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

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  • Cormier, Benjamin

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

  • 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.
    • Handle: RePEc:ehl:lserod:115294
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    File URL: http://eprints.lse.ac.uk/115294/
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    References listed on IDEAS

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    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).

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    More about this item

    Keywords

    China; transparency; official finance; aid; international political economy; development;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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