Casting light on the misconceptions of China's growing aid to Africa

The international development finance landscape is changing - not just in the emergence of new donors with new money, but in the way they do things. And China, one of the world's most significant emerging donors, is at the forefront of this change. For the past two years alone, Asia's economic behemoth has been setting up economic and development institutions left and right, including the Beijing-based Asian Infrastructure Investment Bank, the BRICS' New Development Bankheadquartered in Shanghai, and the "One Belt, One Road" initiative. And all this in addition to the country's growing financial flows and assistance to other regions of the world over the past decade or so.

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Abstract

Abstract

Chinese “aid” is a lightning rod for criticism. Policy-makers, journalists, and public intellectuals claim that Beijing uses its largesse to cement alliances with political leaders, secure access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China's Official Development Assistance (ODA) and more commercially oriented sources and types of state financing. Using a new database on China's official financing commitments to Africa from 2000 to 2013, we find that the allocation of Chinese ODA is driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.

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