Reflections on this week’s coverage in The Economist
In “Apples and Dragon Fruits,” we analyze the factors that motivate China’s provision of official financing from China to Africa. One of the core findings is highlighted in this week’s edition of The Economist. We’d like to take this opportunity to clarify our findings.
April 18, 2016
In a new AidData working paper entitled “Apples and Dragon Fruits,” we analyze the factors that motivate China’s provision of official financing from China to Africa. The title of our paper is based on the idea that we will better understand Beijing’s motivations if we separately measure and analyze Chinese official development assistance (ODA) and other Chinese official financing flows (that lack developmental intent or a sufficiently high grant element to qualify as ODA). Drawing upon AidData’s dataset of Chinese-funded projects in Africa (at china.aiddata.org, Strange et al. forthcoming), our paper introduces a statistical model that attempts to explain which countries receive Chinese ODA — and why. One of the core findings from this model is highlighted in this week’s edition of The Economist (here and here) and it has raised a number of questions, so we’d like to take this opportunity to clarify our findings. Contrary to the conventional wisdom, we find no evidence that China privileges authoritarian or corrupt regimes in its allocation of ODA. Nor do we find evidence that commercial self-interest and natural resource acquisition are motivational drivers. Instead, we find that Beijing — like many Western donors — mostly considers two very different types of criteria when making ODA allocation decisions: the humanitarian needs of other countries and the degree to which (potential) aid-receiving governments support China’s foreign policy positions.This week’s coverage of our findings in The Economist focuses on the strong, positive, and statistically significant relationship that we find between Chinese ODA provision and voting with China in the UN General Assembly (UNGA). The magnitude of the effect of foreign policy support is quite large: our estimates suggests that a 10% percentage-point increase in UNGA voting similarity with China yields an 86% percent increase in Chinese ODA, on average. To better put these findings in greater context, Table 1 below reports all of the country-specific predictions that are generated by our statistical model. It predicts that if Rwanda moved from 67% voting alignment with China in the UN General Assembly to Egypt’s level of alignment (93%, the maximum level of UN voting alignment with China in our Africa sample), it would see a 289% increase in ODA from China. Conversely, if Egypt's level of voting alignment with China in the UN General Assembly (93%, the maximum level of UN voting alignment with China in our Africa sample) fell to Equatorial Guinea's level (65%), our statistical model predicts that Egypt would see an 87% reduction in ODA from China.
In this regard, China’s aid-giving motivations bear a striking resemblance to those of Western donors. Consider the U.S. Government and the way in which it allocates ODA across countries. Since 1985, U.S. law has stipulated that the State Department identify important UNGA votes and that USAID take the voting behavior of recipients in the UNGA into account in its aid disbursement decisions. As such, the State Department submits an annual report to Congress on Voting Practices in the United Nations, and quantitative research conducted confirms that these de jure efforts have changed the way that U.S. ODA is allocated in a de facto sense (see articles here and here). And China is certainly not the only emerging power that plays the aid-for-foreign-policy-support game. India’s Ministry of External Affairs considers a recipient’s voting behavior in the United Nations when deciding about its aid to other countries (see field evidence hereand quantitative evidence here). But aid-receiving governments should care a lot more about their UNGA voting alignment with China since Beijing has deeper pockets than any other emerging power. China’s officially financed development projects committed to Africa alone were worth $94.3 billion between 2000 and 2013.Finally, this week’s story in The Economist notes with surprise that a number of countries are absent from UNGA votes, even though voting in line with major donors can deliver financial dividends. We are less surprised by this pattern. If an aid-seeking government expects two different donors (e.g. the U.S. and China) to vote differently at the UNGA, a strategy of absenteeism avoids embarrassing and alienating at least one donor and perhaps both donors, thus enabling the aid-seeking government to minimize risk and maximize its expected financial returns. Also, aid-seeking governments have foreign policy goals themselves, and to the extent that their own goals make voting in line with a donor impossible, a no-show strategy might help them prevent a reduction in aid. China itself pursued a deliberate non-participation strategy in the United Nations Security Council (UNSC) in order to balance complex foreign policy objectives after it became a UNSC permanent member in the 1970s. One wonders, then, if Chinese aid beneficiaries might be taking a page out of Beijing’s foreign policy playbook.