Under a money tree? Comparing the determinants of Western and Chinese development finance flows to Africa

Abstract

ABSTRACT China’s breakneck economic growth has been accompanied by an expanding development finance agenda. Many have hypothesized that China is undermining the West’s drive to promote good governance globally, and in Africa in particular, by predominantly distributing money to poorly governed countries. This paper explores whether the determinants of Chinese development finance in Africa differ from those of Western countries. It finds that Western countries send more development finance than China to better governed African countries—those with lower corruption levels, better democratic outcomes, and a better human rights track record (though only the latter two have a negative relationship with Chinese development finance in absolute terms). This paper also finds that bilateral trade and UN voting alignment have a stronger impact on China’s development finance than that of Western countries and that China allocates more development finance than the West to richer and more resource-dependent African countries.