The cross-sectional characteristics of Chinese official financing in Africa

Abstract

Purpose This paper aims to provide a more comprehensive look behind the China’s rapid ascent and influence across the African continent by exploring the Sino-African funding data at the project level while incorporating recipient nations’ economic characteristics of interest such as trade data and natural resources endowment. Design/methodology/approach Combining AidData’s project reported data with country bilateral exports and imports data and other pertinent African countries’ data, the authors are able to perform a cross-sectional interrogation of China’s finding motives and their impact on the continent. The results indicate that the China’s funding to Africa mostly goes to energy and transportation sectors, as expected, and the recipient country’s exports to China increase as the funding increases. However, the authors find that the impact of China’s financing on the bilateral trade flow is unbalanced because the recipient country’s imports from China are not found to be significant. Findings Interestingly, although the analysis confirms that oil is a key contributing factor in attracting China’s funding, the authors discover that there exists no positive relationship between the China funding amount and the recipient country’s general natural resource level. The results do not support the common notion that China is primarily interested in extracting natural resource deposits, aside from oil, from the host nation when they allocate their funding. Originality/value Overall, the paper supports the theoretical propositions of the new structural economics framework when it comes to the relationship between China’s funding and the recipient country’s characteristics.