Profit or Power: Determinants of Chinese Financing to the Developing World

Abstract

ABSTRACT Since the launch of its ‘going out’ strategy in 1999, China has become the largest bilateral sovereign lender to the developing world. This article argues that, since Xi Jinping came to power in 2012, China has used overseas financing to developing countries to consolidate a strategical wedge between certain borrowing countries and the United States, China’s main geopolitical rival. Using a Heckman two-stage estimation, this article shows how China, albeit providing financing to a wide array of developing nations, lends more and on more favourable terms to countries that are farther away from the United States in terms of foreign policy preferences. Statistical analyses on a sample of 148 developing countries from 2000 to 2017 provide support for the hypotheses.