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Chinese Development Finance and its determinants: Does global governance matter?

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  • Eunhye Yoo

Abstract

Motivation What motivates China to offer development finance in recipient countries? Research on Chinese development finance focuses on China’s political and economic interests in allocating development finance. Few studies, however, have assessed the impact of international norms and regulation—a neo‐institutional perspective—on China’s development finance. Purpose The article tests the three sets of hypotheses on Chinese development finance, positing that countries will receive more Chinese aid if: (1) they have a UN General Assembly voting alliance with China and do not recognize Taiwan; (2) the more oil and gas reserves they have; and (3) the more memberships of intergovernmental organizations (IGOs), such as the UN agencies, and international non‐governmental organizations (INGOs), which include non‐profit organizations and charities, such as Oxfam, as well as foundations and professional associations. Approach and Methods This study models the amount of Chinese aid received by developing countries as a function of its integration to IGOs/INGO networks. It draws on data from AidData’s Global Chinese Official Finance Dataset, 2000–2014. The model used is ordinary least square regression using fixed effects. Conclusions Chinese aid allocation does not only reflect its political and economic interests. Taiwan recognition continues to be the dominant factor for Chinese development finance. IGO and INGO memberships of recipient countries increase the chance of receiving more Chinese development funding, especially for least developed countries. Policy Implications Chinese development finance provides many developmental opportunities for less developed countries. A key aspect of getting Chinese development finance has been alliance with China. Linkages to IGOs and INGOs also matter. Countries aiming to get Chinese development finance should consider increasing their memberships to transnational networks of IGOs and INGOs.

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  • Eunhye Yoo, 2021. "Chinese Development Finance and its determinants: Does global governance matter?," Development Policy Review, Overseas Development Institute, vol. 39(3), pages 471-492, May.
    • Handle: RePEc:bla:devpol:v:39:y:2021:i:3:p:471-492
    DOI: 10.1111/dpr.12514
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