Aid Curse with Chinese Characteristics? Chinese Development Flows and Economic Reforms

Brazys, Samuel; Vadlamannati, Krishna Chaitanya (2020-08-02). "Aid Curse with Chinese Characteristics? Chinese Development Flows and Economic Reforms". Public Choice. 188 (3–4): 407–430. doi:10.1007/s11127-020-00836-z. ISSN 1573-7101 0048-5829, 1573-7101 .

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Abstract: The paper titled “Aid Curse with Chinese Characteristics? Chinese Development Flows and Economic Reforms” explores the effects of Chinese development aid on economic reforms in recipient countries. The study develops a theoretical model to articulate an “aid curse with Chinese characteristics,” which suggests that Chinese aid may have unique impacts due to China’s distinctive approach to international development. The researchers utilize a global database of Chinese aid projects and examine changes in the Index of Economic Freedom (EFI) to test their hypotheses, using Dalai Lama visits as an instrumental variable to gauge Chinese aid flows.

The study covers a panel data set encompassing 117 countries over a 15-year period (2000-2014), during which China emerged as a significant global development partner. The findings suggest that while Chinese aid might spur short-term economic growth, it often disregards principles of good governance and other civil and political rights, which could undermine long-term development and contribute to resentment in recipient countries.

The research is part of the GLOBUS project, aimed at critically examining the EU’s contributions to global justice, and is funded by the European Union’s Horizon 2020 program . The robustness of the study’s results is highlighted by tests using alternative instruments and diverse data samples. The paper further contributes to the discourse on China’s role as a revisionist power in global affairs, noting that, despite China’s ambitions to redefine development partnerships, it may encounter similar challenges as traditional donor countries have faced.

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