China Restructures Its Global Infrastructure Initiative

 AIDDATA, a research lab at William & Mary, published in November 2023 a massive 393-page study titled "Belt and Road Reboot: Beijing's Bid to De-Risk Its Global Infrastructure Initiative" by Bradley C. Parks, Ammar A. Malik, Brooke Escobar, Sheng Zhang, Rory Fedorochko, Kyra Solomon, Fei Wang, Lydia Vlasto, Katherine Walsh, and Seth Goodman.  

The study concludes that Beijing's annual international development finance commitments--mostly other official flows (OOF) and much less overseas development assistance (ODA)--have not plummeted to nearly zero as some reporting has suggested. In spite of recent declines in lending, China remains the world's single largest source of international development finance.  China's ODA and OOF commitments to low- and middle-income countries are now hovering around $80 billion a year.  

Comment: the study is not, however, organized on a geographical basis and Chinese loans only to Africa have fallen to about $1 billion annually in recent years, down from a high of $28 billion in 2016.  The drop in Chinese loans has had a much greater impact on Africa than on the rest of the Belt and Road Initiative countries.  End Comment

By comparison, due in large part to the U.S. International Development Finance Corporation's financing of private sector projects, Washington now provides about $60 billion of development finance each year to low- and middle-income countries.  

In an effort to de-risk financing, China is ratcheting down its use of the policy banks--China Export Import Bank and China Development Bank--while ratcheting up its use of state-owned commercial banks, such as ICBC and Bank of China.  Beijing is putting in place increasingly stringent safeguards to shield itself from the risk of not being repaid.  Comment:  This accounts for much of the sharp drop in recent lending to countries in Africa.  

China's Aid and Other Official Financing to Africa

AIDDATA, a research lab at the College of William and Mary, published in October 2017 a working paper titled "Aid, China, and Growth: Evidence from a New Global Development Finance Dataset" by Axel Dreher, Heidelberg University, Andreas Fuchs, Heidelberg University, Bradley Parks, College of William and Mary, Austin M. Strange, Harvard, and Michael J. Tierney, College of William and Mary.

The paper introduces a new dataset of official financing--including foreign aid (overseas development assistance or ODA as defined by the OECD) and other forms of concessional and non-concessional state financing (other official financing or OOF)--from China to 138 countries between 2000 and 2014. The distinction between ODA and OOF is critical. Most Chinese OOF consists of loans that must be repaid and does not qualify as ODA. Most of what is covered in this paper is OOF and not ODA. The study suggests that only about 23 percent of China's global development program is financed with ODA. Any comparison of China's aid with aid from Western countries should be careful to compare ODA to ODA and OOF to OOF.

In the years surveyed, by dollar value 34 percent of China's total official finance (ODA and OOF) went to Africa. More significantly, 58 percent of its ODA went to Africa. In terms of number of projects for both ODA and OOF, the top 10 recipient countries were in order: Cambodia, Pakistan, Zimbabwe, Angola, Sudan, Tanzania, Ghana, Kenya, Ethiopia, and Sri Lanka. The most important recipient countries for both ODA and OOF by dollar value were in order: Russia, Pakistan, Angola, Ethiopia, Sri Lanka, Laos, Venezuela, Turkmenistan, Sudan, and Ecuador.

Estimating China's Foreign Aid

Japan's JICA Research Institute published on 26 May 2017 "A Note on Estimating China's Foreign Aid Using New Data: 2015 Preliminary Figures" by Naohiro Kitano.

The note presents estimates of China's foreign aid from 2001 to 2015 as defined by the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development and makes comparisons with the net ODA flows of major DAC member countries and emerging providers that report to the DAC. In an earlier analysis, China reported that 52 percent of its foreign aid goes to Africa.

Ethiopia and the Fragile States Index

The Fund for Peace released its 2017 Fragile States Index and included a special commentary on Ethiopia dated 14 May 2017 and titled "Golden Era of Growth Fails to Mask Deeper Grievances in Ethiopia" by Hannah Blyth.

Ethiopia's overall Fragile States Index score has been incrementally worsening over the past decade, moving from 95.3 in 2007 to a score of 101.1 in the 2017 index. Ethiopia and Mexico were the most worsened countries over the past year.

China's Aid and Other Forms of State Financing to Africa

The University of Heidelberg Department of Economics published in October 2016 a paper titled "Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa" by Axel Dreher, Andreas Fuchs, Bradley Parks, Austin M. Strange, and Michael J. Tierney.

The authors argued that much of the controversy about Chinese aid stems from a failure to distinguish between China's official development assistance (ODA) and more commercially-oriented sources and types of state financing. They found the allocation of Chinese ODA to be driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows.

China's Loans and Aid to Africa

The China Africa Research Initiative at Johns Hopkins University has a website titled "Data: Chinese Loans and Aid to Africa" that provides useful information by country on China's development cooperation with Africa.

The site notes, for example, that from 2000 to 2014, the Chinese government, banks, and contractors extended $86.3 billion worth of loans to African governments and state-owned enterprises. Most Chinese loan finance is official export credits that do not qualify as official development assistance. One third of the value of these loans was secured by future revenues from commodity exports such as oil, copper and sesame.

China-Kenya Economic Relations: Dealing with Myths

The World Bank published a paper in March 2016 titled "Deal or No Deal: Strictly Business for China in Kenya?" by Apurva Sanghi and Dylan Johnson.

The paper examines China's economic presence in Kenya and some of the myths surrounding that relationship.  It notes that 78 percent of full-time and 95 percent of part-time employees in Chinese companies are hired locally.  Although China represents a large potential market for Kenyan exporters, China has a better chance of expanding its exports to Kenya than Kenya does to China.  Nevertheless, Kenyan policy makers should be less concerned about bilateral trade imbalances, like the trade deficit with China, and worry about Kenya's overall trade balance.

Chinese firms offer relatively few technology transfer or supplier opportunities for Kenyan firms and academic institutions.  There is a tendency to underestimate the benefits Kenyan consumers derive from the availability of more affordable Chinese goods. 

China's "Aid" to Africa

AidData.org published on 21 October 2015 a brief analysis titled "Chinese 'Aid' to Africa: Be Careful Comparing Apples and Dragon Fruits" by several professors and researchers associated with the College of William and Mary and Heidelberg University.

The authors note that most of China's "aid" to Africa is not overseas development assistance (ODA), but rather commercially-oriented forms of Chinese state financing known as other official flows (OOF).  China's ODA to Africa from 2000 to 2013 has averaged about $2.25 billion annually compared to $6.62 billion annually from the United States. 

Foreign Direct Investment in Africa 2015

Ernst and Young just published its Attractiveness Survey Africa 2015: Making Choices.  It contains a wealth of current information, primarily on foreign direct investment (FDI) in Africa.

In 2014, the number of new FDI projects in Africa fell 8.4 percent but remained well above 2008 levels.  Capital investment in Africa, however, surged to $128 billion, up 136 percent over 2013.  FDI investors returned enthusiastically to Egypt and Morocco and increased their projects in Ethiopia and Mozambique.  There were fewer projects in South Africa, Angola, Nigeria, Ghana, and Kenya.

There was a slight drop in the attractiveness of Africa for investment as a region.  Africa dropped from 2nd to 4th place in regional rankings after Oceania, North America, and Asia.  FDI in Africa has grown five fold since 2000 and is forecast to overtake  official development assistance (ODA) in 2015.  FDI is projected to reach just over $55 billion compared to just under $55 billion for ODA.  Portfolio investment is predicted to grow to $18 billion and remittances an astounding $65 billion.

Collectively, European investors began by far the largest number of FDI projects in Africa in 2014.  The United States was the largest single country investor, launching 101 FDI projects or almost 14 percent of all projects in Africa.  The UK and South Africa tied for second, the UAE was fourth, France fifth, and Germany sixth.  Although Chinese investment soared in 2014, it was only number 7 with the launching of 32 FDI projects valued at $6.1 billion and 4.4 percent of the total number of new projects.

External Financial Flows and Tax Revenues for Africa

The African Development Bank has just released its African Economic Outlook for 2015.  Chapter 2 titled "External Financial Flows and Tax Revenues for Africa" reports that private external flows in the form of investment and remittances now drive growth in external finance.  Foreign investments are expected to reach $73.5 billion in 2015.  Foreign direct investment is moving away from mineral resources and into consumer goods and services.  African sovereign borrowing is rocketing.  Remittances have increased six-fold since 2000 and are projected to reach $64.6 billion in 2015.  Official development assistance will decline in 2015 to $54.9 billion. 

African Leaders and China's Foreign Assistance

Aid Data published in November 2014 a study titled "Aid on Demand: African  Leaders and the Geography of China's Foreign Assistance" by Axel Dreher, Andreas Fuchs, Roland Hodler, Bradley Parks, Paul Raschky, and Michael Tierney.  The study investigates whether political leaders of aid-receiving African countries use foreign aid to further their own political or personal interests. 

The authors noted that the publication of this paper led to some inaccurate reporting and confusion among journalists, bloggers, and researchers.  They published a rejoinder on 26 November 2014 titled "Diving into the Details: What 'Aid on Demand' Says and Doesn't Say about China in Africa." 

Estimating China's Foreign Aid 2001-2013

The Japan International Cooperation Agency (JICA) Research Institute published in June 2014 a solid analysis titled "Estimating China's Foreign Aid 2001-2013" by Naohiro Kitano and Yukinori Harada.  The JICA report deals with China's global aid and does not break it down by region.  In the past, China has said that about 45 percent of its aid goes to Africa.