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Rogue Aid? The Determinants of China's Aid Allocation

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  • Axel Dreher
  • Andreas Fuchs

Abstract

Foreign aid from China is often characterized as ‘rogue aid’ that is not guided by recipient need but by China’s national interests alone. However, no econometric study so far confronts this claim with data. We make use of various datasets, covering the 1956-2006 period, to empirically test to which extent political and commercial interests shape China’s aid allocation decisions. We estimate the determinants of China’s allocation of project aid, food aid, medical teams and total aid money to developing countries, comparing its allocation decisions with traditional and other so-called emerging donors. We find that political considerations are an important determinant of China’s allocation of aid. However, in comparison to other donors, China does not pay substantially more attention to politics. In contrast to widespread perceptions, we find no evidence that China’s aid allocation is dominated by natural resource endowments. Moreover, China’s allocation of aid seems to be widely independent of democracy and governance in recipient countries. Overall, denominating aid from China as ‘rogue aid’ seems unjustified.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3581.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3581

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Keywords: aid allocation; China’s foreign aid; new donors; donor motives;

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References

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  1. Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
  2. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2010. "Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid between Non-DAC and DAC Donor Countries," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 25, Courant Research Centre PEG.
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  1. China and the aid market
    by Straub in Stephane Straub on 2012-01-30 07:05:12
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Cited by:
  1. Fuchs, Andreas & Klann, Nils-Hendrik, 2013. "Emergency Aid 2.0," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79898, Verein für Socialpolitik / German Economic Association.
  2. Fuchs, Andreas & Vadlamannati, Krishna Chaitanya, 2012. "The Needy Donor: An Empirical Analysis of India’s Aid Motives," Working Papers 0532, University of Heidelberg, Department of Economics.
  3. Strange, Austin M. & Parks , Bradley & Tierney, Michael J. & Fuchs, Andreas & Dreher , Axel, 2014. "Tracking Under-Reported Financial Flows: China’s Development Finance and the Aid-Conflict Nexus Revisited," Working Papers 0553, University of Heidelberg, Department of Economics.
  4. Axel Dreher & Nathan Jensen, 2009. "Country or Leader? Political Change and UN General Assembly Voting," KOF Working papers 09-217, KOF Swiss Economic Institute, ETH Zurich.
  5. Axel Dreher & Andreas Fuchs, 2011. "Does terror increase aid?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 86, Courant Research Centre PEG.
  6. Kersting, Erasmus & Kilby, Christopher, 2014. "Aid and democracy redux," European Economic Review, Elsevier, vol. 67(C), pages 125-143.

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