Diving into the Details: What “Aid on Demand” Says and Doesn’t Say About China in Africa

Last week, AidData released a working paper entitled Aid on Demand: African Leaders and the Geography of China’s Foreign Assistance. We were delighted to see that the paper provoked a fair amount of media coverage, as well as discussion and debate among scholars and bloggers. But a lack of familiarity with the data, methods, and research findings has led to inaccurate reporting and confusion. We’d therefore like to briefly clarify several matters of fact.

China working paper

There is an important distinction to be made between “pledges” or promises of assistance versus binding commitments. Our working paper excludes Chinese funding “pledges” that never reached the commitment, project implementation, or completion stage.

AidData’s Tracking Underreported Financial Flows (TUFF) methodology makes it possible to “follow the money” from initial pledge to project completion. Since AidData reports on the status of every Chinese official finance activity in its database, one can track whether a given activity was simply announced, or if it progressed to an official commitment of assistance (a “commitment”) or to the subsequent stages of implementation and completion. This “status” variable also makes it possible to systematically identify cancelled and suspended projects, and reduces the likelihood of inflated aggregate financial estimates.

In the Aid on Demand working paper, we intentionally excluded projects that had been suspended, cancelled, or that had been “pledged” without a formal commitment.  We only included projects that were formally committed, being implemented, or completed. However, it is worth noting that other researchers—with different research questions—may benefit from including pledges and/or suspended and cancelled projects, depending on the nature and scope of their analysis.

If you want to understand China’s role in Africa’s development, you have to systematically track and analyze Chinese official development assistance AND other sources of official financing (e.g., non-concessional loans and export credits).

AidData’s TUFF methodology is designed to capture all sources of Chinese official financing, not simply official development assistance (ODA). For more information on the TUFF methodology and rationale, this Center for Global Development working paper is a useful read.  

In the Aid on Demand working paper, we use the terms “aid” and “development finance” to represent all official financing flows—that is, both ODA and other official flows (OOF). However, we explain on pg. 5 that these terms are employed as shorthand for total official financing, and the analysis contained in the paper separately analyzes Chinese ODA and total Chinese official financing.

The top-line “aid” numbers often cited in the media—$83 billion from 2000-2012—include all sources of Chinese official financing to Africa, including ODA and OOF. However, if one looks exclusively at Chinese ODA projects in the 1.1 version of AidData’s Chinese Official Finance to Africa dataset, this number declines to $24.1 billion. This estimate is quite closely aligned with those provided by other researchers and official reports published by the Chinese government. For example, in China’s 2014 White Paper on Foreign Aid, Beijing asserts that between 2010 and 2012 it provided an annual average of $4.8 billion in “aid,” of which 51 percent or $2.5 billion went to Africa. Using AidData’s data, the estimate of average annual Chinese ODA over the same period (2010-2012) is $2.68 billion (USD 2009), which is very close to China’s official reporting.

So, why track both Chinese ODA and OOF? Tracking all sources of Chinese official financing flows has led some users of the data to draw inaccurate conclusions and make misleading comparisons to Western ODA, but public disclosure—and responsible use—of these data also opens up a whole range of new opportunities for research, evaluation, and learning. The fact of the matter is that both forms of Chinese official financing (ODA and OOF) are substantial and potentially consequential for a wide range of political, social, economic, and environmental outcomes in developing countries. Therefore, having access to data on both sources of funding empowers well-informed analysts to make their own decisions about the types of data that are most relevant to their questions of interest.  

We found that a disproportionate share of Chinese official financing went to the birth regions of African leaders. It’s important to be clear about what this means and what it does not.  

Our analysis, as reported in the paper, shows that a disproportionate share of Chinese official financing goes to the birth regions of African leaders, after controlling for a range of other factors such as economic development, population density, and whether the country’s capital falls within a given region. This finding also holds (see pages 26-28 of the working paper) when we look at ODA-like flows. However, our analysis does not show that most Chinese official financing goes to the birth regions of African leaders. This is a subtle yet important difference, and it has proven to be a source of confusion in the coverage of our paper.

Getting this central finding straight is important. Our findings show that the subnational distribution of Chinese official financing is subject to a source of targeting bias, which could negatively affect its ultimate impact on development outcomes. Specifically, our results indicate that the average African leader’s birth region receives nearly four times as much (270% more) financial support from China than other regions during the period of time when he or she is in power.  As we explain in the paper, this result holds even after we control for a host of other factors that influence the distribution of funding. However, this finding does not mean that all—or even most—Chinese official finance activities are sited in the home regions of African leaders. There is still a tremendous amount of variation in where Chinese projects are physically sited within individual African countries, and many of these projects are not located in the home regions of African leaders.

The motivation for analysis contained in this working paper is simple: to better understand the targeting efficiency of Chinese official financing in Africa.

We are interested in better understanding China’s role in Africa and its ultimate impact on development outcomes. We expect that the Chinese authorities are also interested in better understanding the full range of advantages and disadvantages associated with their “on demand” approach, which places a strong emphasis on the principle of country ownership and non-interference in the internal affairs of partner countries.

There are many well-documented benefits associated with embracing the principle of "country ownership.” However, donors, such as China, that take this principle of "country ownership” seriously ought to be mindful of some of the attendant risks.

Many leaders in Africa stay in power through patronage politics, and this phenomenon poses risks that Western and non-Western donors need to bear in mind. John Cohen tried to sound this alarm in 1995 when he returned from Kenya on assignment for the (now defunct) Harvard Institute for International Development. However, he lacked sub-nationally georeferenced development finance data to support his argument. We are now in a new era where the availability of sub-nationally georeferenced development finance data is rapidly expanding, so donors are in a much better position to evaluate how their funding is allocated across towns, districts, cities, etc.

In the current version of the Aid on Demand working paper, we do not address the question of whether Western aid suffers from the same type of subnational targeting bias. However, we plan to address this issue in the next iteration of the paper.  Stay tuned for an updated version of the paper that will compare Chinese and World Bank development finance!

 

Dr. Bradley Parks is Co-Executive Director of AidData and Research Faculty at the College of William & Mary’s Institute for the Theory and Practice of International Relations. Dr. Roland Hodler is Professor of Economics and Director of SIAW at the University of St. Gallen, External Research Associate at the Oxford Centre for Analysis of Resource Rich Economies, and CESifo Research Network Fellow. Dr. Axel Dreher is Professor of International and Development Politics at Heidelberg University. Dr. Paul Raschky is Associate Professor at the Department of Economics at Monash University.  Dr. Michael Tierney is George and Mary Hylton Associate Professor of Government and International Relations at the College of William and Mary. Dr. Andreas Fuchs is a Postdoctoral Research Associate at Heidelberg University's Alfred-Weber-Institute for Economics.  They are the co-authors of Aid on Demand, a recent paper published as part of the AidData Working Paper series. The views expressed in AidData Working Papers are those of the authors and should not be attributed to AidData or funders of AidData’s work.

Tags: ChinaAfricageo-referencinggeocoded datadevelopment finance