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China’s Contribution to Development Cooperation: Ideas, Opportunities and Finances

Author

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  • Justin Yifu LIN

    (FERDI)

  • Yan WANG

    (FERDI)

Abstract

Conventional economic theories seem to be inadequate in explaining the diverse and multipolar world we live in. Having lost confidence in the Washington consensus, developing countries are increasingly looking East for development experiences and ideas: what worked, why and how. This paper examines China’s role in development cooperation from the angle of structural transformation as a major driver of growth and job creation. Being a bit ahead in the structural transformation process, China can contribute ideas, tacit knowledge, implementation capacity, opportunities as well as finances. Based on a joint learning model, developing countries choose partners based on their respective comparative advantages, instruments of interaction and degree of complementarity. Countries that have a higher number of revealed comparative advantage (RCA) in sectors that needed strongly would be in a better position to help in structural transformation. We use empirical evidence to show that China-financed infrastructure projects do address Africa’s infrastructure bottlenecks, and in addition, China’s industrial upgrading and outward investment provide opportunities for light manufacturing development in low-income developing countries. Further, expanding the definitions of international aid or cooperation could induce more development financing from various sources. Rationales of China-led grand vision of “One Belt One Road” are discussed.

Suggested Citation

  • Justin Yifu LIN & Yan WANG, 2015. "China’s Contribution to Development Cooperation: Ideas, Opportunities and Finances," Working Papers P119, FERDI.
    • Handle: RePEc:fdi:wpaper:1980
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    References listed on IDEAS

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    Cited by:

    1. Kitano, Naohiro, 2016. "Estimating China’s Foreign Aid II: 2014 Update," Working Papers 131, JICA Research Institute.
    2. Justin Yifu Lin & Yan Wang, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 102-117, February.
    3. Kilama, Eric Gabin, 2016. "The influence of China and emerging donors aid allocation: A recipient perspective," China Economic Review, Elsevier, vol. 38(C), pages 76-91.
    4. Liu, Ailan & Tang, Bo, 2018. "US and China aid to Africa: Impact on the donor-recipient trade relations," China Economic Review, Elsevier, vol. 48(C), pages 46-65.
    5. Amanor, Kojo S. & Chichava, Sérgio, 2016. "South–South Cooperation, Agribusiness, and African Agricultural Development: Brazil and China in Ghana and Mozambique," World Development, Elsevier, vol. 81(C), pages 13-23.
    6. Salvatore Babones & John H.S. Åberg & Obert Hodzi, 2020. "China's Role in Global Development Finance: China Challenge or Business as Usual?," Global Policy, London School of Economics and Political Science, vol. 11(3), pages 326-335, May.

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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