Speech at the International Conference on Transforming Global Governance: China and the United Nations

14 Jan 2014

13-14 January 2014, Shanghai, China

Statement of Mr. Haoliang Xu
UN Assistant Secretary-General
and UNDP Regional Director for Asia and the Pacific

Dear friends and colleagues, distinguished participants,

It is my great pleasure to attend this important and timely conference on “Transformative Global Governance: China and the United Nations”.  I thank the organizers for inviting me to attend and speak today.  In 2012 UNDP and China Center for International Economic Exchange jointly undertook a project and organized a High-Level Forum on Global Governance and published a report titled “Reconfiguring Global Governance: Effectiveness, Inclusiveness and China’s Global Role”, available in English and Chinese.  We collaborated with the MFA in that project, and I am very happy that the discussions at this conference will generate new wisdom for this important subject.

The rapid growth and socio-economic development achieved in recent decades by many formerly low-income countries has resulted in a pool of finance, technology and human capital that can be used to help other developing countries with their own development transformations.  These emerging countries also have relevant experiences to share, having recently dealt with and overcome many of the same challenges.  The 2013 Human Development Report, called “The Rise of the South: Human Progress in a Diverse World” highlighted these new realities, noting that the emerging powers are already sources of innovative social and economic policies; that their importance as economic partners for other developing countries is rising; and that they warrant a stronger role in international governance institutions.

The most populous country, second largest economy, the largest country in goods traded, China is emerging as a leader in many aspects of global affairs and is exerting its influence over emerging institutions, processes and norms of global governance.  A founding member of the United Nations and a permanent member of the UN’s Security Council, China’s assessed contribution has increased significantly in recent years and is today the sixth largest contributor to UN’s peacekeeping budget and the largest troop contributor to UN peacekeeping operations among the five permanent members of the Security Council.

As a result, the world’s expectations of China have also changed.  These expectations are diverse, spanning areas of peace and security, trade and investment, human rights, governance and international development cooperation.  At the same time, it is important to recognize that, despite its great achievements in many fields, China remains a developing country with multitude of development challenges and that China wants to position itself as a developing country.  China’s GDP per capita is $6,091 compared to Norway’s $99,558, USA’s $51,749, Japan’s $46,720, Germany’s $41,863 and Malaysia’s $10,432, to name just a few (WB 2013).  China still has nearly 100 million rural poor according to 2012 government statistics, with a Gini coefficient of 0.474.  For those who live in China, they know too well the challenges China faces in environment protection and sustainable development.  The consequences of decades of rapid economic development, coupled with insufficient attention to and enforcement of existing laws, air pollution, land and water pollution, food security are affecting hundreds of millions of people every day.  The side effects of massive urbanization, for example, in terms of jobs for young people, the psychological health of rural population new to urban settings, and sustainable development of cities, are also begin to be felt.  After all, the Human Development Index of China is only 0.699 with a rank of 101, compared to 0.955 of Norway (#1), 0.937 of the US (#3), 0.920 of Germany (#5), 0. 912 of Japan (#10) and 0.769 of Malaysia (#64).

But these issues do not change the fact that the world’s expectations of China have changed.  As China continues to develop its economy and society, China cares and needs to care more about how China is perceived in the world, and how China should respond to the world’s expectations.  This concerns not only the political, security, trade and investment spheres.  It also concerns another critical area where the landscape has changed rapidly in recent years and where China can exercise a powerful leadership role: development and humanitarian cooperation, which I will focus on today.

China has already supported other developing countries around the world for decades, investing to help build public infrastructure, transferring knowledge and technologies, and building the capacity of officials and others.  It has also made valuable contributions to help countries recover and rebuild after disasters. According to various estimates, China’s ODA is at least $4 b a year. China has always maintained that its development assistance is based on South-South Cooperation and for bilateral cooperation.  The 2011,  China’s  White Paper on Foreign Aid states clearly that China’s assistance is provided based on the principles of “adhering to equality and mutual benefit, stressing substantial results and keeping pace with the times without imposing any political conditions on recipient countries”.  The Paper also states that “China’s foreign aid is provided mainly through bilateral channels.  At the same time, China also has done its best to support and participate in aid programs initiated by organizations like the United Nations, and has actively conducted exchanges and explored practical cooperation with multilateral organizations and other countries in the field of development assistance with an open-minded attitude”.  

Therefore, granted that China contributes to all Specialized Agencies through membership dues and does use multilateral channels including various UN agencies and programmes, especially when it comes to major disasters, its foreign assistance is predominantly delivered as bilateral assistance, through MOFCOM and others. It is concerned, I believe, that if it uses multilateral agencies such as the UN more, it risks being seen more as a donor - with its attendant characteristics – and less as a developing country, still in need of development and in firm solidarity with other developing countries.

There is a need as well as scope, however, for innovation in developing new thinking and new approaches, for exploration of other delivery modalities for China’s external assistance and for deeper engagement in global as well as country level platforms.  In this discussion, I would like to focus on a few questions concerning China’s external assistance, sharing some thoughts on how China and the UN can work together more effectively in future.  They include China’s use of the UN as a means for delivering China’s assistance and its internal decision making and coordination mechanism, the value that the UN offers to China and what China can gain by working through the UN, the need for China to take advantage of various platforms of dialogue for development cooperation and the need for China to cultivate a generation of young professionals to further develop its assistance programme.

As I mentioned earlier, China’s contributions to the UN development agencies have been relatively limited to membership dues of specialized agencies, via the various corresponding line ministries.  In addition to responding to humanitarian crises with financial and material assistance, including through contributions to the UN, China also makes contributions to the UN’s development funds and programmes, such as UNDP, UNICEF, UNFPA and UN Women.  But this funding is very limited.  In 2013, for example, China’s combined contributions to UNDP reached a historical high of $6 m, including funding earmarked for supporting trilateral and South-South cooperation.  Its contribution to UNICEF is $1.5 m and to UNFPA is $1.2 m. The reason, I can understand, is because China is a developing country and is still, in fact, receiving aid. 

At the same time, however, one cannot but note that China contributes significantly to the WB and other International Financial Institutions (IFIs).  Based on information on the IFIs’ websites, at the end of the last fiscal year, China has 5.76% ($12.9 b) of the subscribed capital and is the 3rd biggest shareholder after the US and Japan.  In 2010, China paid $161 m to IDA 16th replenishment, among other contributions to smaller trust funds.  China also paid $80 m between 2006-2012 to the WB in its capacity as trustees of various so-called global vertical funds, such as GEF, CGIAR and GFATM (while China is a beneficiary of some of the funds themselves).  For ADB, China’s contribution to last ADF replenishment in 2012 is $ 45 m, and to replenish PRC Regional Cooperation and Poverty Reduction Fund in 2012 is $20 m. You can tell a similar story with regard to AfDB. 

Why the difference?  Isn’t there a problem of logic where, at least it appears, China sees more value in institutions with weighted voting system and much less so  in the UN development system where everyone has an equal representation?  Is China’s voice important more in IFIs?  Is there any evidence that China gets more value for money from IFIs?  Or is this because who sets the priority and who pulls the purse strings?  The WB lends about $25 to $30 b a year in development financing.  UNDP alone delivers $5 b grant assistance a year. 

One can argue that the UN development system combined is no less significant than the WB.  I mention this not because I think the IFIs are not important, I do so to use the example to question, for instance, whether strategic questions such as mentioned earlier are being closely examined systematically and whether the current inter-ministerial coordinating mechanism (e.g. MFA-MOFCOM-MOF co-lead, I understand) is working effectively and serving its purpose.  As China seeks to develop its relations with the UN, as China seeks to increase its soft power, I think it is important that we look at these questions. 

Why should China use the UN?  How would that benefit China, especially as we move forward, making every effort to achieve the MDGs by 2015 and going forward with a Post-2015 development agenda? UNDP’s Strategic Plan for 2014-2017, recently approved by our Executive Board, has a good discussion of this question.  It states that UNDP is:

a)    Recognized as being neutral, able to act as an impartial facilitator of dialogues and cooperation on important development issues,

b)    Trusted due to long-standing relationships at the country level, maintained through good times and bad;

c)     Able to draw on knowledge and expertise gained in all development settings, thus, able to grasp and respond flexibly to common concerns and important differences between countries and regions;

d)    Geared to address development issues as they actually exist – complex, multi-dimensional and often unique to each society;

e)    Acknowledged as a partner who can advise on the “big” issues of economic and social transformation, environmental sustainability and democratic governance, as well as help develop the plans and capacities to deliver on them;

f)      Seen widely as having a strong operational capability, deployable in widely varying conditions; and

g)    Positioned to tap the assets of the UNDS to support countries in their development efforts

These comparative advantages clearly offer China ways to account for its contributions and value for money.  In the context of China, working with the UN also helps the Chinese assistance to take advantage of the standards and systems that the UN uses,, improving Chinese capabilities over time and reducing the criticisms we see in the press from time to time. China should see the UN development system as a resource.  This is the case not only for humanitarian assistance.  I would argue it is the same for development cooperation.  The challenge is to find ways that are suitable for China, for both sides to agree on the UN’s value added, and to build confidence through pilot initiatives.  I am happy to note that UNDP and MOFCOM have made significant progress in these directions.

Let’s have a quick look at how traditional donors have used the multilateral channels for their bilateral aid, based on their assessment of the effectiveness and efficiency of the agencies.  Based on our analysis of OECD’s data, for Japan, about 40% of its aid is delivered through multilateral channels; for the UK it’s 37%, South Korea 26%, the USA 17%, and for all DAC country assistance it’s 30%.

One issue that I often see is China’s reluctance to participate in country level development dialogues, in countries where China is providing development assistance.  Why is this the case?  The principles stated in China’s White Paper may provide partial answers.  China may see these efforts as part of the aid effectiveness effort of Paris and Busan, to which China does not fully subscribe to.  China may also believe that its aid activities are already coordinated with the host government and see no need to go to the forums and talk about them. China may have overlooked, however, a) these development dialogues are always hosted or co-hosted by the host governments; b) while China has indeed coordinated with the host governments, most other development partners don’t know about China’s plans; lack of information gives rise to speculation of China’s intentions; c) China is missing an opportunity to let other partners know its objectives, policies, and contributions and to project China as a more results-oriented and constructive development partner, that it is.  In my view, China’s positions on aid effectiveness should not prevent China from actively participating in multilateral dialogues at country level.  UNDP is always associated with these dialogues and is always ready to offer insights if required.

As China becomes more and more confident in multilateral fora, it needs to build a cadre of professionals who are familiar with evolving rules of engagement and practices of multilateral assistance.  Most of China’s assistance will continue to be delivered bilaterally.  Both bilateral and multilateral assistance will require China to have qualified people as well institutions that are fit for purpose.  For people, the UN offers a fertile ground for training for China’s young and aspiring.  This will, in fact, help increase the number of Chinese working in the UN as well as cultivate a group of young professionals in the government who are familiar with international practices and know the UN’s organizational culture.  The total number of Chinese working in the UN Secretariat system is about 460, or 1.09% of the workforce, not commensurate with China’s proportion of membership dues.  Of the 460, about 35% or 160 are non-language related specialists or are managers, with 10 or so at senior level (D1 and above).  All other Security Council members have far more staff than China, including at senior levels.

UNDP runs a Young Professional Programme, or JPO Programme, for training young professionals (P1/P2 levels).  UNDESA runs a similar programme for the Secretariat.  They are funded by primarily OECD countries to support their young people to work in the UN.  In the past, the resistance is often its cost.  But today, the difference between the cost of JPOs and the compensations of Chinese diplomats working overseas has narrowed significantly.  The Chinese Government has the ability to finance a JPO programme but needs to be convinced of its value.  The experience of Japan is instructive.  Japan supported nearly 300 JPOs over the past 10 years in different UN agencies, with most in UNDP and the rest in other agencies.  Typically, 50% of JPOs stay and others go to the government or the private sector.  Over the past decade, the number of Japanese staff in UNDP increased significantly thanks to its JPO programme.  Nigeria has seen the value of the JPOs and has decided to fund its own JPO programme.  We are in the process of recruiting the first batch

My point is to say that China needs a generation of young people to bring China’s aid to a new level.  The UN, as well as the WB and other multilaterals, can help.  The UN has YPP, UNDP has a new plan targeting recruitment of P3/P4 level trainees.  UNDP also has a secondment programme with MOFCOM.   These are win-win initiatives, benefiting both China and the UN and helps to enhance China’s voice and soft power.   But it takes time to see the result.  The time to act is now.

I believe there is a need to review the institutional set-up as well.  As I argued earlier, there is a question who will argue for more multilateral development assistance.  I also have an impression that perhaps too many Chinese institutions are involved in providing development assistance, not able to have policy coherence and achieve real impact.  In most countries I have seen, external assistance is more centralized in a much smaller number of core institutions.  A related question is how to differentiate aid with trade and investment and, sometimes, how to mix aid with trade and investment.  You will need very different institutions and experiences to achieve this.

There are many issues that China cannot tackle alone.  Teaming up with the UN, UNDP included, will allow China to achieve regional impact, e.g. SIDS, LDC graduation, Middle Income Traps, etc.  Due to time limitations, we will have to leave this to the next conference.

The UN is committed to working with China to explore new partnerships and areas for deeper cooperation.  It’s in China’s interest to review how China can leverage multilateral approaches to enhance China’s reputation and position as a global leader for development and a responsible stakeholder of the international system.  China needs to invest in its young people now to build a generation of professionals who can manage and deliver China’s assistance programme more effectively in the future.  The time to act ambitiously is now. 

Thank you very much.