China has become a major source of global development finance, but the nature and consequences of its official financing activities are poorly understood. The absence of systematic evidence and rigorous analysis on the economic growth effects of Chinese development finance represents a major blind spot in the literature. This article introduces a new dataset of official financing from China to 138 developing countries between 2000 and 2014. This allows us then to investigate whether Chinese development finance affects economic growth in recipient countries. The results demonstrate that Chinese development finance boosts short-term economic growth. An additional project increases growth by between 0.41 and 1.49 percentage points two years after commitment, on average. These effects persist across different aid sectors and appear to be driven by increases in investment and - to a lesser extent - consumption. While this study does not find that significant financial support from China impairs the overall effectiveness of aid from Western donors, aid from the United States tends to be more effective in countries that receive no substantial support from China. Overall, this evidence should allay some of the fears that policymakers have expressed about China acting as “rogue donor” that undermines the effectiveness of Western assistance.
Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, and Michael J. Tierney (2021). Aid, China, and Growth: Evidence from a New Global Development Finance Dataset. American Economic Journal: Economic Policy, Volume 13, Issue 2, Pages: 1–40.