Following the Belt and Road: Impact of Chinese Financing on African Infrastructure Development and Attitudes Towards China

Abstract

Over the past decade, China’s role in international development finance has dramatically increased but become a topic of controversy as many projects have been incredibly successful while others have become embroiled in scandal. This paper studies the effects of Chinese financing on the African continent— both on infrastructure development and African attitudes towards China. First, to benchmark Chinese lending against other institutions, I compare the impact of Chinese, World Bank, and African Development Bank loans on African infrastructure development. Then, I dive into a deeper analysis on the impact of Chinese loans by studying four important infrastructure sectors (water, power, ICT, and transportation) and whether or not high levels of corruption in the recipient country can impact infrastructure development in these sectors. Previous studies have shown moderately positive impacts of Chinese financing, but observed a lot of heterogeneity in results and thus this paper contributes to the discussion by analyzing some factors which could explain that heterogeneity. Additionally, I use Afrobarometer survey data to track how countries’ perceptions of China have changed over time depending on the amount of financing they've received and the amount of bilateral trade they conduct with China. Overall, I find that Chinese loans seem less effective than World Bank and AfDB loans in producing infrastructure development but by sector, Chinese financing seems to have the best impact on transportation and the worst impact on power infrastructure development. Additionally, high degrees of corruption in the recipient country had significant negative impacts in the water sector but not any others. In regards to attitudes, Chinese financing was more influential than trade volumes in impacting African attitudes towards China and, prior to 2014/2015, increased financing was generally viewed positively on the continent.