China in Africa: Competition for traditional development finance institutions?

Abstract

Official development finance from China has risen tremendously in the past two decades across the globe, including in the world's poorest continent, Africa. How has this sudden increase in development resources affected the two major multilateral development banks (MDBs) in the region, the World Bank and the African Development Bank (AfDB)? One might expect that the MDBs-often described as tools to exert the influence of wealthy western countries-might compete with China to maintain their relevance and influence in Africa. This study undertakes a combination of statistical tests and in-depth interviews with government officials in three recipient countries to see if this is the case, both in terms of overall finance levels as well as in the sectoral distribution of projects. The results indicate that total MDB finance levels by country change little over time regardless of Chinese activity. The same is true for funding levels of traditional bilateral donors. The sectoral allocation of concessional lending does not show any responsiveness either. In contrast, shifts in funding levels overall and in sector allocation can be observed for non-concessional countries; the latter, however, represent only a small minority among the recipients of Chinese finance. Overall, the study suggests that while China's role in African development finance is indeed substantial and growing, it has not had the "game changing" impact on traditional development finance as popular perception might lead one to believe. Things may change, however, once more recipient countries develop economically and move into the non-concessional category.

Aid and Conflict at the Subnational Level – Evidence from World Bank and Chinese Development Projects in Africa

“…As global population censuses have to build on strong assumptions and yearly data have to be imputed, this is of course subject to a certain degree of measurement error. (Humphrey and Michaelowa, 2018), which adds to the comparability of donors. One interesting difference is that the WB finances a larger number of projects which then also have more locations across countries on average.…”

“…Overlapping panels: Our main tables use the years 1995-2012 for the WB, and the years 2000-2012 for China. As there could be coordination or competition between the two donors (e.g., Gehring et al, 2015;Humphrey and Michaelowa, 2018), we also want to estimate both jointly in one regression. Tables A55 and A56 show that the coefficients change slightly, with the WB estimates becoming less negative on average.…”

Stochastic hybrid decision‐making based on interval type 2 fuzzy sets for measuring the innovation capacities of financial institutions

“…As a result, local institutions in particular have had difficulties in dealing with these large institutions. These increasing competition conditions have made it necessary for financial institutions to take the necessary actions (Humphrey & Michaelowa, 2019; Vives, 2019). In this process, some institutions have tried to gain competitive advantage by developing new products and services, while others have preferred the strategy of reaching different markets.…”

Is Favoritism a Threat to Chinese Aid Effectiveness? A Subnational Analysis of Chinese Development Projects

“…For ease of exposition, we use the term "aid" to refer to all official financing flows (Official Development Assistance and Other Official Flows).6 Since we have introduced this instrument in the working paper version of this paper, subsequent work has adopted it for different research questions. Examples areGehring et al (2018), andHumphrey and Michaelowa (2019).…”

“…Several recent studies provide evidence that there is a significant "hassle factor" associated with financing development projects through the multilateral development banks-in particular, the World Bank (e.g.,Humphrey and Michaelowa 2019;Gallagher and Kilby 2019).24 SeeDreher and Fuchs (2015) andStrange et al (2017) for references.…”