditionally employed a mixed aid scheme consisting of grant assistance and export credits, but suspended this scheme for new projects originating in 1997 and beyond, moving instead to grant aid and technical cooperation. Priority areas in British grant aid are poverty reduction and environment conservation; in technical cooperation, environment conservation, English language education and public-sector efficiency.

Canada formulated its "Development Aid Policy Framework on China" in 1994. Priorities in Canadian aid are on transition to market economy, environment conservation, urban policies, and human rights and democratic development.

French aid focuses on technical cooperation and soft loans for human resources development and institution building. Technical cooperation includes French language education, human resources development in the legal and administrative fields, and health and medical care activities.

3. Japanese Economic Cooperation Policies for China

Japanese ODA to China has supported the Open and Reform Policy of China for the last 20 or so years and has contributed substantially to the achievement of its astounding economic development. It is in Japan's interest that China will progress towards a more open, stable society and take on greater responsibilities as a member of the international community. Japan should encourage China to move in those directions and support its efforts to do so. To this end, it is indispensable for Japan to build broad, multi-layered relations with China, and ODA has an important role to play within this context.

However, it should be noted that in the course of economic development, China's demand for and its expectations to assistance have been changing, and that the issues in China which would have the direct impact on Japan, including environmental degradation and infectious diseases, have increased. Japan itself is in difficult economic and fiscal straits and is required to seek greater effectiveness and efficiency in its ODA programs. There are some who cast a skeptical eye on assistance to China. Thus the environment surrounding ODA to China is undergoing significant changes. Cognizant of these changes, Japan should seek new directions in future ODA to China. Specifically, Japan will implement its ODA to China based on the idea mentioned in (1) to (4) below, from the following perspective:

  1. Given China's economic development, China should implement on its own those programs it is capable of implementing. Poverty alleviation and disparities between the domestic rich and poor are in some aspects a matter of income redistribution within China. Japan should encourage China's "self-help" efforts and provide complimentary support for areas that China cannot reach.
  2. The "ODA Charter" contains "Principles" that touch on the military expenditures and the situations of basic human rights of recipient countries. Japan should use not only policy discussions directly concerned with aid but various opportunities of bilateral discussions to raise these issues with China and increase China's recognition and understanding on them.
  3. It is impossible and inappropriate to respond to all of the diverged and enormous demands for aid in China. Rather, Japan should make best efforts for more efficient and effective use of limited aid resources by, for example, employing a model approach that invests aid resources in specific regions or specific issues.
  4. Japan should encourage China to make greater efforts to enhance publicity activities on Japanese aid so that Japanese ODA is more widely known within China. Japan should also strengthen its own publicity activities, increase human interaction, and use the expertise and technologies that Japan has, in order to implement "aid with a visibility of Japan."
  5. Japan should evaluate its aid to China in a timely and appropriate manner, and expeditiously reflect the evaluation results in the subsequent aid implementation. It should also disclose these findings broadly to the public so as to gain their understanding and support.

(1) Significance of economic cooperation to China

In order to maintain and strengthen the security and prosperity of Japan, the maintenance of a peaceful international environment is essential, and more than anything else, the stability and prosperity in the East Asian region in which Japan is located is indispensable. To achieve this it is necessary to create an environment of cooperation in which no country in the region is isolated. It is desirable from Japan's perspective to have a more open and more stable society in China that is willing and able to fulfill its responsibilities as a member of the international community.

Japan should work towards deepening China's involvement and participation in the international community, and support Chinese efforts in these directions.

It is therefore important for Japan to build broad, multi-layered relations with China, through bilateral cooperation in the political, economic and cultural spheres, grass-roots level human interaction and stronger academic exchanges, and thus to increase the mutual understanding and trust of the two countries. In accomplishing this, support through ODA for Chinese Open and Reform Policy will continue to have a significant role to play alongside the development of private trade and investment activities.

Recent years have witnessed a number of frameworks created for regional cooperation and dialogue in the Asia-Pacific, among them APEC (Asia-Pacific Economic Cooperation), ASEAN (Association of Southeast Asian Nations) + 3 (Japan, China, Korea) and ARF (ASEAN Regional Forum). China has recently begun to take an active part in these frameworks. In light of these trends, Japan should provide furthre possible assistance to strengthen Chinese involvement in these frameworks for multilateral coordination.

(2) Future direction for Japanese economic cooperation

A. Japanese economic cooperation to date

China embarked on its Open and Reform Policy in December 1978, and requested the provision of yen loans in 1979. In response, then-Prime Minister Ohira committed during his visit to China in December 1979 that Japan would provide ODA to China. This decision was based on the idea that support for China's Open and Reform Policy would benefit not only the stability and prosperity of China and Japan, but those of the entire Asian region and indeed the entire world.

By fiscal 1999, Japan had provided yen loan of 2,453.5 billion yen and grant aid of 118.5 billion yen (on an Exchange of Notes basis), together with technical cooperation of 116.3 billion yen (actual outlays via the Japan International Cooperation Agency (JICA)). Japan had net disbursements of $1.22597 billion in fiscal 1999, and China ranked second behind Indonesia in terms of Japanese bilateral ODA.

Japanese ODA to China as a whole, mainly through yen loans, has contributed to the alleviation of infrastructure bottlenecks in the coastal regions and stabilization of China's macroeconomy. (*11) In addition, the grant aid and technical cooperation have contributed mainly to projects related to basic human needs such as health and medical care, as well as those on environment conservation and human resources development. (*12) This cooperation, which includes assistance for Chinese students studying in Japan (*13), has successfully contributed to the provision of materials and facilities as well as transfer of expertise and technology, both of which China needs.

Japanese ODA has thus supported China's Open and Reform Policy and substantially contributed to the extraordinary development that China has achieved.

B. Japan's presence in the overall economic cooperation to China

As noted above, among the countries of the Organization for Economic Cooperation and Development (OECD)/ Development Assistance Committee (DAC) which have provided bilateral aid to China, Japan has more or less constantly accounted for more than half of all bilateral assistance to the country ever since it began providing assistance in 1979. Japan is China's largest donor country, and its presence in assistance to China is extremely large.

The DAC has recognized the achievements of Japanese assistance in its "Development Cooperation Review Series: Japan" which mentions that Japanese yen loans and other assistance to China, "together with trade and direct investments, have made a positive contribution to the rapid economic growth of China in recent years." (*14) China also expresses high appreciation and gratitude for the role played by Japanese ODA in its economic development.(*15)

C. Changes in the situation surrounding economic cooperation to China

Thus Japan's ODA to China has significantly contributed to the economic development of China. However, compared to the situation in which Japan began to extend ODA to China, the present situation surrounding ODA has dramatically changed. Major changes are shown below, and it is necessary to implement ODA to China by reflecting fully such changes.

  1. Under the severe economic and fiscal circumstances that Japan currently faces, together with the changes such as the increasing national power of China both in terms of its economic and military power as well as the emerging presence as a business competitor, increasing skepticism within Japan over ODA to China has been raised by the astounding development in the eastern coastal regions, the modernization of Chinese military capabilities, and China's own assistance to third countries and its lack of transparency.
  2. As the Chinese economy develops, China is better able to raise private sector funds from the domestic and international markets, and indeed the Chinese private-sector itself is better able to raise funds. This has produced changes in Chinese expectations and demands for Japanese ODA funding.
  3. As the market economy progresses in China, there are development needs in so-called "soft" areas that cannot be solved merely by investments of funds. These needs include the building of institutions and legal systems as well as the development of human resources, all of which are necessary for the integration of China into the international economic community (including the accession WTO).

D. Direction of economic cooperation over the next five years Below are the basic concepts in implementing future ODA to China.

  1. Japan will conduct detailed reviews on individual project proposals and efficiently implement assistance based on priority areas and issues in light of both newly emerging development needs of China and Japan's own national interests with the understanding and supports from the people of Japan.
  2. China should implement on its own those programs that it is capable of implementing. As the Chinese economy develops, private-sector funding raised by China from both domestic and international markets will, over the long term, play a larger role.
  3. Efforts must be made to achieve objectives of Japan's cooperation with China efficiently and effectively by coordinating ODA not only with other public funding but with private funding.
  4. Japan should implement ODA in a way to encourage Chinese efforts to marketize its economy based on the recognition that it is in Japan's interest for China to be integrated into the international economic community and to play a responsible political role in the international community as well.
  5. Attentions must be paid to ensure that Japanese ODA to China does not lead to a strengthening of Chinese military capacity or other developments inconsistent with the "Principles" (*16) of the "ODA Charter."

Yen loans are to be changed from the traditional form of committing loan targets over multiple years, to a single-year commitment system (*17) based on a "long list" (list of candidate projects for yen loans). From this fiscal year, the amount of total ODA comprising of yen loans as well as grant aid and technical cooperation would be decided on the so-called "projects accumulation formula," without making the previous levels as a prerequisite. In other words, while responding to new demands for Japanese aid in China, Japan will examine and implement each individual project requested, with a focus on the priority areas and issues described in Subsection (3) below, and taking into consideration the severe economic and fiscal situation that Japan currently faces.

(3) Economic cooperation guidelines for priority areas and issues

In implementing ODA to China, Japan will focus on the priority areas and issues listed below, examine each proposal and decide whether to adopt it or not. Accordingly, Japan's ODA to China, which has traditionally focused on the construction of infrastructure in the coastal areas, will place more emphasis on the areas such as the conservation of environments and eco-systems, the serious pollution and degradation of which are observed in China, the improvement of living standards and social development in the inland regions, human resources development, institution building, and technology transfers. In addition, every effort will be made to contribute to and encourage mutual understanding between Japan and China.

A. Cooperation towards resolving environmental and other global issues

China has serious environmental problems: in addition to pollution, it is also experiencing a rapid expansion of areas subject to acid rain and desertification. Many have pointed to the negative impacts caused by the spreads of the yellow sand due to desertification.

Rapid increases in China's energy consumption are also exacerbating various environmental problems, not the least of which is global warming. Chinese energy consumption may also have an impact on energy security for the entire Asia-Pacific region.

China has HIV/AIDS infections and patients of approximately 500,000, 50-times more than Japan. It also has an estimated 1.41 million tuberculosis sufferers (from UNAIDS (*18) materials (1999)). These global issues have come to be challenges which need to be tackled urgently.

Some of these issues have a direct impact on Japan via the oceans and atmosphere. Japan will continue to actively address these issues, making maximum use of cooperation results gained so far and its own experiences. (*19) Of particular importance are the management of water resources and the forest conservation and forestation to maintain and restore eco-systems. In light of this, Japan will make efforts to provide cooperation in these areas. In so doing, Japan will endeavor effective implementations of cooperation through the compiling of environment information that provides a foundation for cooperation including, among others, mapping of eco-systems and land-use, and surveys of forest conditions, as well as the research and study on policy options.

For energy-related environmental issues, Japan will support Chinese efforts to introduce new and/or renewable energy sources and for energy conservation.

Furthermore, by utilizing the successful achievements Japan gained through its cooperation in the eradication of polio (*20), Japan will address the issue of infectious diseases, mainly through projects on HIV/AIDS and tuberculosis.

B. Assistance for Open and Reform Policy

It is important for Japan to encourage China to develop toward a more open society through its assistance for Open and Reform Policy. In particular, Japan will provide assistance for efforts to accelerate economic marketization so as to encourage stronger ties between the Chinese and international economies.

Japan will provide assistance for strengthening "(good) governance," including the establishment of legal systems to regulate economic activities, in order to ensure stimulating private sector activities that are a driving-force for marketization.

To support Chinese integration into the world economy, Japan will enhance assistance that promotes marketization, including institution building and human resources development, and assistance that encourages understanding of the global standards and rules that govern economic activities (including the WTO Agreements).

To strengthen good governance, Japan has already implementied JICA training programs on Japanese criminal-justice systems and on administrative laws on science and technology. In the future, Japan will provide assistance that improves the rule of law, and the transparency and efficiency of administration among the officials of local governments, and support for grass-roots educational activities.

C. Promotion of mutual understanding

Promotion of mutual understanding among the peoples of Japan and China will build the foundation for long term, friendly relations between the two countries. It is extremely important that China itself make concrete efforts to improve the way in which it views Japan, but, at the same time, it will be an effective means of promoting mutual understanding between the peoples of the two countries to provide the Chinese people with more opportunities to come in actual contact with people and culture of Japan.

Japan has in the past made active use of ODA to invite Chinese students to study in Japan, to give the leaders of future generations and a broader spectrum of Chinese people the opportunity to make direct contact with people of Japan, and to learn about present Japan and Japanese culture. In the future, Japan will utilize its ODA to further promote personal-level interaction in cooperation with the private sector. From this perspective, enhanced efforts will be made for the strengthening of human resources development programs that contribute to mutual understanding, through the dispatch of experts to China and the acceptance of trainees from China, support for Chinese students studying in Japan, youth exchange and cultural exchange programs, as well as academic exchange and university-level exchange programs (including promotion of Japanese studies joint research projects). ODA will be used to improve the environment for the acceptance of students from China in order to facilitate support to them and other human interaction on this level.

Japan will also provide support in the form of policy recommendations and human capacity development to promote tourism that provides opportunities for the people of Japan and China to make direct contact. (*21)

D. Assistance for poverty alleviation

Poverty alleviation is a key issue in Chinese development, and assistance in this area will require, among others; 1) economic and social development that rectifies the disparities between the coastal and inland regions, which face the large differences in per-capita income; 2) sustainable agricultural and rural development programs to alleviate poverty in the inland and other regions with unfavorable natural conditions; and 3) support for programs to assist the most vulnerable members of society.

Poverty is ultimately an issue of income redistribution within China. However support for policy and institution building and human resources development in these areas will enable the efforts of the Chinese government to better alleviate poverty, which will also contribute to the maturation of Chinese society as a whole.

"Development Partnership Strategy: Shaping the 21st Century: The Contribution of Development Cooperation" (*22) of the OECD/DAC sets forth the orientation for development cooperation in the twenty-first century. One of its goals is to halve the ratio of the world population in poverty by 2015. This goal was reconfirmed at the Kyushu-Okinawa Summit in July 2000. Efforts toward the reduction of poverty is one of the important roles that Japan can and must play as a leading member of the international community.

In the past, Japan's cooperation has been extended to poverty-stricken regions to meet their basic human needs--agriculture, health and medical care. In the future, Japan will provide support to the poor at grass-roots level in the areas such as education and health, which form the foundation for future human resources development. In case of cooperation which aim to improve the public welfare in regions with large populations in poverty, Japan will provide support to those which benefit the poor. The impact on Japanese agriculture and others should be noted when making decisions on assistance.

E. Support for private sector activities

A large number of Japanese companies have operations in China and play a major role in broadening and strengthening relations between the two countries. From this perspective, it is important to provide support for improvement of the environment that will facilitate business activities by Japanese companies in China and broaden and deepen private sector economic relations between Japan and China.

In light of China's accession to the WTO, assistance to the efforts to enhance the foundation of China for the acceptance of foreign investment, such as assistance for the strengthening of intellectual property rights protection policies, will lead to facilitate the activities of Japanese companies,.

Further, in providing assistance, efforts will be made to utilize the experiences and know-hows of the private sector, and to actively seek out such proposals that will make use not merely of funds provided but of superior Japanese equipments, systems and technologies in case of yen loans, by which it is expected to result in higher presence in procurement of materials, etc. is the yen loan projects for Japanese companies that have experienced substantial declines. The use of superior Japanese technology, facilities and expertise may also deepen Chinese understanding for Japanese assistance.

F. Promotion of multilateral cooperation

Japan and China have agreed to go beyond their bilateral "friendly neighbor" relationship to create a "friendly, cooperative partnership" (*23) in which they will cooperate for the solution of issues facing the East Asian region and the international community as a whole. The use of ODA to achieve concrete results will be extremely significant in promoting these efforts. To this end, for example, Japan will cooperate with China on assistance activities for third countries, building on the achievements gained in assisting human resources development centers (for example, Japan-China Friendship Hospital ) that Japan has provided support with priority.

Japan will also provide active assistance for regional cooperation in East Asia, such as cooperation on environmental issues under the framework of Japan, China and Korea or in the East Asian region as a whole.(*24)

(4) Issues to be noted in the implementation of economic cooperation

A. Strengthening of efforts to ensure ODA based on the ODA Chater

There have been criticisms in Japan in recent years that Japan's assistance to China does not conform to the "Principles"articulated in the "ODA Charter" because of substantial increases in Chinese defense expenditures, China's development of nuclear weapons and missiles, China's imports and exports of arms, or questions about democracy and human rights protection.

Japan has been implementing its ODA in conformance with the "ODA Charter," and made efforts to watch carefully nuclear weapons development (See Note), military expenditure and arms imports and exports in China, and to pay due attention to China's promotion of democracy and protection of basic human rights and freedoms.

Japan has taken many opportunities to convey to China its domestic anxieties over recent substantial increases in defense expenditure and to seek Chinese understanding on this issue. Japan has also encouraged China to improve its transparency and capacity to explain the policy in military areas. For example, in meetings between the foreign ministers of the two countries, Japan has urged China to make greater efforts to increase the transparency of its defense policies. Japan has also provided support to those which contribute to democratization through, for example, the development of the Chinese legal system.

In the future, Japan will make utmost effort to deepen Chinese understanding and recognition of the "ODA Charter" by raising the issues at every opportunity from assistance policy discussions to other bilateral consultations, including high-level meetings. In particular, there are sectoral consultations between the relevant authorities in both countries on sectors such as security, military management and disarmament, and human rights. These are excellent opportunities to deepen the recognition and understanding of the Chinese side on the idea behind the "ODA Charter." Japan will actively use these consultations to make the points that needs to be made, to increase mutual understanding and trust, and to encourage China to better discharge its responsibilities as a major member of the international community, as well as will provide support for China's efforts in that direction.

(Note) China continued to perform nuclear tests despite the repeated requests by Japan to cease. In response, Japan took measures to freeze in principle all grant aid to China until it became clear that Chinese nuclear testing had been suspended. China announced a nuclear testing moratorium after completing a final test in July 1996, and in September of that year it signed the Comprehensive Test Ban Treaty (CTBT). In light of these, Japan resumed grant aid in March 1997.

There has been a growing concern on China's aid to third countries in recent years. This aid lacks clarity and transparency, which is one of the reasons for the critical view against assistance to China taken in Japan. In the future, Japan will urge China to improve transparency in its third country assistance by encouraging China to make public the results.

B. Promotion of economic cooperation "with visibility"

It is important for mutual understanding between Japan and China that a broad spectrum of the Chinese public be aware of Japan's assistance. Indeed, this will also be essential to rebuild the basis for support in Japan for assistance to China. China has indicated its intention to make stronger efforts to publicize Japan's ODA to its people, and Japan will therefore encourage further these efforts of China, and at the same time engage in broad public relations activities for the Chinese people as follows.

  1. ODA is implemented based on the result of negotiations between central governments, but steps will be taken to directly reflect at the project formulation stage the opinions and needs of the local governments who will implement projects. This will have the effect of deepening local governments' awareness of Japanese assistance.
  2. There are many examples of local governments in Japan who have "Friendship City" arrangements with Chinese counterparts implementing their own cooperation projects, and NGOs interested in China doing the same. In implementing ODA, Japan will enhance further collaborations with local governments and NGOs, and support grass roots level exchange activities by those entities. (*25)
  3. Grant assistance for grass-roots projects (*26) has been extremely active in China. While the scale of individual projects is limited, these projects contribute directly to improve living standards for residents. These are welcomed by local governments and residents alike, and are visible. Therefore Japan will more actively utilize this type of assistance in the future.
  4. Taking account of the changes in the Chinese mass media, Japan will endeavor to strengthen its ties to the local media. It will also strengthen public relations activities for ODA in general and incorporate PR activity into the implementation individual cooperation projects in order to bolster the publicity on Japan's ODA among the Chinese people.

C. Greater use and more flexible implementation of technical cooperation

In light of the economic and social development in China, Japan will place greater emphasis on "soft" assistance, i.e. expertise assistance for policies and institutions, in addition to traditional technology cooperation and human resources development. In order to respond flexibly to these changes in assistance needs and implement projects in an effective manner, Japan will review its own systems and develop institutions by, for example, making greater use of NGOs, local governments, and senior overseas volunteers (*27) in addition to experts and Japan Overseas Cooperation Volunteers, (JOCV), as well as fostering assistance personnel with expertise in these "soft" areas Japan will endeavor to obtain full understanding from China for the participation of NGOs and local governments in ODA. Further consideration should be given to the Chinese-side liaison functions from the perspective of formulating ODA projects jointly with China.

In addition, Japan will strengthen further the collaboration with financial assistance from the perspective to promote effective technical cooperation. In so doing, Japan will encourage coordination among relevant institutions on the Chinese side because different government institutions in China serve as liaisons for different assistance schemes and this may impede effective cooperation. Furthermore, in order to positively utilize the results of technical cooperation so far, Japan will continue providing support to the basis for cooperation which have achieved so that the effect of cooperation would spread to the country as a whole.

D. Joint formulation of projects

Traditionally, assistance projects have been screened to some extent by China and submitted to Japan. In the future, Japan will be more actively involved in the process of project formulation, working jointly with the Chinese side, including local governments, to formulate projects and to enhance transparency.

The "round" system (*28) has been curtailed for yen loans. From now onward, a single-year system (*28) based on a "long list" of candidate projects for the next 3-5 years are to be employed, with projects selected each fiscal year. Japan will faithfully implement this system and improve the transparency of the process towards project adoption.

In addition, Japan will consider the process for selection of grant aid projects and trainees and youth programs to be invited to Japan through technical cooperation to improve their transparency.

E. Other issues

  1. Promotion of model approach
    Two model approaches focusing on development in specific regions or specific issues/areas will be instrumental in effective, visible assistance to China having an enormous territory and population. The first approach is to select a specific region as a model, provide a variety of forms of Japanese assistance to the region, and support intensively the development of the region.

    The second is the approach used in the "Japan-China Environmental Development Model Cities Plan" (*29) in which a model region is selected to achieve goals in a specific issue/area, and model projects are implemented to this end. The approach aims that the results would then be spread to other regions facing the same problems so that the benefits are not limited only to the model region.
  2. Coordination with Other Official Flows (OOF) (*30) and private sector funding
    Programs of the Japan Bank for International Cooperation (JBIC) include international financial services (services formerly undertaken by the Export Import Bank of Japan) which is categorized as OOF, and ODA services (including yen loans). The former aims to provide financial support for Japanese external economic policies; the latter is for assisting nation-building in developing countries. They thus have different objectives and intentions.

    Among international financial services, however, some argue that, as far as untied loans (*31) are concerned, the differences between untied and yen loans at the operational level are not entirely clear. In order to effectively and efficiently utilize public funds which are limited resources, Japan will pay due attention to the use of greater expertise and know-how to achieve better synergy between the two funds, while taking account of the characteristics of ODA which has relatively loose terms of lending, and untied loans, which are based on market interest rates. Whether ODA or untied loans, it is extremely important that providing funds contributes to Japan's national interest as a whole in light of Japanese foreign policy for China.

    By clearly differentiating the two funds based on the objectives and intentions of each scheme in responding to a variety of needs on the Chinese side, Japan will ensure more effective and efficient management of public funds. In addition, Japan will operate services on untied loans under an appropriate collaboration among Japanese government agencies and implementing institutions so as to contribute to Japan's national interests.

    It is also necessary to actively tap not only public funds but private-sector funding and expertise in infrastructure creation and other areas so as to facilitate the sustainable economic growth of China. However, there are various risks that cannot be borne by the private sector on its own, and therefore, Japan will utilize public funds in the construction of relevant basic infrastructure to facilitate private sector-driven infrastructure construction.
  3. Stronger coordination with international institutions and other major donors
    As a result of its extraordinary economic development, in 1999 China lost the eligibility for IDA lending (under World Bank lending guidelines), which has looser terms, and shifted to the country eligible only for IBRD lending. China has never received concessionary ADF (*10) from the ADB since it joined that institution.

    Japan's ODA to China will shift its emphasis away from the traditional focus of coastal region infrastructure development to improved living standards and social development in the inland regions, as well as human resources development and environmental conservation. Japan will strengthen its collaboration with the World Bank and ADB, which have abundant expertise, human resources and information in areas like poverty reduction and social development, and from which China has been expecting support .

    For projects like anti-tuberculosis programs that must be simultaneously implemented across a wide area within China, Japan will work in coordination with international institutions to divide up regions and functions of responsibility.

    For micro-credit projects (*32) and other projects requiring large human resources at the implementation stage, Japan will explore the potential for joint implementation with the UNDP and other institutions.
  4. Promotion of IT cooperation oriented towards bilateral and regional cooperation
    China has seen extraordinary IT development in recent years, and the government of China has announced its intentions to make active use of IT in domestic development. Based on this and cognizant that IT development and utilization would be driven primarily by the private sector, Japan will explore the possibility for flexible cooperation that combines a range policy measures as a supplement to private-sector efforts.

    Specifically, Japan will contribute through ODA to the development of human resources who will support the foundation of IT development, in addition to explore the potential to support "soft" areas such as IT standards and systems.
  5. Stronger evaluation
    Japan will actively evaluate assistance to China. This will include more than just evaluation of individual projects but timely, appropriate evaluation which will be made of the conformance and rationality of assistance from more comprehensive perspectives.

    Specifically, an Evaluation Committee consisting of private sector experts will be established to check implementation of this program and to provide an evaluation of and advice on the assistance program for China in general at the time this plan is envisioned to conclude, in approximately 5 years.

    In the implementation of the evaluation, Japan will conduct joint evaluation to reflect fully Chinese ideas and assessments in the evaluation. Evaluations by third countries and international assistance institutions will also be used to improve Japanese ODA to China.

    Efforts will be made to improve the understanding of the Japanese public for economic cooperation to China, by further disclosing information on the intentions behind ODA to China, the process of ODA project selection and implementation, and the results and problems identified in the evaluations such as that described above. The Internet will also be used to provide this information in a more easily understood form.


1. The "Theory of Primary Stage of Socialism"

First proposed at the 13th National Congress of Chinese Communist Party in 1987 by then-General Secretary Zhao Ziyang. At the fifteenth National Congress of Chinese Communist Party in 1997, General Secretary Jiang Zemin repeated this perception of Chinese socialism. This theory advocates the introduction of a merchandise economy and market mechanisms in order to achieve the primary responsibility of poverty eradication, and therefore provides the theoretical rationale for the introduction of market economy methods. The primary stage is set to continue for 100 years from the establishment of the People's Republic of China in 1949.

2. The "June Fourth" incident

After the death of former General Secretary Hu Yaobang in April 1989, a student movement seeking democracy began to spread, culminating in a sit-in in Tiananmen Square, Beijing that was put down when the marshal law troops of the People's Liberation Army burst into the square early on the morning of June 4. The incident has come to be known as the "June Fourth" incident. It is also called the "Tiananmen Square" incident, and sometimes the "Second Tiananmen Square" incident to distinguish it from an incident that occurred at the same place after the death of Premier Zhou Enlai in 1976.

3. "Southern Tour Lectures"

A speech made in January 1992 by Deng Xiaoping while on a tour of Wuchang, Shenzhen, Zhuhai and Shanghai. The speech advocated maintaining Open and Reform Policy and accelerating economic growth. It provided the impetus for recovery in Chinese economy that had been stagnant since the 1989 "Tiananmen Square" incident and set the stage for the high growth that occurred after 1992.

4. "The education about the importance of the studying, being political-minded and being honest and upright" (San-Jiang)

An ideology education movement initiated by the Chinese Communist Party in November 1998. It asks people to emphasize three things: education, politics and morals. The movement involved political ideology classes at work places, among others. Its purpose was to restore the authority of the Party, which had lost must of its respect due to rampant corruption and weakening ideology, and to encourage moral rectitude on the part of Party and government officials.

5. Theory of "Three Represents"

A doctrine announced by Premier Jiang Zemin while on a tour of Guangdong in February 2000. The doctrine said that the Chinese Communist Party should represent three objectives: 1) the demand of the Chinese people for the development of advanced, social production capacity in China, 2) the forward-looking orientation of the advanced culture of China, and 3) the fundamental interests of the widest range of people in China. This became a powerful component in the campaign to shore up Party ideology, together with "San Jiang" Education.

6. "Omnidirectional Diplomacy"

The basic principle underlying the Chinese foreign policy of pursuing friendly relations with all countries rather than entering into alliances with specific countries and powers. This was also referred to as "Independence Autonomous Diplomacy" at the 12th National Congress of Chinese Communist Party in September 1982. In light of the multi-polar international order that has emerged since the end of the Cold War, China has emphasized relations with the major powers of Japan, the United States, Russia and the EU as it seeks to join them as one of the world's poles.

7. Domestic population forecasts by the government of China

From "Chinese Population and Development in the Twenty-first Century," published by the Information Office of State Council on December 19, 2000.

8. Targets of the "10th Five-year Plan"

The plan sets the following targets:

  1. Macroeconomy
    Average annual economic growth rate of approximately 7%, the size of GDP of approximately 12.5 trillion yuan (9,400 yuan per-capita) by 2005, creation of new jobs and transfer of rural labor (approximately 40 million people each), restraint of urban registered unemployment rate (approximately 5%), etc.
  2. Economic structural adjustment
    Strengthening of the basic position of agriculture, optimization of the industrial structure so as to strengthen international competitiveness, development of tertiary industries, development of information industries, promotion of information technology, strengthening of infrastructure construction, large-scale development of western regions in order to achieve coordinated regional development, and promotion of urbanization, etc.
  3. Science and technology, educational development, and human resources development
    Research and development spending of at least 1.5% of GDP by 2005, promotion of scientific and technological advances and innovations so as to improve sustainable development capacity, acceleration of educational development (middle school matriculation rate of at least 90%, high school matriculation rate of at least 60%, university, etc. matriculation rate of 15%), promotion of human resources strategy, etc.
  4. Sustainable development
    Restraint of natural population growth rate to 0.9%, restraint of total population to 1.33 billion by 2005, resource conservation, protection and perpetual utilization, enhancement and reinforcement of eco-systems (expansion of the forest cover rate to 18.2% (13.9% in 1999), improvement of urban environments, restraint of major pollutant emissions (10% reduction from 2000 levels).
  5. Promotion of Open and Reform Policy
    Enhancement of economic systems and expansion of foreign opening.
  6. Living standards
    Expansion of job opportunities and improvement of social security system, increase in incomes (average annual rate of approximately 5%), material improvements in quality of living standards.

9. Establishment of "Japan-China Board of Assistance to Greening Activities"

In the joint press release announced on the occasion of President Jiang Zemin's visit to Japan in November 1998, the importance of government and private-sector efforts to conserve and restore forests was confirmed, and in July 1999 then-Prime Minister Obuchi proposed the establishment of a fund to promote cooperation in greening activities by private organizations in Japan and China. This led to the establishment of the "Japan-China Board of Assistance to Greening Activities" in November of that year.

10. ADF

Asian Development Fund. The special fund provided by the Asian Development Bank (ADB) as a source of low-interest, long-term funding. Lending conditions are looser than for "Ordinary Capital Resources" (OCR).

11. Results achieved by yen loans to China

For example, yen loans have been used to provide approximately 35% (approximately 4,600 kilometers) of China's total electrified railway extension (approximately 13,000 kilometers), to build approximately 13% (approximately 60) of the large 10,000 tons + berths in Chinese ports (approximately 470), and to provide approximately 35% (approximately 4 million tons a day) of China's sewage treatment capacity (approximately 11 million tons a day). (All figures as of 1998, from studies conducted by the Japan Bank for International Cooperation.)

12. Results achieved by grant aid and technical cooperation

Japanese grant aid has, for example, been used to establish the Japan-China Friendship Hospital, which has the capacity to treat approximately 3,000 patients a day and is one of the major medical institutions in China. Technical cooperation is used primarily to train government officials. By fiscal 1998, Japan had accepted a cumulative total of nearly 9,000 trainees and had dispatched 4,000 experts to China. The Japan-China Friendship Center for Environment Protection is also supported with a combination of grant aid and technical cooperation, and serves as a central institution for human resources development in environmental conservation and for research and development of anti-pollution technologies. The center plays an active part in China's efforts to deal with air pollution and acid rain.

13. Support for Chinese students studying in Japan

There has been a substantial increase in the number of Chinese students studying in Japan in recent years, and they now account for the largest percentage of foreign students in Japan. Japan's National Scholarship Program accepted 1,767 Chinese students in fiscal 1998, 1,749 in 1999. Japan also provided scholarships for 6,000-7,000 Chinese students studying at their own expense in both years respectively.

14. The DAC Report "Development Cooperation Review Series: Japan"

The DAC conducts regular peer reviews in order to improve the development assistance activities of its members and of the aid community in general. Each member is reviewed approximately once every three years. Peer reviews are conducted by representatives of the DAC Secretariat and two countries chosen from DAC members. The review of Japan published in 1999 was performed by France and UK. Comments regarding Japan's ODA to China are found in the annex to the report titled "Report on Visit to China" as was quoted in this Program.

15. Chinese comments on Japan's ODA

The Joint Declaration published on the occasion of Premier Zhu Rongji's visit to Japan in November 1998 said, "China expresses its gratitude for economic cooperation provided to China by Japan." During the Japan-China summit in October 2000, Premier Zhu Rongji said, "Japan's ODA has been a major help in the development of the Chinese economy and the construction of the Chinese state. It has also contributed substantially to the promotion of economic relations between the two countries." At the ceremony to commemorate 20 years of Japan-China economic cooperation, Xiang Huaicheng, the Minister of Finance remarked, "Economic friendship and cooperation between China and Japan have supported the economic development of China, improved its investment environment, raised living standards of the people and actively contributed to the development of its human resources." At the same ceremony, Wu Yi, the State Councilor said, "On behalf of the government of China, I would like to express our thanks for the assistance that the government of Japan has provided for the building of the Chinese economy."

16. "Principles" of the "ODA Charter"

Adopted as the cabinet decision on June 30, 1992. This document advocates the principles espoused in United Nations Charter (particularly, sovereign, equality and non-intervention in domestic matters), and, in addition, articulates the following four principles in implementing ODA: 1) Environmental conservation and development should be pursued in tandem; 2) Any use of ODA for military purposes or for aggravation of international conflicts should be avoided; 3) Full attention should be paid to trends in recipient countries' military expenditures, their development and production of mass destruction weapons and missiles, their export and import of arms, etc; 4) Full attention should be paid to efforts for promoting democratization and introducing of a market-oriented economy, and the situation regarding the securing of basic human rights and freedoms in the recipient country.

17. Single-year provision of yen loans

In the past, the "round" system was used to determine lending ceilings over multiple years. This is to be changed to a "single-year" system in which lending ceilings are determined by consultations between governments each year. The selection of projects under the single-year system is based on a list of candidate projects for the next 3-5 year period created by the recipient government (a "long list"), and decided after studying the needs to be addressed by the proposed projects and their maturity.


The Joint United Nations Program on HIV/AIDS. Established at the UN Economic and Social Council in 1994 as an institution with a joint sponsorship and participation of five UN agencies and the World Bank. Formally began operations in 1996 for the purpose of assisting the strengthening of AIDS programs in developing countries, assisting government efforts to combat AIDS, and strengthening and coordinating UN's AIDS programs. The main purpose of the institution is to coordinate and strengthen the financial resources, expertise and networks of its sponsoring institutions. It does not directly provide funding to developing countries or implement projects. The joint sponsoring institutions as of October 2000 were UNICEF (United Nations Children's Fund), UNDP (United Nations Development Programme), UNFPA (United Nations Fund for Population Activities), UNDCP (United Nations office for Drug Control and Crime Prevention), UNESCO (United Nations Educational, Scientific and Cultural Organization), WHO (World Health Organization), and the World Bank.

19. Assistance to China in environmental areas

In June 1997, Japan announced the "Initiatives for Sustainable Development toward the Twenty-first Century" (ISD). This program acknowledged that environmental degradation was spreading on a global scale and threatened the survival of humankind, and thus being a security issue that all human beings must work together to resolve. Based on this awareness, it articulated basic principles of support for "self-help efforts" and "sustainable development." During the Japan-China-Korea summit in November 2000, leaders emphasized the importance of building an awareness of the three countries as an "environment community" and constructing a trans-national network to this end. Assistance for environmental areas is an embodiment of these principles. Japan must make active use of the experiences and technologies that it has developed as well as of the results achieved through cooperation not only at the national level but also at the local government and private sector levels in order to prevent air and water pollution.

20. Eradication of wild polio with Japan's ODA

Japan has made substantial contributions to the achievement of the WHO goal of eradicating polio by 2000 through the "Polio Countermeasures Project", a project-type technical cooperation program (implemented as a general mixture of three types of cooperation; acceptance of trainees, dispatch of experts and provision of equipment) implemented between 1991 and 1999, together with the grant aid "Polio Eradication Plan" that provided vaccines. The last case of wild polio seen in China was in 1994. In October 2000, the WHO announced that wild polio had been eradicated from the Western Pacific region including China.

21. Policy recommendations and human resources development assistance for the promotion of tourism

Policy recommendations and human resources development assistance for the promotion of tourism should take full account of the different features and characteristics of each region of China, the accessibility from Japan, and the opinions of those in the industry and other interested parties. Other cooperation might include programs for the protection of cultural assets that form tourism sources, human resources development in the related fields, and formulation of tourism development plans.

22. DAC Development Partnership Strategy: Shaping the 21st Century: The Contribution of Development Cooperation

In 1996 the DAC adopted guidelines for assistance toward the twenty-first century. Aiming at the "improvement of living standards for all people," the strategy includes several specific targets such as cutting in half the proportion of people living in extreme poverty, and points to the importance of self-help efforts by developing countries and coordinated cooperation by the international community. Japan played a leading role in the formulation of this strategy.

23. New partnership between Japan and China

The Joint Declaration published on the occasion of Premier Jiang Zemin's visit to Japan in November 1998 advocated going beyond the traditional "friendly neighbor" bilateral relations and establishing a "friendly cooperative partnership for peace and development."

24. Environmental cooperation within the East Asian region

One example is the "East Asian Acid Rain Monitoring Network" that started formally its operations from 2000 to monitor acid rainfall with a membership of 10 East Asian countries including China. Another example is the "North-West Pacific Action Plan" (NOWPAP) which is about to launch programs to combat ocean pollution in the Sea of Japan and Yellow Sea. The "Asia-Pacific Region Migratory Waterfowl Protection Strategy" is a network of breeding grounds from East Asia (including China) throughout to Australia to exchange information and initiate research.

25. Trends of NGO's activities in China

There are many social organizations in China that act as non-government organizations, but most of them are reportedly established by the Party or government institutions. There are, however, some NGOs, for example, those in the environmental area, that have conducted their activities by utilizing both domestic and foreign funding. These organizations come in a wide variety of sizes and are active in a wide range of fields, including culture and science, international exchange, support for economic activities, environmental conservation, poverty alleviation programs and improvement of the status of women. The activities of foreign NGOs in areas like education, medical care and environment are also on the rise. Japanese NGOs are actively implementing projects in China, particularly in areas like academic exchange, health and medical care, population, poverty alleviation, education, and environment and eco-system conservation.

26. Grant assistance for grass-roots projects

This refers to financial assistance to the relatively small-scale programs implemented by local governments, educational and medical institutions of developing countries as well as by NGOs which are active in those countries in order to address the diverse development needs of those countries. The assistance is provided primarily through Japanese embassies who are familiar with local conditions. Japan provided support to 78 projects in China in fiscal 1999, ranking number one in the world.

27. Senior oversees volunteers

This program responds to the growing number of requests for technical assistance from developing countries by sending middle-aged people (40-69 years old) with wide-ranging skills, abundant experience and a desire to contribute as volunteers to the development of developing countries. The program was launched in 1990. Personnel are sent in principle for a period of 1-2 years. At the end of December 2000, there were 265 volunteers in place (cumulative total of 509). The governments of Japan and China are currently discussing the startup of this program for China.

28. "Round" system and "single-year" system

See Note 17.

29. Japan-China Environmental Development Model City Plan

One of the two projects that comprise the "Japan-China Environmental Cooperation for the Twenty-first Century" framework advocated at the summit meeting of September 1997. This project focuses on three cities, Dalian, Chongqing, and Guiyang, using yen loans to assist in the implementation of measures to address major sources of pollution and the building of monitoring systems so as to create "eco-recycling societies." The primary emphasis is on air pollution. The program also provides technical cooperation for "soft" areas such as human resources development and institution building. The three cities will serve as model cases, the results of which will be spread to other cities.

30. Other Official Flows (OOF)

Flows of public funds to developing countries not included in ODA. ODA refers specifically to funds that meet the following three requirements (DAC Definition): (1) provided by official agencies or by their executive agencies; (2) administered with promotion of the economic development and welfare of developing countries as its main objective; (3) concessional in character to avoid severe burdens on developing countries and conveys a grant element (GE: index of the "concessionarity " of conditions; if financed at commercial terms (assumed interest rate of 10 %), the GE is 0%; in case of outright gifts, the GE is 100%) of at least 25 %.

31. Untied loan

Loan at quasi-commercial conditions made for the purpose of promoting Japanese exports/imports or its economic activities overseas, or contributing to the stability of the international financial order. These are referred to as "untied loans" because they are not conditional on procurement of Japanese materials or equipment. The cumulative total approved for China was 2,230.0 billion yen as of fiscal 1999 (balance of approximately 420.0 billion yen as of March 2000).

32. Micro-credit project

As the name implies, a project to provide small-scale funding in contrast to the large funding needed for infrastructure assistance. One example is the "Grameen Bank" that achieved significant success by providing small loans at non-collateral basis to impoverished peasants in Bangladesh.


1. Major economic indicators

  1990 1995 1999
Population (X 1,000) 1,133,696 1,200,2415 1,238,599 (1998)
Nominal GNP total (US$1 million) 415,884 744,890 923,560 (1998)
Per-capita (US$1) 370 620 750 (1998)
Current account balance (US$1 million) 11,997 1,618 15,667
Fiscal balance (1 billion yuan) -14.65 -58.15 -176.00
Foreign debt balance (US$1 million) 55,301 118,090 154,600(1998)
Foreign exchange rate (US$1 = yuan) 4.7832 8.3514 8.2783

* Source: "Japanese ODA" (1999 statistics from the IMF's "International Financial Statistics.")

2. Major social development indicators

  1990 Most recent year
Average life expectancy at birth (years) 70 70 (1998)
Infant mortality rate (per 1,000) 30 31 (1998)
Adult illiteracy rate (%) 27 Male 9 (1998)
Female 25 (1998)
Net elementary education enrollment rate (%) 100 100 (1997)
Percentage of population enjoying safe water (%) 74 (1988-1990) 90 (1990-1996)
Percentage of population with income of less than $1/day (%) - 18.5 (1998)

* Source: "Japanese ODA"

3. Japanese ODA results (net disbursements, unit: US$1 million)

  1990 1995 1999
Grant (Total) 201.31 387.87 414.47
(Grant aid) 37.82 83.12 65.68
(Technical cooperation) 163.49 304.75 348.79
Government lending (Net value: Total - repayments) 521.71 992.28 811.50
Total 723.02 1,380.15 1,225.97

* Source: "Japanese ODA"
* Net disbursements represent the funds (includes debt rescheduling) transferred to recipient countries during a period minus the collections on loans etc.