Association for Public Policy Analysis & Management

As China-Africa trade and investment have experienced an exponential growth in the past two decades, it has raised concerns in the western world and among some African politicians that China is practicing neo-colonialism in Africa, which are vehemently denied by the Chinese side. Neo-colonialism is a term initially coined by the founding President of Ghana that argued that aid is a tool to perpetuate the gap between the former colonies and its neo-colonial master. Is China also using its foreign aid to bribe African countries and gain access to Africa’s rich natural resources? Existing research has primarily drawn on unofficial Chinese aid data compiled by AidData, a research lab at William and Mary College from media sources. However, the quality of the aid data is at dispute and therefore cannot offer a reliable image of China as a donor in Africa.

This paper intends to provide solid empirical evidence to this heated debate examining the relationship between the number of foreign student scholarship given by Chinese Government, is an increasingly important form of China’s foreign assistance, to African countries and the amount of natural resources they have. We use new discoveries of oil, gas and mineral fields in an African country, which are reasonably exogenous, to instrument for the quantity of natural resources in a 2SLS setup. Instrumental variables neatly eliminate the endogenous problems that prevail in previous studies and we find no evidence that Chinese aid targets natural resources in Africa. On the contrary, political factors such as diplomatic relationship with Taiwan and competition with the aid provided by the USA are significant predictors in the allocation of Chinese aid to African countries. The results are robust to different measures of Chinese access to natural resources in Africa, including the amount of production, the value of exports, the value of Chinese imports, Chinese shares of an African country’s export or African shares of China’s import. The results also survive a number of placebo tests and sensitivity analysis.