China’s Development Finance to Asia

Abstract

This study empirically examines China’s development finance to developing countries with a focus on Asia from 2000 to 2012. It uses AidData's Global Chinese Official Finance Dataset, one of the most reliable and publicly available data sources that systematically collects and differentiates different types of China’s official development financial flows, to produce descriptive and inferential statistics for Asia, a world region where the rise of China poses unique challenges. Descriptive statistical analysis indicates that South Asia was the largest recipient of China’s ODA-like flows in Asia for the period under study while the majority of China’s OOF-like flows to Asia went to Eastern Europe and Central Asia. In both types of flows, energy, transport, and mining sectors received the bulk of financing. The estimation results show that China’s allocation decisions for its concessional flows in the region have strong motives of pursuing strategic interests while its less concessional flows are committed to more governance-challenged countries. This study also provides detailed discussion of the trends in China’s development finance to Southeast Asia, a subregion which is critical to China’s strategic and economic interests.