On 28^th November 2004, ahead of the ASEAN Leaders Summit, Prime Minister Jun'ichiro Koizumi said to the reporters accompanying him in the Laotian capital Vientiane that, "perhaps the time has come for China to graduate from ODA." Thereafter, it became clear that the Japanese government had settled upon a policy of discontinuing the grant assistance part of its ODA within the next few years.

Another element that accounts for a significant proportion of Japan's ODA is the loan assistance (yen loans) that the government provides through the Japan Bank for International Cooperation. Both the principal and the interest on the yen loan must be repaid. The interest on these loans is low and the repayment period is long. The international standard generally means that ODA interest is set at 1.4%, with a repayment period of at least ten years.

According to data provided by the Japanese Embassy in China, over the 25 years since 1979, Japan has provided a total of around 3.3 trillion yen of ODA to China. Japan's yen loans to China rose to 214.4 billion yen ($1.95 billion) in 2000, reaching their highest ever level. However, since 2001 they have been cut by about 20% each year and had been reduced to 96.7 billion yen by 2003, 45% of the level at its highest point.

The main source of funds for Japan's ODA is assistance provided from the taxes paid by the people of Japan and this assistance is used for a wide range of purposes in China, including infrastructure construction, such as railways, roads, ports and airports, the development of rural areas, environmental conservation and improvements to the level of medicine and healthcare. This assistance is implemented in every province, city and autonomous region of China. Most of China's large infrastructure projects, particularly those dating from the early part of its period of reform and opening up, were built using assistance from Japan. The construction funds for Beijing Capital International Airport, Shanghai Pudong International Airport, Beijing's subway system and the China-Japan Friendship Hospital were all secured with the assistance of yen loans.

Thus, Japan's ODA to China fulfils an active role in enhancing infrastructure construction in China and promoting China's economic development, and both the government and people of China are grateful to Japan for the assistance that it has provided.

It would not be true to say that the deterioration of the relationship between the Chinese and Japanese peoples has not been a factor in the decision to abolish Japan's economic assistance to China. It is certainly possible that there has been a lack of progress in developing mutual understanding between them. However, this problem is merely a matter of whether economic assistance disappears from the historical stage sooner or later, as China's economy develops and its ability to fund its own construction projects improves; the Chinese populace must keep its cool with regard to the cessation of economic assistance, which would have happened one day, in any case. China is experiencing dynamic economic development and we must see that the economy will develop through our own knowledge, determination and belief.

China's economic development is hugely successful and there are those in Japan who wonder whether there is any need to provide it with any further ODA. I think that we should let nature take its course.