"Since the 1990’s, China has substantially increased its aid to Uganda. However, the aid policies and aid distribution channels through which China provides its aid are not well known. Using available aid data from the various recipients and information from the Chinese consulate in Uganda, this paper provides insights on how China’s aid has impacted on the economic and social welfare of the people in Uganda. The paper further analyses sector specific opportunities and challenges faced by Uganda as a result of the impacts generated through the growth of this economic relationship with China. The findings indicate that the aid which China provides to Uganda has mainly been in the form of technical assistance, with emphasis on training in Chinese institutions; grants; interest-free loans; preferential loans that have an interest subsidy; and debt relief. Indirect benefits have been felt for example, debts that have been cancelled have reduced Uganda’s external burden hence have had a positive impact on peoples’ welfare in Uganda. However, the created employment may not be sustainable in the long-run. The paper concludes that there is a strong need for government to contribute meaning-fully to donor funded projects for sustainability and further poverty reduction of the beneficiaries of these services. In addition, urges government to re-strategize its position in order to benefit from its relations with China."