Following overhaul of the central heating system in his neighborhood during the winter of 2002, the small boiler adjacent to his apartment building was shutdown. Also gone are the huge coal stacks beneath his windows.

Zhang and his neighbors are benefiting from Lanzhou's pollution-control projects, one of which involved the shutting down of small coal fired boilers. Homes once reliant on them are now supplied by the new system which uses the redundant heat generated by one of the city's power plants.

To date, 540 small boilers have gone in the centre of Lanzhou, dramatically reducing dust, coal cinders, sulphur dioxide and other pollutants.

About 35 per cent of the project's total construction fund comes from a low-interest loan from Japan.

In total, Lanzhou received a loan of 7.7 billion Japanese yen (US$64.24 million) towards the costs of its comprehensive projects to ease environmental pressure. By the end of 2002, Gansu Province, one of the poorest in China, had received US$198.3 million in Japanese loans to support projects ranging from fertilizer production to fibre optic telephone cables.

The long-term and low-interest rate loan is one of the forms of Official Development Assistance (ODA) offered to China by Japan.

By the end of 2002, China had been the recipient of over 2.9 trillion yen (US$24.2 billion) through the ODA, in the form of loans, aid grants and technical assistance.

Gansu Province is not the only beneficiary of ODA.

Beijing's Capital Airport, the electric railway from Beijing to Qinhuangdao in Hebei Province and the National Library in Beijing are but a few well-known beneficiaries of ODA projects.

In October 2001, the Japanese Ministry of Foreign Affairs announced the "Economic Co-operation Program for China," which marks a significant shift in the priority of Japanese ODA to China.

It said that ODA to China would turn from helping with infrastructure construction in coastal areas to environmental protection, the curbing of infectious diseases, poverty-relief and exploration of inland areas.

The yen-loan was cut by over 25 per cent in 2002. Environmental protection projects and technical renovation in agriculture and rural areas are listed in ODA plans in accordance with the document.

The shift of priority matches well with the goals set by the Chinese Government.

The State has been making efforts to protect the country's environment from accelerating industrialization. Japanese assistance in flood-prevention, wildlife protection and tree-planting was a welcome addition to China's continuing efforts.

There are about 30 million rural people living below the poverty line in China. The widening development gap between the coastal and inland areas is worrying the government of China so much that former Premier Zhu Rongji listed it as one of the most important issues to be addressed.

With the advanced technologies and equipment brought by the Japanese ODA, more farmers will be able to improve their quality of life earlier.

As Shuichiro Megata, minister for economic affairs of the Japanese Embassy to China put it in an interview: "China's strength both economically and militarily has been greatly enhanced...which makes many Japanese think of China as a business competitor for Japan on the international market. There are opinions at home that it may not be necessary to aid the economically-booming China or that it is beyond Japan's capability to offer assistance overseas when our country is hit by heavy fiscal deficit and economic difficulty.

"However, we are well aware of the gaps in development in different parts of the country and the low per capita income of China."

Japanese ODA to China has, in effect, benefited both countries.

Despite its rapid growth, China is still, and will remain, a developing country in the near future. It is far from becoming a business competitor in the real sense to Japan.

It is said that China will be a "factory of the world." However, before China can become a real "factory of the world," it will become a market for the world, which spells vast business opportunities for other countries, including Japan, said Vice-Minister of Foreign Affairs Wang Yi.

Economic aid is "an important means in Japanese foreign policy" and plays "a tremendous role" in maintaining Japan's image as an economic power, said Japanese Minister of Foreign Affairs Yoriko Kawaguchi.

According to Professor Shigekazu Matsumoto in studies of modern Japan with Peking University, economic aid has helped Japan to recover its international credibility, while at the same time it could act as a powerful tool in achieving its foreign policy goals.

In the pacesetting Official Development Assistance Charter released in 1992, Japan added strict political preconditions to its ODA. If the Japanese Government thought recipient countries did not meet the required political standards, it would stop or cut the aid.

Jin Xide, an expert in Japanese studies with the Chinese Academy of Social Sciences pointed out in his book on Japanese ODA that such association of ODA and political issues made it possible to manipulate the relationship between Japan and its aid recipients.

However, Wang Yi said: "It is understandable for Japan to re-examine its ODA plan to China if it is because of fiscal difficulty. But if the assistance plan is linked with domestic issues of China...it would only harm the friendship between the two peoples and the sound development of co-operation between China and Japan."

(China Daily May 7, 2003)