Racing for Global Impact: Political Turnovers & US-China Foreign Aid Competition

• In Event: The US-China Rivalry

Abstract

With the rise of China, foreign aid has become an important realm of contention as the US and China compete for more influence and international support for their vision of the global order. Yet, the literature on responses to China’s growing foreign assistance as well as dynamics of the US-China aid competition is still in its infancy. This paper contributes to this new but growing literature by looking at the relationship between political turnovers and aid-giving behaviors of the US and China. I argue that a US-China aid competition is shaped by opportunity and certainty. Particularly, the two superpowers would compete when there are opportunities arising from political turnover in (potential) recipient states, bringing in new ruling coalitions who are more open to receiving outside aid and reshaping their policy platform. However, opportunities alone are not enough. As investors seeking to buy influence through foreign aid, the US and China would also want to make sure that their aid can influence the recipient’s new leadership and avoid giving too much aid to those ruling coalitions that are less open to donor’s influence. Two features can provide this certainty. First, I argue that the US and China will send less aid to states receiving more of the opposing side’s aid. Second, due to their open politics, democracies who just went through political turnover provide more certainty for both the US and China by allowing them to identify the new leaders’ preferences and tailor their aid to the new ruling elites. Using VAR and structural equations analysis, I found evidence supporting the argument: the US generally reduces aid to states receiving more Chinese aid and vise versa, but the two powers compete directly in democratic states that have new leaders. The paper’s findings have important implications for the role of domestic political institutions and transitions in the larger global competition between the US and China.

Author

• Eric Ngo, University of Iowa