The Political Risks of Chinese Non-Development Finance





Published date: 

十二月, 2022


Szu-Ning Ping
Ching-Hsing Wang
Hsuan-Mien Wang


   Scholars see Chinese foreign aid very differently from traditional ODA (official development assistance) due to its inherently commercial essence. Not surprisingly, Chinese non-development finance (NDF) greatly outweighs standard ODA in the total amount. As the quasi-FDI is disguised by foreign aid, the authors try to find out how political risks influence the location of Chinese NDF in recipient countries. Based on the previous literature and the characteristics of Chinese aid, we provide three hypotheses that the Chinese NDF does not consider the political institutions in recipient countries, but that it does take into account the local corruption and political stability. Using a dataset based on AidData’s Global Chinese Development Finance Dataset (version 2.0), we confirm the first and second hypotheses, but the third only partly. We confirm that political institutions will not be decisive in allocating Chinese NDF, but more corrupt countries are preferred. However, only financial flows in the energy and mining industries will significantly obviate an unstable political environment.