IDEAS home Printed from https://ideas.repec.org/a/spr/revint/v18y2023i2d10.1007_s11558-022-09469-x.html
   My bibliography  Save this article

Chinese or western finance? Transparency, official credit flows, and the international political economy of development

Author

Listed:
  • Ben Cormier

    (London School of Economics)

Abstract

Why do some developing countries obtain more official finance from China vis-a-vis Western sources? This study finds borrower transparency significantly affects which governments borrow more from China. From a supply side perspective, Chinese lending agencies have incentives to lend more to untransparent borrowers. From a demand side perspective, untransparent borrowers have incentives to use Chinese finance to avoid Western pressure to become more transparent. These findings and explanations have three implications. First, they help explain variation in external debt composition across developing countries using official credit. Second, they have implications for the international political economy of developing countries’ financial ties to China. Third, they imply the use of Chinese finance may allow untransparent governments to remain so, an important implication for the political economy of development.

Suggested Citation

  • Ben Cormier, 2023. "Chinese or western finance? Transparency, official credit flows, and the international political economy of development," The Review of International Organizations, Springer, vol. 18(2), pages 297-328, April.
    • Handle: RePEc:spr:revint:v:18:y:2023:i:2:d:10.1007_s11558-022-09469-x
    DOI: 10.1007/s11558-022-09469-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11558-022-09469-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11558-022-09469-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. James R. Hollyer & B. Peter Rosendorff & James Raymond Vreeland, 2019. "Why Do Autocrats Disclose? Economic Transparency and Inter-elite Politics in the Shadow of Mass Unrest," Journal of Conflict Resolution, Peace Science Society (International), vol. 63(6), pages 1488-1516, July.
    2. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, May.
    3. Trebesch, Christoph & Gelpern, Anna & Horn, Sebastian & Morris, Scott & Parks, Bradley, 2021. "How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments," CEPR Discussion Papers 16331, C.E.P.R. Discussion Papers.
    4. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    5. Ballard-Rosa, Cameron & Mosley, Layna & Wellhausen, Rachel L, 2021. "Contingent Advantage? Sovereign Borrowing, Democratic Institutions and Global Capital Cycles," British Journal of Political Science, Cambridge University Press, vol. 51(1), pages 353-373, January.
    6. Christopher Kilby, 2011. "Informal influence in the Asian Development Bank," The Review of International Organizations, Springer, vol. 6(3), pages 223-257, September.
    7. Paul Clist & Alessia Isopi & Oliver Morrissey, 2012. "Selectivity on aid modality: Determinants of budget support from multilateral donors," The Review of International Organizations, Springer, vol. 7(3), pages 267-284, September.
    8. Humphrey, Chris & Michaelowa, Katharina, 2019. "China in Africa: Competition for traditional development finance institutions?," World Development, Elsevier, vol. 120(C), pages 15-28.
    9. Isaksson, Ann-Sofie & Kotsadam, Andreas, 2018. "Racing to the bottom? Chinese development projects and trade union involvement in Africa," World Development, Elsevier, vol. 106(C), pages 284-298.
    10. Bruce Bueno de Mesquita & Alastair Smith & Randolph M. Siverson & James D. Morrow, 2005. "The Logic of Political Survival," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524406, April.
    11. Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2011. "Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid Between nonDAC and DAC Donor Countries," World Development, Elsevier, vol. 39(11), pages 1950-1968.
    12. Cormier, Ben, 2022. "Partisan external borrowing in middle-income countries," LSE Research Online Documents on Economics 113929, London School of Economics and Political Science, LSE Library.
    13. Richard Clark & Lindsay R. Dolan, 2021. "Pleasing the Principal: U.S. Influence in World Bank Policymaking," American Journal of Political Science, John Wiley & Sons, vol. 65(1), pages 36-51, January.
    14. Axel Dreher & Jan-Egbert Sturm & James Raymond Vreeland, 2015. "Politics and IMF Conditionality," Journal of Conflict Resolution, Peace Science Society (International), vol. 59(1), pages 120-148, February.
    15. Gehring, Kai & Michaelowa, Katharina & Dreher, Axel & Spörri, Franziska, 2017. "Aid Fragmentation and Effectiveness: What Do We Really Know?," World Development, Elsevier, vol. 99(C), pages 320-334.
    16. Isaksson, Ann-Sofie & Kotsadam, Andreas, 2018. "Chinese aid and local corruption," Journal of Public Economics, Elsevier, vol. 159(C), pages 146-159.
    17. Honig, Dan & Weaver, Catherine, 2019. "A Race to the Top? The Aid Transparency Index and the Social Power of Global Performance Indicators," International Organization, Cambridge University Press, vol. 73(3), pages 579-610, July.
    18. Alexander E. Kentikelenis & Thomas H. Stubbs & Lawrence P. King, 2016. "IMF conditionality and development policy space, 1985–2014," Review of International Political Economy, Taylor & Francis Journals, vol. 23(4), pages 543-582, July.
    19. William Easterly, 2007. "Are aid agencies improving? [‘Who gives foreign aid to whom and why?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(52), pages 634-678.
    20. Humphrey, Chris & Michaelowa, Katharina, 2013. "Shopping for Development: Multilateral Lending, Shareholder Composition and Borrower Preferences," World Development, Elsevier, vol. 44(C), pages 142-155.
    21. Mona Lyne & Daniel Nielson & Michael Tierney, 2009. "Controlling coalitions: Social lending at the multilateral development banks," The Review of International Organizations, Springer, vol. 4(4), pages 407-433, December.
    22. Mr. Fabian Valencia & Mr. Luc Laeven, 2012. "Systemic Banking Crises Database: An Update," IMF Working Papers 2012/163, International Monetary Fund.
    23. Hollyer, James R. & Rosendorff, B. Peter & Vreeland, James Raymond, 2014. "Measuring Transparency," Political Analysis, Cambridge University Press, vol. 22(4), pages 413-434.
    24. Broich, Tobias, 2017. "Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa," China Economic Review, Elsevier, vol. 46(C), pages 180-207.
    25. Honig, Dan & Weaver, Catherine, 2019. "A Race to the Top? The Aid Transparency Index and the Social Power of Global Performance Indicators – ERRATUM," International Organization, Cambridge University Press, vol. 73(3), pages 709-711, July.
    26. Winters, Matthew S. & Martinez, Gina, 2015. "The Role of Governance in Determining Foreign Aid Flow Composition," World Development, Elsevier, vol. 66(C), pages 516-531.
    27. Andreas Dür & Leonardo Baccini & Manfred Elsig, 2014. "The design of international trade agreements: Introducing a new dataset," The Review of International Organizations, Springer, vol. 9(3), pages 353-375, September.
    28. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    29. Bobonis, Gustavo J. & Gertler, Paul J. & Gonzalez-Navarro, Marco & Nichter, Simeon, 2019. "Government transparency and political clientelism: Evidence from randomized anti-corruption audits in Brazil," Research Department working papers 1463, CAF Development Bank Of Latinamerica.
    30. William Greene, 2004. "Fixed Effects and Bias Due to the Incidental Parameters Problem in the Tobit Model," Econometric Reviews, Taylor & Francis Journals, vol. 23(2), pages 125-147.
    31. Dür, Andreas & Baccini, Leonardo & Elsig, Manfred, 2014. "The design of international trade agreements: introducing a new dataset," LSE Research Online Documents on Economics 59179, London School of Economics and Political Science, LSE Library.
    32. Plümper, Thomas & Troeger, Vera E., 2019. "Not so Harmless After All: The Fixed-Effects Model," Political Analysis, Cambridge University Press, vol. 27(1), pages 21-45, January.
    33. Kolstad, Ivar & Wiig, Arne, 2009. "Is Transparency the Key to Reducing Corruption in Resource-Rich Countries?," World Development, Elsevier, vol. 37(3), pages 521-532, March.
    34. Broich, Tobias, 2017. "Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa," MERIT Working Papers 2017-011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    35. Kilby, Christopher, 2009. "The political economy of conditionality: An empirical analysis of World Bank loan disbursements," Journal of Development Economics, Elsevier, vol. 89(1), pages 51-61, May.
    36. Samuel Brazys & Johan A. Elkink & Gina Kelly, 2017. "Bad neighbors? How co-located Chinese and World Bank development projects impact local corruption in Tanzania," The Review of International Organizations, Springer, vol. 12(2), pages 227-253, June.
    37. Alexandra O. Zeitz, 2021. "Emulate or differentiate?," The Review of International Organizations, Springer, vol. 16(2), pages 265-292, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cormier, Ben & Heinzel, Mirko & Reinsberg, Bernhard, 2024. "Informally governing international development: G7 coordination and orchestration in aid," LSE Research Online Documents on Economics 122594, London School of Economics and Political Science, LSE Library.
    2. Gao, Xiaoxue, 2023. "Digital transformation in finance and its role in promoting financial transparency," Global Finance Journal, Elsevier, vol. 58(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cormier, Benjamin, 2023. "Chinese or western finance? Transparency, official credit flows, and the international political economy of development," LSE Research Online Documents on Economics 115294, London School of Economics and Political Science, LSE Library.
    2. Ben Cormier & Mark S. Manger, 2022. "Power, ideas, and World Bank conditionality," The Review of International Organizations, Springer, vol. 17(3), pages 397-425, July.
    3. Dreher, Axel & Lang, Valentin & Reinsberg, Bernhard, 2024. "Aid effectiveness and donor motives," World Development, Elsevier, vol. 176(C).
    4. Emmanuelle Auriol & Josepa Miquel-Florensa, 2019. "Taxing fragmented aid to improve aid efficiency," The Review of International Organizations, Springer, vol. 14(3), pages 453-477, September.
    5. Marson, Marta & Savin, Ivan, 2022. "Complementary or adverse? Comparing development results of official funding from China and traditional donors in Africa," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 189-206.
    6. Humphrey, Chris & Michaelowa, Katharina, 2019. "China in Africa: Competition for traditional development finance institutions?," World Development, Elsevier, vol. 120(C), pages 15-28.
    7. Dreher, Axel & Fuchs, Andreas & Hodler, Roland & Parks, Bradley C. & Raschky, Paul A. & Tierney, Michael J., 2019. "African leaders and the geography of China's foreign assistance," Journal of Development Economics, Elsevier, vol. 140(C), pages 44-71.
    8. Liya Palagashvili & Claudia R. Williamson, 2021. "Grading foreign aid agencies: Best practices across traditional and emerging donors," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 654-676, May.
    9. Axel Dreher & Sarah Langlotz & Silvia Marchesi, 2017. "Information Transmission And Ownership Consolidation In Aid Programs," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1671-1688, October.
    10. Hoeffler, Anke & Sterck, Olivier, 2022. "Is Chinese aid different?," World Development, Elsevier, vol. 156(C).
    11. Cormier, Ben, 2022. "Partisan external borrowing in middle-income countries," LSE Research Online Documents on Economics 113929, London School of Economics and Political Science, LSE Library.
    12. Kern, Andreas & Nosrati, Elias & Reinsberg, Bernhard & Sevinc, Dilek, 2023. "Crash for cash: Offshore financial destinations and IMF programs," European Journal of Political Economy, Elsevier, vol. 78(C).
    13. Dreher, Axel & Gehring, Kai & Klasen, Stephan, 2015. "Gesture Politics or Real Commitment? Gender Inequality and the Allocation of Aid," World Development, Elsevier, vol. 70(C), pages 464-480.
    14. Lauren L. Ferry & Emilie M. Hafner-Burton & Christina J. Schneider, 2020. "Catch me if you care: International development organizations and national corruption," The Review of International Organizations, Springer, vol. 15(4), pages 767-792, October.
    15. Asmus, Gerda & Eichenauer, Vera & Fuchs, Andreas & Parks, Bradley, 2021. "Does India use development finance to compete with China? A subnational analysis," Kiel Working Papers 2189, Kiel Institute for the World Economy (IfW Kiel).
    16. Mitchell Watkins, 2022. "Undermining conditionality? The effect of Chinese development assistance on compliance with World Bank project agreements," The Review of International Organizations, Springer, vol. 17(4), pages 667-690, October.
    17. Loujaina Abdelwahed & Georgios Karras, 2021. "Did 272 billion dollars from China help stabilize business cycle fluctuations in recipient countries?," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 314-358, May.
    18. Mandon, Pierre & Woldemichael, Martha Tesfaye, 2023. "Has Chinese aid benefited recipient countries? Evidence from a meta-regression analysis," World Development, Elsevier, vol. 166(C).
    19. Dreher, Axel & Gehring, Kai & Klasen, Stephan, 2015. "Gesture Politics or Real Commitment? Gender Inequality and the Allocation of Aid," World Development, Elsevier, vol. 70(C), pages 464-480.
    20. Samuel Brazys & Krishna Chaitanya Vadlamannati, 2021. "Aid curse with Chinese characteristics? Chinese development flows and economic reforms," Public Choice, Springer, vol. 188(3), pages 407-430, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:revint:v:18:y:2023:i:2:d:10.1007_s11558-022-09469-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.