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Building Bridges or Breaking Bonds? The Belt and Road Initiative and Foreign Aid Competition

Krishna Chaitanya Vadlamannati, Yuanxin Li, Samuel Brazys and Alexander Alexander Dukalskis
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Krishna Chaitanya Vadlamannati: School of Politics & International Relations, University College Dublin
Yuanxin Li: School of Politics & International Relations, University College Dublin
Samuel Brazys: School of Politics & International Relations, University College Dublin
Alexander Alexander Dukalskis: School of Politics & International Relations, University College Dublin

No 201906, Working Papers from Geary Institute, University College Dublin

Abstract: China’s renewed prominence is the most important development in international relations in the 21st century. Despite longstanding rhetoric of its own “peaceful rise”, China is increasingly viewed as a long-term strategic competitor, especially in the United States. Foreign aid is one arena where this competition may be playing out. While Western foreign aid principles have emphasized coordination and harmonization, the rise of China as a major development partner has raised the specter of a return to competitive foreign aid practices. Most notably, China’s Belt and Road Initiative (BRI), has received a wary reception by some who view it primarily as a geostrategic effort. We test if the BRI is inducing a competitive foreign aid response by evaluating if countries involved in this initiative are more likely to receive US support for loan packages from the major, Western, multilateral development banks (MDBs). Using an instrumental variable approach, covering 6975 project/loan packages in 16 MDBs from 157 countries during 2013-2018 period, we find that the United States is more likely to vote for MDB packages to countries that have signed on to the BRI, predominantly when the actual amount of Chinese aid flowing to those countries is still low, suggesting the US is competing for “in play” countries.

New Economics Papers: this item is included in nep-cna
Date: 2019-04-09
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