Does one good turn deserve another? Evidence from China’s trade and aid policy

Camélia Turcu () and Yunzhi Zhang
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Camélia Turcu: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne
Yunzhi Zhang: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

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Abstract: In this article, we explore the effects of China's foreign aid on its exports. To do this, we use a sample of 165 countries during the period 2000–2014 and employ a gravity model. We find that the return on Chinese exports for every dollar spent on foreign aid is from $0.156 to $0.4, at the aggregate level. The aid provided in past periods continues to promote China's exports. We also show, while taking into account aid heterogeneity, that China experiences a higher return in terms of exports when providing development aid intended for infrastructure, to the recipients. Additionally, we find that China's international aid helps the country to trade more with similar income-level economies. Hence, it can, to a certain extent, foster South-South trade relations.

Keywords: Emerging donors; aid-trade nexus; gravity model; China (search for similar items in EconPapers)
Date: 2024-05-29
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Published in Post-Communist Economies, 2024, 36 (6), pp.741-760. ⟨10.1080/14631377.2024.2349391⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04732801

DOI: 10.1080/14631377.2024.2349391

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