US and China aid to Africa: Impact on the donor-recipient trade relations

This paper investigates the impact of the US and China's foreign aids to Africa on trade flows between donor and recipient countries. Evidence from the gravity model estimates reveals that the two donors' exports are strengthened by their aids to African partners. Interestingly, China's aid shows a positive effect on its total volume of trade and imports from Africa, while the aid from the US exhibits little impact on the US-Africa total trade and its imports from Africa. A possible explanation for such a difference could be due to the dissimilar national interests of donors in Africa. This study finally suggests that African countries should accelerate the pace of advancing domestic economies and rely less on foreign assistance, in order to establish a fairer and more equal international economic order.     

Exporting National Champions： China＇s Outward Foreign Direct Investment Finance in Comparative Perspective

We examine the extent to which Chinese development banks have financed the globalization of China＇s ＂national champion ＂firms： specifically, through outward foreign direct investment （OFDI）. We create a database of Chinese fnance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China＇s OFDI finance from 2002 to 2012 at US$14Obn. As a percentage of total OFDI, China＇s lending is roughly three times higher than Japan ＇s, the previous global leader in OFDl finance. We identify two major reasons for China＇s high （31 percent） ratio of OFDl lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are statelowned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.     

Biases in the allocation of foreign aid: Some new evidence

The purpose of the paper is to examine the pattern of bilateral and multilateral foreign aid allocations during the 1970s. Cross-section and pooled regressions for a set of roughly 90 countries where aid allocations have been relatively free of gross political overtones confirm the well-known bias in per capita aid flows against populous countries, butdo not provide evidence of a middle income bias. Instead, regressions on 1976–1978 aid flows and per capita incomes of recipient countries seem to suggest a low income bias, i.e. low income countries received more aid per capita than middle income countries. Yet, there was asample of extremely poor countries which remained neglected in foreign aid allocations.     

Money on the road to empire: Japan's adoption of gold monometallism, 1873–971

In the macro‐economic literature, Japan has at several times been treated as a canonical example of why countries joined the gold standard. On the one hand, the country has been linked to the argument that there exists a relationship between the gold standard and lowered borrowing costs; on the other hand, it has been discussed as motivated by a desire to expand its trade with gold standard countries. This article argues against both strands in the literature, and argues for a third interpretation. It demonstrates that the specificities of Japan's gold standard reveal a concern with ‘original sin’, or the impossibility of raising foreign loans in Japan's own currency, and explains that there were grave costs to gold standard adoption.     

Aid,development and politics in Southern Africa: A critical look at new conditionalities in official development assistance

Development aid totalling more than 25 billion rand a year is currently flowing from the North to the Southern African region. Several countries in the region are extremely de pendent on these financial transfers and foreign donors have become important players in domestic decision making. In recent years, Northern donors have increasingly demanded major political and administrative reforms in recipient countries as a condition for con tinued aid. This article examines these new political conditionalities, drawing on data from sub‐Saharan and Southern Africa to illustrate certain key issues.     

Japan's outward FDI potential

While Japan's outward FDI stock is historically high, it is not necessarily clear whether there is untapped growth potential, given the economic size of Japan and that of partner countries. This paper examines whether Japan's actual outward FDI stock is high or low relative to the FDI predicted by the gravity model using the outward FDI patterns of all OECD nations, which we call counterfactual FDI. The results indicate that the ratio of Japan's actual to counterfactual FDI is the highest among the OECD countries as of the year 2015. The regional distribution of Japan's actual to counterfactual FDI favors Southeast Asian nations, South Africa and the US. These results imply that Japan has no unrealized potential for outward FDI.     

Foreign Aid,Governance and Economic Growth in Sub‐Saharan Africa: Does One Cap Fit All?

Sub‐Saharan Africa (SSA) has been receiving foreign aid for many decades; nonetheless, it ranked among the poorest regions in the world. This study revisits the aid effectiveness debate quantitatively by investigating the relationship among foreign aid, governance and economic growth in SSA using more recent data from 1996 to 2012 and testing for heterogeneity in aid recipient countries. Fundamental questions raised in this study are: does aid work the same way in all regions and group of countries in SSA? Do governance and size of aid matter? Employing the system generalized methods of moments (system GMM) technique, results show that foreign aid has an insignificant negative relationship with economic growth in aggregate SSA. However, one cap does not fit all in SSA as heterogeneity across aid recipients has implications for aid effectiveness. Moreover, governance and size of aid complement each other to improve growth in SSA. This study has been able to show quantitatively that a general policy for countries in SSA is not good enough for aid effectiveness; donors should increase the size of aid, and governance in recipient countries must improve. In conclusion, heterogeneity, governance and size of aid matter for aid effectiveness in SSA.     

Gerschenkron Redux? Analysing New Evidence on Joint‐Stock Enterprise in Pre‐War Shanghai

Alexander Gerschenkron (1904–78) famously postulated that the more backward an economy was at the outset of industrialisation, the more reliant it would be on state‐backed banks as a means of directing investment. Gerschenkron thereby implied that impersonal equity markets were likely to play a less significant role in countries aiming to catch up with the West. This article is aimed at examining Gerschenkron's thesis primarily through an analysis of shareholding in 1930s Shanghai. Drawing on newly discovered archival material as well as on recent studies, the paper clarifies the magnitude of joint‐stock enterprise and the ubiquity of stock‐exchange trade in a city that was by far China's most important economic hub. The pattern of joint‐stock enterprise in pre‐war China is compared with that of Japan, the first non‐Western society to become fully industrialised. The argument advanced is that Gerschenkron's thesis incorrectly played down the significance of impersonal equity markets to pre‐war Japan's successful industrialisation and to the limited nature of pre‐war China's industrialisation. Japan could sustain its industrialisation thrust in the early 20th century on a nation‐wide scale partly because of the growing vitality of its equity markets in Tokyo and Osaka. By contrast, China's pre‐war industrialisation was much less extensive because its equity markets were more limited.     

What can we learn on Chinese aid allocation motivations from available data? A sectorial analysis of Chinese aid to African countries

Since the creation of the Forum on China-Africa Cooperation (FOCAC) in 2000, Chinese official development assistance (ODA) to Africa has increased drastically. Only few analyses on the determinants of Chinese ODA allocation to African countries are available. Moreover, existing literature mainly focused on total aid flows while Chinese motivations for aid allocation might differ depending on the ODA sector considered. Our objective is to study the factors associated with Chinese aid allocation to African countries by sector between 2000 and 2014. We consider three ODA broad sectors as defined by the Organisation for Economic Cooperation and Development (OECD): the social infrastructure and services sector, the economic infrastructure and services sector and the production sector. Chinese ODA is measured using AidData's Global Chinese Official Finance Dataset, 2000–2014, Version 1.0. Over the 2000–2014 period, China allocated 971, 218 and 138 ODA projects to African countries in the social infrastructure and services sector, the economic infrastructure and services sector and the production sector respectively. Between 2000 and 2014, the economic infrastructure and services sector was the first sector in terms of ODA amount with a total of US$18.9 billion ahead from the social infrastructure and services sector with US$7 billion or the production sector with US$3.1 billion. Results of our analysis suggest that the motivations of Chinese aid allocation to African countries differ by sector. Chinese ODA in the social infrastructure and services sector appears more responsive to the economic needs of recipient countries but is also more driven by foreign policy considerations. Chinese economic interest, in particular for natural resources acquisition, is associated with China's ODA allocation in the economic infrastructure and services sector. Finally, while governance quality in recipient countries is not related to Chinese ODA in the social infrastructure and services sector, we find that China allocates more ODA in the economic infrastructure and services sector and the production sector to African countries with weaker institutions. One of the strong conclusions of this study is to show that considering only China's overall aid to Africa can be misleading as to its underlying determinants, and therefore to point out the need to disaggregate the analysis by ODA sectors.     

Host countries’ growth opportunities and China's outward FDI

In 2014, China proposed the Belt and Road policy, which has pushed China's outward foreign direct investment (OFDI) to over tens of billions of US dollars. However, existing studies have not reached a consensus about the decisive factors in China's OFDI. To verify whether China's OFDI activities are motivated by profits, this paper applies a measure of country‐specific growth opportunities adopted by Bekaert et al. (2007) to measure the growth opportunities of the target countries for China's OFDI. A multinational panel data model, based on data from 51 countries from 2003 to 2012, is used to explore the relationship between host countries’ growth opportunities and China's OFDI. Overall, the analysis finds that China's OFDI does not follow the host countries’ growth opportunities but exhibits different features toward developed countries and developing countries. For developed countries, China's OFDI follows host countries’ growth opportunities to some extent. In the case of developing countries, China's OFDI does not follow host countries’ growth opportunities. When we consider factors such as a host country's financial development and political stability, improvement in these factors improves the attractiveness of the host country to China's OFDI. It is also found that the 2008 global financial crisis did not have a very significant impact on China's OFDI activities.     

Does foreign aid promote recipient exports to donor countries?

This paper uses the gravity model of trade to investigate the effect of foreign aid on exports of aid recipients to donor countries. Most of the theoretical work emphasises the possible negative impact of aid on recipient countries’ exports, primarily due to exchange rate appreciation, disregarding possible positive effects of aid in overcoming supply bottlenecks and promoting bilateral trade relations. Using non-stationary panel (cointegration) estimators to control for omitted variable and endogeneity bias, we find that the net effect of aid on recipient countries’ exports is insignificant, both for our sample (of 123 countries) as a whole and for important regional sub-samples. This finding is in line with the small or insignificant macroeconomic impact of aid found in earlier studies and also suggests that exporters in recipient countries are not benefiting from improved trade relations with donors.     

Has China displaced the outward investments of OECD countries?

As China has rapidly emerged as one of the world's largest investors abroad, there has been a hectic debate in the literature on whether its emergence as a major foreign investor may have undermined the importance of western industrialised economies, including those in the Organisation for Economic Cooperation and Development (OECD). This paper aims to investigate whether this is the case. The study uses a panel dataset covering 155 countries, including 33 in the OECD, where China had invested during 2003–09. This is by far the most comprehensive dataset of China's outward foreign direct investment (OFDI). A two-stage least squared (TSLS) regression approach is adopted for our econometric models according to an established augmented gravity model in the literature. The empirical results show clear evidence that China's OFDI displaces that of the OECD countries, but the argument that China's emergence is a ‘new colonialism’ is not supported as OECD countries' OFDI in resource abundant host countries, particularly that in Africa and Latin America, does not appear to have been displaced by China's OFDI.     

Exchange Rate Regime,Financial Market Bubbles and Long‐term Growth in China: Lessons from Japan

Since 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current capital outflows by comparing China and Japan with respect to the impact of exchange rate expectations on speculative capital flows. It is argued that both in China and Japan, given benign liquidity conditions in the USA, policy‐induced appreciation expectations have generated capital inflows that have contributed to overinvestment and financial market bubbles. The current reversal of capital flows is seen as a signal that the bubble in China has burst. To stabilize growth in China and to discourage speculative capital outflows a fixed exchange rate to the dollar is recommended. Given Japan's experience and given that China's foreign assets remain high, the depreciation pressure on the Chinese renminbi can be expected to abate.     

Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid Between nonDAC and DAC Donor Countries

Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives, and insufficient coordination. The emergence of an increasing number of new donors may further complicate the coordination of international aid efforts. At the same time, it is open to question whether new donors (many of which were aid recipients until recently) are more altruistic and provide better targeted aid according to need and merit. Project-level data on aid by new donors, as collected by the AidData initiative, allow for empirical analyses comparing the allocation behavior of new versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that, on average, new donors care less for recipient need than old donors. New and old donors behave similarly in several respects, however. They disregard merit by not taking the level of corruption in recipient countries into account. Concerns that commercial self-interest distorts the allocation of aid seem to be overblown for both groups.     

Confucius Institutes and FDI flows from China to Africa

Is the establishment of new Confucius Institutes (CIs) in African countries motivated by resource seeking? We focus on uncovering new empirical evidence about the establishment of CIs, whether they are related to natural resources, and the extent to which the establishment of new CIs and Chinese foreign aid flows affect one another. Whereas Chinese aid flows do indeed appear to be empirically associated with African countries' natural resources, the evidence we report suggests that CIs are established based on a distinct set of motives. We find that CIs, Chinese foreign aid flows to Africa and natural resources have joint predictive power on the subsequent year's Chinese FDI outflows. CIs are not, however, positively associated with the subsequent year's aid flows. And aid flows are not positively associated with the subsequent year's expected number of CIs. We interpret this as evidence that CIs reflect an economically significant expression of Chinese soft power. The goals underlying the expression of this soft power are not subsumed by natural resource seeking and are not easily compressed to a single dimension. The data show that CIs and aid flows are not positive predictors of each other and are not subsumed (i.e., made to disappear) by the inclusion of controls for natural resources. Thus, the presence of a CI reveals independent, novel, and economically significant information about future trade flows that cannot be explained away by differences in resources or other control variables commonly found in empirical models of trade flows. The empirical evidence suggests that CIs are indeed an effective instrument for increasing China's soft power but that this soft power is not motivated solely (if at all) by resource seeking.     

国际援助再分类及其对受援国经济增长的异质性影响

国际援助对受援国的经济影响在学界并没有一致的答案，文章从不同类型国际援助的影响具有异质性的角度再次探讨这一问题。文章的主要工作有两点：一是对援助类型的重新分类；二是根据新分类的援助，实证分析不同类型援助的异质性影响。首先，基于中观经济学对生成性资源的分类方式，文章提出资源配对援助法，将国际援助分为了商业性援助、开发性援助和公益性援助三类，并与经合组织债权人申报系统相衔接，建立了分类后的国际援助数据集。然后，在实证分析部分，分别研究了援助总规模和不同类型国际援助对受援国经济发展的影响。结果发现，援助总规模对受援国的经济正向影响显著。同时，开发性援助和公益性援助存在门槛效应和滞后性，两者都有显著的正向影响，而且开发性援助对受援国经济发展促进作用要强于公益性援助。     

PROBLEMS IN EXPANDING JAPAN'S IMPORTS OF MANUFACTURES FROM DEVELOPING ECONOMIES: A SURVEY*

The Japanese economy is now the second largest market economy, with a large trade surplus. And yet, Japan's imports of manufactures have long been very low relative to its GNP, when compared with other industrial countries; its ratio of manufactured imports to GNP was in the range of 2.1–2.7% in the 1980-87 period, as compared with 8.5–10.3% for the industrial countries as a whole or 4.7-7.2% for the United States. The share of developing economies in total imports of manufactures in Japan is about the same as, if not higher than, those for most other industrial countries. If Japan's ratio of manufactured imports to GNP were to rise in the future to approach closer to those of other industrial countries, Japan's imports of manufactures from developing economies could be two to three times what they are today, even if Japan's GNP does not increase at all and the share of developing economies in Japan's manufactured imports does not increase. This paper is an attempt to probe the potential of the Japanese market for imports of manufactures from developing economies in terms of rising ratio of such imports to GNP. The paper explores the reasons why Japan's ratio is exceptionally low, on the basis of existing literature. (a) Japan's ratio of manufactured imports to GNP has remained exceptionally low compared with those for other industrial countries. (b) Japan's ratio of manufactured imports from developing economies to GNP has remained distinctly low despite the recent surge in such imports. (c) If a part of the reason for the low ratio for Japan was a market access problem as often alleged, the problem is not with formal import barriers such as tariffs and formal non-tariff barriers because these barriers in Japan are no higher than in other industrial countries. As for informal import barriers, evidence found indicates that: (i) Administrative guidance and flexibly managed competition policy, which in the past had considerable effects of limiting imports, appear to have declined-in importance, but they still have import-limiting effects in certain areas. (ii) Market access difficulties involving import procedures, product standards, testing and certification requirements, which were enormous in the past, may have also decreased in severity over the last decade, but problems in these areas persist. (iii) There are aspects of the Japanese distribution system and practice that seem to make foreign access to the Japanese market significantly more difficult than the access by Japanese exporters to the markets in other industrial countries. Distribution in Japan suffers from overregulation. (iv) Users of manufactured products in Japan are sensitive to quality, perhaps more so, on the average, than in other industrial countries. Does the recent upsurge in Japan's imports of manufactures suggest that the traditional import behavior of Japan is changing? Japan's manufactured imports measured in yen increased by 18 and 27 percent in 1987 and 1988, respectively, and those coming from developing economies increased even more rapidly. There is also some evidence that price and income elasticities of demand for manufactured imports may have increased recently. These are encouraging, but it remains to be seen whether the trends will continue far enough into the future to bring Japan's import behavior more into line with those of other industrial countries. If they do, implications for the market prospects of manufactured exports from developing economies could be far-reaching. Outstanding questions are: (i) How much of the recent increase in manufactured imports is attributable to the appreciation of the yen (price effect)? How much is attributable to the increase in income or industrial output (income effect)? How much is attributable to removal of formal and informal import barriers effected so far (structural change)? Has consumer taste changed? (ii) Why have Latin American countries not been successful in promoting their exports of manufactures to Japan, when Asian exporters have been so successful? (iii) Up until now, the share of developing economies in Japan's manufactured imports has not been particularly low compared with those for other industrial countries, but is this share likely to fall or rise in the future? (iv) What is the likely impact of recently increased direct investment (DFI) by Japanese manufacturers in developing economies on the imports of their products into Japan?     

Aid for Trade in Developing Countries: Complex Linkages for Real Effectiveness*

Abstract: Aid for trade is intended to support the integration of developing countries into the world trading system. Although this form of aid is being hailed as a promising new development tool, it lacks the strategic dimension that it needs if it is to be truly effective and fulfill donors' policy commitments. From a theoretical perspective, this paper presents the various aid‐for‐trade categories and analyzes the linkages between foreign direct investment, aid for trade and development. It also presents a typology of trade‐related needs for a panel of countries, to serve as a guide for donors in formulating their aid supply strategies. This typology reveals a number of disparities between countries and regions, as well as a low level of regional integration. Trade‐related needs are particularly significant in West Africa and East Africa, and substantial in the infrastructure sector. This paper also stresses the importance of refining the formulation of actual demand by beneficiaries, structuring the aid supply in accordance with donors' specific areas of expertise and enhancing coordination among the various stakeholders, both public and private. Lastly, further trade liberalization will not by itself suffice to generate strong growth and improve the geographical and sectoral distribution of foreign direct investment. Factors such as political stability, the business climate, physical infrastructure, institutions and human capital also play a fundamental role. Of particular importance is the coherence of trade, sectoral, macroeconomic and tax policies, not only within each country and region but also between industrialized and developing countries.     

Can China's Diplomatic Partnership Strategy Benefit Outward Foreign Direct Investment?

In the context of global integration, whether a diplomatic partnership strategy can promote outward foreign direct investment (OFDI) and how it works are very important issues for China. Based on a dataset featuring China's partnerships collected from the Ministry of Foreign Affairs website, we establish an empirical framework to assess the role of China's diplomatic strategy in its OFDI arising from partnerships since 1993. The results show that the establishment or upgrade of partnerships has had a positive effect on Chinese firms’ decisions on OFDI for at least the short term, especially for firms with higher demand for policy guarantees from the government, such as non‐central firms and non‐Beijing firms. The results also show that the increase in OFDI is concentrated in host countries with higher political risks, such as developing countries, neighboring countries, and Belt and Road countries, which is consistent with China's diplomatic focus. Our research proves that China's diplomatic strategy can assist firms to invest abroad.     

Does Korea follow Japan in foreign aid? Relationships between aid and foreign investment

Korea, an emerging donor country, largely considers its economic relations to recipients when allocating its aid. Such practices were preceded by Japan before the 1990s. We expect those similar practices between the two countries will make resemblance in aid outcomes. On a macro-level, we show similarities in aid allocations by type, region, income, and sector. The similarities are ascertained also at a micro-level by our statistical analysis on the relationships between aid and FDI. The analysis based on the FDI gravity model and panel dynamic system GMM estimation shows that only aids from Korea and Japan create more inflow of FDI into their respective recipient developing countries. Those are contrasted with other donors’ aids, which are not related to FDI or the substitute for FDI.