AIDS Funds Frozen for China in Grant Dispute

 NYTimes.com

Michael Reynolds/European Pressphoto Agency

A Chinese man dying of AIDS was comforted by his wife. A global fund has frozen payments to China to fight H.I.V.

By SHARON LaFRANIERE

Published: May 20, 2011

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BEIJING — The Global Fund to Fight AIDS, Tuberculosis and Malaria has frozen payments on hundreds of millions of dollars worth of disease-fighting grants to China, one of the charity’s biggest recipients, in a dispute over China’s management of the grants and its hostility toward involving grass-roots organizations in public health issues.

The dispute may add to a growing debate among global health experts whether China, which spent an estimated $46 billion staging the 2008 Olympic games and last year’s Shanghai Expo and financed a $586 billion economic stimulus package, should be a recipient of such aid at all.

The fund, which has expanded to 150 countries since it was founded in 2002 as a pool for public and private donations to fight the world’s worst diseases, quietly decided to hold back payments from a major AIDS grant to China in November. It froze payments from other grants to China several weeks ago because of fresh concerns over lack of monitoring of funds.

Its decisions appear rooted in a collision between the fund’s conviction that grass-roots organizations must be intrinsically involved in the fight to control diseases like AIDS, and the Chinese government’s growing suspicion of any civil-society groups that are not directly under its control. They follow complaints by some AIDS activists that Chinese officials have sought to suppress their public-health activities, have shunted grant money to groups under government control and have failed to account for how some funds were spent.

At stake are hundreds of millions of dollars for programs to reduce the incidence of tuberculosis, prevent and treat H.I.V. infections and wipe out malaria. China has received $539 million from the Global Fund since 2003, according to the fund’s Web site. An additional $295 million is in the pipeline, making China the fund’s fourth largest recipient behind Ethiopia, India and Tanzania, one global health expert said.

A decision by the Global Fund to pull out of China would be hugely embarrassing for the Chinese government because it would suggest that China was unable to meet the standards of an international organization that dispersed funds to far less sophisticated governments. The fund can terminate grants that have been mismanaged or short of that,  formally suspend them. Suspension is a harsher step than halting payments and sets up a series of major obstacles to the release of additional funds.

Those more punitive measures seemed to have been averted Friday after two days of tense meetings between officials from the fund and the government. Jon Liden , a spokesman for the Global Fund, said China agreed Friday to a number of stipulations on how money would be used and monitored. “We came to a point where we needed to make clear signals to China,” he said. “We seem to share an understanding of the way forward.” This week, sources familiar with the negotiations said China pledged to the Global Fund that it would repay any funds that were misspent. But some fear that the inclusion of civil society groups in the health effort may still be an issue.

The meetings took place against the backdrop of growing questions over whether China should be allowed to benefit from the fund’s largesse. As a middle-income country, China qualifies for grants, as do Thailand, India, the Philippines and a number of Latin American countries. Unlike poorer countries, those nations are expected to contribute a certain percentage of the cost of the programs financed.

But China’s huge success in winning awards — coupled with growing evidence of the government’s deep pockets — has inspired fiery criticism, including from Jack Chow, a former first assistant director general of the World Health Organization who helped create the Global Fund. Dr. Chow, now a professor at Carnegie Mellon University, has argued that China’s Health Ministry seeks aid only because the Chinese government chooses instead to lavish funds on “hard power” agencies or to invest it in other sectors.

“China’s persistent appetite threatens to undermine the entire premise behind the Global Fund,” he wrote in the July issue of Foreign Policy. At a time when the fund is struggling for contributions, he wrote, “Donors will grow even more reluctant if they realize that substantial funds are being awarded to a country that can more than pay for its own health programs.”

China’s contributions to the fund amount to a mere $16 million, compared with $5.5 billion from the United States, the leading donor, he wrote. Fund officials have been reviewing the question of eligibility criteria, and lower-than-expected donations are now forcing them to be more selective about recipients.

Some fund officials suggest that China is not expected to apply for major new grants. Nonetheless, fund officials insist the controversy over eligibility criteria had no bearing on the fund’s decision to hold up payments.

The problems between the fund and China turned serious late last year after audits revealed that China had failed give 35 percent of a $283 million AIDS grant to community-based organizations, as it had pledged. The grant focused on community-based H.I.V. treatment and prevention, especially focusing on drug users and prostitutes.

According to a report by a nongovernment group called Global Fund Watch, China actually allocated less than 11 percent to nongovernment groups. An external audit found that community groups appeared to be left out of strategy sessions.

Chinese officials countered that many civil society groups could not be trusted to properly spend the Global Fund’s money and that government agencies were more trustworthy, sources said. But in interviews this week, activists challenged that view.

One, Chang Kun, alleged that government officials or “official NGOs” created by the government routinely pocketed more than half the grant funds. He said that an AIDS rights group that he headed in western China’s Xinjiang region had received a grant of roughly $3,000 in 2005, only to be forced to return it because the government disbanded his group.

“They view our campaigning as troublemaking. They don’t like private NGOs and people taking up organizing roles,” he said. “I have been campaigning for AIDS patients for seven years now, and I rarely see people getting any benefits from the Global Fund.”

The Hebei Province director of an AIDS support group, Shen Zhiqi, said that he supported the fund’s decision to withhold funds, because “I really don’t want to see something as well-intentioned as the Global Fund be sucked into the black hole of corruption.” But he said he did not endorse totally withdrawing financing because it would hurt grass-roots groups.

The Chinese government has been wary of such groups for years. One prominent official gave a taste of the government’s thinking earlier this week. In Qiushi, a Communist Party journal, Zhou Benshun, the secretary general of the party’s political and legislative affairs commission, wrote that China must “guard against being misled to the point of falling into the trap of so-called ‘civil society’ devised by certain Western countries.”

Jonathan Ansfield contributed reporting, and Li Bibo contributed research.