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Working Paper 129 - China’s Engagement and Aid Effectiveness in Africa

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  • Jean Claude Berthélemy

Abstract

Chinese aid, finance, trade and investment flows to Africa are growing fast. We consider the consequences of these trends using a quantified framework. Very often, adequate data are simply non-available, but we find that existing data provide useful insights on what is ongoing. We first discuss the allocation of Chinese aid, using data on turnover of economic cooperation, and we find it is at least partially comparable to other bilateral aid. We also consider the potential issue created by re-indebtedness of African countries borrowing to China. Second, we show, through studying African import patterns, that the growing importation of Chinese products in Africa can be interpreted as trade creation instead of trade diversion. Hence it has positive rather than negative impact on African economies. Third, we study the influence of Chinese engagement on economic diversification. We show that the usual “Dutch disease” argument is debatable. We find that none of the various dimensions of China engagement has had so far a significant impact, positive or negative, on African economic diversification. For the future, the evolving preferential trade regime offered by China, and its policy of creating special economic zones, could help tip the balance on the positive side.

Suggested Citation

  • Jean Claude Berthélemy, 2011. "Working Paper 129 - China’s Engagement and Aid Effectiveness in Africa," Working Paper Series 295, African Development Bank.
    • Handle: RePEc:adb:adbwps:295
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    References listed on IDEAS

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    1. Paul Collier & Anthony J. Venables, 2007. "Rethinking Trade Preferences: How Africa Can Diversify its Exports," The World Economy, Wiley Blackwell, vol. 30(8), pages 1326-1345, August.
    2. Helmut Reisen & Sokhna Ndoye, 2008. "Prudent versus Imprudent Lending to Africa: From debt relief to emerging lenders," OECD Development Centre Working Papers 268, OECD Publishing.
    3. John Henley & Stefan Kratzsch & Mithat Külür & Tamer Tandogan, 2008. "Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon?," WIDER Working Paper Series RP2008-24, World Institute for Development Economic Research (UNU-WIDER).
    4. Peter Kragelund, 2008. "The Return of Non-DAC Donors to Africa: New Prospects for African Development?," Development Policy Review, Overseas Development Institute, vol. 26(5), pages 555-584, September.
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