The rise of China: Competing or complementary to DAC aid flows in Africa?

This study investigates if the relationship between bilateral DAC aid and Chinese aid allocation is better described as competing aid flows, or if Chinese aid has been mainly a complement to DAC aid in Africa between the years 2000 and 2012. The relationship is analysed in a two-level framework, both cross-country and within countries at the sector level, where China is assumed to be responsive to established DAC aid allocation priorities. This study makes use of the most recent update of AidData’s unique dataset on Chinese Official Finance to Africa and the DAC aid data is extracted from the OECD Creditor Reporting System database. The results suggest a positive and statistically significant effect of DAC aid allocation with respect to Chinese aid allocation in the following year at the country level. The result is interpreted as a competition between China and DAC to serve the same recipient countries with aid. A similar, or any, relationship between DAC and Chinese aid allocation at the sector level within recipient countries is however not confirmed.JEL:F35; O5