Investment, not aid, is giving China an edge in Africa

China has committed billions of dollars in repayable, long-term development finance (not aid) for Africa over the past decade as it seeks to secure its political and economic clout there. While these multibillion-dollar loans are almost always tied to management of the project by a Chinese company (often a large state-owned company) and sometimes include a significant percentage of Chinese labor, China has nevertheless filled a void left by the West and is now reaping enormous praise from African governments.

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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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