AFRASO Lecture by Dr. Andreas Fuchs: "China's Development Finance to Africa"

29. January 2015
Goethe University, Campus Westend, RuW 4.202

6 pm - 8 pm

Chinese development finance is a lightning rod for criticism. Politicians, policy analysts, and scholars charge that Beijing is using its largesse solely to cement alliances with African political leaders, secure access to natural resources, and create new commercial opportunities for Chinese firms. We argue that much of the controversy surrounding “Chinese aid” follows from a failure to measure and carefully distinguish between China’s official development assistance (ODA) and other forms of official financing. Using a newly constructed database on Chinese official financing commitments to Africa from 2000-2011, we find that the allocation of Chinese ODA appears to be driven primarily by political considerations, while economic interests better explain Chinese commitments of less concessional forms of official finance. These results suggest that the factors driving Chinese allocation choices may not be substantially different from those that shape the behavior of Western donors.
Moving beyond standard cross-country analyses, we also investigate the allocation of Chinese aid within countries. Specifically, we analyze whether the political leaders of aid recipient countries misappropriate foreign aid flows to further their own political or personal goals. While much of the literature expects China’s aid to undermine the aid conditionality attached by Western donors, note that China keeps control of its projects from the planning phase to the implementation stage (and sometimes even controls management after the project has been completed). As Chinese aid money usually does not leave Chinese hands, one could also expect that Western donors’ aid is more prone to corruption or favoritism. We proxy for leaders’ personal interests by investigating whether more aid is allocated to the leaders’ birthplaces and/or to regions populated by the same ethnic group, controlled for objective indicators of need. We have collected data on 117 African leaders’ birthplaces and ethnicity and have access to geocoded World Bank and Chinese aid projects (from AidData). Using nested estimation models we test for whether different indicators of developmental need on the one hand and political and personnel interests of the recipient countries’ leaders on the other hand affect the allocation of these donors’ aid to a different degree.

Dr. Andreas Fuchs - Biography