China in Africa: Competition for Traditional Development Finance Institutions?

Official development finance from China has risen tremendously in the past two decades across the globe, including in the world’s poorest continent, Africa. How has this sudden increase in development resources affected the two major multilateral development banks (MDBs) in the region, the World Bank and the African Development Bank (AfDB)? One might expect that the MDBs—often described as tools to exert the influence of wealthy western countries—might compete with China to maintain their relevance and influence in Africa. This study undertakes a combination of statistical tests and in-depth interviews with government officials in three recipient countries to see if this is the case, both in terms of overall finance levels as well as in the sectoral distribution of projects. The results indicate that total MDB finance levels by country change little over time regardless of Chinese activity. The same is true for funding levels of traditional bilateral donors. The sectoral allocation of concessional lending does not show any responsiveness either. In contrast, shifts in funding levels overall and in sector allocation can be observed for non-concessional countries; the latter, however, represent only a small minority among the recipients of
Chinese finance. Overall, the study suggests that while China’s role in African development finance is indeed substantial and growing, it has not had the “game changing” impact on traditional development finance as popular perception might lead one to believe. Things may change, however, once more recipient countries develop economically and move into the non-concessional category.