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No Strings Attached: Chinese Foreign Aid and Regime Stability in Resource-Rich Recipient Countries

February 18, 2016

The political conditionality of Western aid is often said to have a positive effect in enhanc- ing recipient countries’ governance and civil liberties in the post-Cold War era. Recently, however, developing countries are experiencing a surge in foreign aid by the Chinese gov- ernment as this rising economic giant seeks to secure a stable energy supply to fuel its domestic growth machine. Yet, unlike Western aid, China’s aid often comes with little, it any, political preconditions. Thus, by reducing recipients’ reliance on Western aid, China’s aid may plausibly undermine the alleged democracy-promotion effect of Western aid. Contrary to widely received claim that China is using its aid to bolster authoritarian- ism in developing countries, we argue in this study that China’s aid allocation is primarily motivated by its growing energy need and it tends to allocate aid to recipients with signif- icant energy resource sector. Building on this claim, we further contend that China’s aid tends to enhance the authoritarian tendency of recipients whose economies rely heavily on energy resource export. We test the empirical implications of these hypotheses with recently available China’s foreign aid data. Our seemingly unrelated regression (SUR) analysis distinguishes the energy development-dominated China’s aid flow pattern from democracy promotion-oriented Western aid. We then probe more substantively the po- litical effect of China’s aid on recipients’ democracy-conditional on the size of recipients’ energy resource sectors-using treatment effects model, the results supports our hypothesis that China’s aid tends to attenuate the positive democracy promotion effect of Western aid, particularly in recipient countries with significant resource sector.

From → Working papers

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