Comparing the Determinants of Western and Chinese Development Finance Flows to Africa

Image: Flickr, hans-johnson
Image: Flickr, hans-johnson

In 2000, China’s annual development finance to Africa totaled US$121 million, and was distributed among a handful of countries. By 2013, that figure had risen to well over US$16 billion.

Over the same period, the west began paying growing attention to the quality of governance in the developing world, and how it relates to economic development. Many have hypothesized that China—through its growing economic and political footprint—is undermining the west’s drive to promote good governance in developing countries, and in Africa in particular, by predominantly engaging with countries ruled through corruption, autocracy, and despotism. Furthermore, China has been accused of distributing development finance to further its own strategic and economic interests, rather than to benefit the development of the recipients of its money. This paper explores whether various governance indicators among African countries impact the development finance they can secure from China and western countries differently. It is the first to explicitly compare the determinants of the value of Chinese and western development finance received by other countries. This paper finds that China sends more development finance to countries with worse governance outcomes than the west. It also finds that bilateral trade relations and UN voting alignment have a stronger impact on China’s development finance than that of western countries.

1 Nov 2018