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East Asia and Pacific

Where does Chinese development finance go?

Tariq Khokhar's picture

This post looks at the recently updated “Global Chinese Official Finance Dataset” from research group AidData. The post is also available here as an R Notebook which means you see the code behind the charts and analysis.

Credit: A city park in Tianjin, China. Photo: Yang Aijun / World Bank
Credit: A city park in Tianjin, China. Photo: Yang Aijun / World Bank

China has provided foreign assistance to countries around the world since the 1950s. Since it’s not part of the DAC group of donors who report their activities in a standard manner, there isn’t an official dataset which breaks down where Chinese foreign assistance goes, and what it’s used for.

A team of researchers at AidData, in the College of William and Mary have just updated their “Chinese Global Official Finance” dataset. This is an unofficial compilation of over 4,000 Chinese-financed projects in 138 countries, from 2000 to 2014, based on a triangulation of public data from government systems, public records and media reports. The team have coded these projects with over 50 variables which help to group and characterize them.

Activity-level data on an increasingly important donor

This dataset is interesting for two reasons. First, China and other emerging donors are making an impact on the development finance landscape. As the Bank has reported in the past (see International Debt Statistics 2016), bilateral creditors are a more important source of finance than they were just five years ago. And the majority of these increases are coming from emerging donors with China playing a prominent role.

Second, this dataset’s activity-level data gives us a look at trends and allocations in Chinese bilateral finance which can inform further analysis and research. Organizations like the World Bank collect data on financial flows directly from government sources for our operational purposes, but we’re unable to make these detailed data publicly available. We compile these data into aggregate financial flow statistics presented from the “debtor perspective”, but they’re not disaggregated by individual counterparties or at an activity-level. So there can be value added from sources such as AidData’s China dataset.

A detailed view, but only part of the picture of all financial flows

However, this dataset has limitations. It only presents estimates of “official bilateral credits”. These are flows between two governments, and are just one part of the total financial flows coming from China. By contrast, the World Bank is able to integrate the granular data it collects from countries into the full set of financial flows to and from its borrowing countries. This situates official bilateral credit among the broader spectrum of providers of long-term financing (such as bondholders, financial intermediaries, and other private sector entities), sources of short-term debt (including movements in bank deposits), and equity investments (foreign direct and portfolio investments). This data integration leads to better quality statistics.

In short, AidData’s China dataset provides more detail on one type of financial flow, but is likely to be less reliable for a number of low-income countries. With these caveats in mind, I’ve done a quick exploration of the dataset to produce some summary statistics and give you an idea of what’s inside. 

Looking at foreign assistance by type of flow

First, let’s see what the trends in different types of foreign assistance look like. AidData researchers code the projects they’ve identified into three types of “flow”:

  1. Official Development Assistance (ODA), which contains a grant element of 25% or more and is primarily intended for development.
  2. Other Official Flows (OOF), where the grant element is under 25% and the the financing more commercial in nature.
  3. Vague Official Finance, where there isn’t enough information to assign it to either category.

Here are the total financial values of the projects in AidData’s dataset, grouped by flow type and year:

It looks like more Chinese finance is classed as OOF ($216bn in the period above) than ODA ($81bn), and that 2009 is a bit of an outlier. With this dataset, we next can figure out which countries are the top recipients of ODA and OOF, and also which sectors are most financed.

Transforming urban waterfronts

Fen Wei's picture
HafenCity, Hamburg. Photo Credit: ELBE&FLUT / Thomas Hampel at http://www.hafencity.com
HafenCity, Hamburg.
Photo Credit: ELBE&FLUT / Thomas Hampel at http://www.hafencity.com
“The waterfront isn’t just something unto itself. It’s connected to everything else,” said Jane Jacobs, a prominent urbanist.
 
This connection is twofold; it refers to the relationship between cities and their waterfronts – as ever-changing as cities themselves.
 
Evolving from its past definition during the industrial era as a city’s service yard, the urban waterfront has, in recent decades, taken on new meanings.

On one hand, the waterfront is playing a more significant role in transforming the urban fabric of a city or even reshaping a city’s identity.
 
On the other hand, successful urban waterfronts have also demonstrated how city resources – such as available land, cleaner water, historic preservation, and urban revitalization – can be unlocked and realized, and how these elements can be integrated into the city and public life.
 
[Read: Regenerating Urban Land: A Practitioner's Guide to Leveraging Private Investment]

Engineering our way out of disasters – the promise of resilient infrastructure

Ede Ijjasz-Vasquez's picture
Hurricane Irma moves through the Caribbean in this satellite image from September 5th, 2017.
Image credit: NOAA
The last few weeks have been a stark reminder of how natural disasters can undermine precious development progress in an instant. Images of incredible devastation in the Caribbean wrought by a record-breaking Atlantic hurricane season, collapsing buildings in Mexico during a violent series of earthquakes, and massive monsoon flooding in South Asia that claimed hundreds of lives have resulted in an outpouring of support from the international community.
 
Unfortunately, scenes like these are becoming more routine. The impacts of climate change are becoming increasingly visible, and rapid urbanization is concentrating risk in vulnerable regions of the world.
 
Just consider the following statistics:

The localization of the Sustainable Development Goals: Implementing the SDGs in Colombia, Indonesia, and Kenya

Mahmoud Mohieldin's picture
Medellin, Colombia. (Photo: World Bank Group)

We are approaching the end of year two of implementing the Sustainable Development Goals (SDGs). In September 2015, global leaders from 193 countries set a 15-year deadline – by the year 2030 – to reach the SDGs, a roadmap to end poverty, promote equality, protect people and the planet, while leaving no one behind.
 
What have countries accomplished in these past two years at the local level – where people receive vital goods and services to live and thrive – in areas such as health, education, water, job training, infrastructure? (The results are mixed) Have we raised enough financing? (Likely not). Do we have adequate data to measure progress? (Not in all countries). Some global development leaders have expressed concern that we may not be on track to reach critical SDGs in areas such as health and poverty.
 
To achieve the SDGs, we have to focus on building capacity of development actors at the local level to finance and deliver services that change the lives of people in their communities. This view is well-supported by a joint United Nations Development Program (UNDP)-World Bank Group (WBG) report, which shows that gaps in local delivery capacity are a major factor in determining the success – or failure – of efforts to reach the Millennium Development Goals (MDGs), the predecessor of the SDGs.
 
The lynchpin for successful local implementation of the SDGs is SDG 11, which focuses on making cities and human settlements inclusive, safe, resilient, and sustainable. It is vitally important to manage the process of urbanization to achieve all of the SDGs, not least because the world population is likely to grow by a billion people – to 8.6 billion – by 2030, with most of this growth to be absorbed by urban areas in developing countries.
 
Tackling the challenges facing cities, such as infrastructure gaps, growing poverty, and concentrations of informal housing requires a multi-faceted approach that includes coordinated regional planning with strong rural-urban linkages, effective land use, innovative financing mechanisms, improved and resilient service delivery models, sustained capacity building, and the adoption of appropriate smart and green growth strategies.
 

The WBG is working with our many partners, including countries, the United Nations, the private sector, and civil society to provide more effective, coordinated, and accelerated support to countries for implementing the SDGs at the national and local levels. We have provided below examples from three countries, from diverse regions and situations, which have begun this work in earnest.
 
Following the end of a 50-year conflict in 2016, Colombia has a chance to consolidate peace after the signing of a peace agreement. The National Development Plan of 2014-2018 includes an ambitious reform program focusing on three pillars: peace, equity, and education. Through strong collaboration with all stakeholders – local governments, communities, civil society, businesses, and youth, among others – Colombia is focusing on improving institutional capacity and financing for local and regional governments, enhancing basic services in both rural and urban areas.
 
Medellin city, which in the 1990s had the highest murder rate in the world, has emerged as a confident leader, implementing an integrated and multi-sector approach that has included a combination of violence prevention programs, and the transformation into a prosperous, inclusive, and livable city. Their efforts, with support from the WBG and other partners, have the strong support of local business leaders who recognize that improving poor people’s lives can help reduce the core inequities that fueled conflict in the past. The Government of Colombia is also implementing a program to enhance the capacity at the municipal level in public finance, planning, and management, to help build infrastructure and improve service delivery.

Remittance flows set to recover this year, after two years of decline

Dilip Ratha's picture
The latest edition of the Migration and Development Brief and an accompanying Press Release have just been launched. Remittances to low- and middle-income countries are on course to recover in 2017 after two consecutive years of decline, says the latest edition of the World Bank’s Migration and Development Brief, released today.

Philippines: A crucial first step to address Metro Manila’s floods

Mara Warwick's picture
A resident of the city of Manila helps clean up a creek to remove garbage that clogs drainage and waterways. (Photo: Justine E. Letargo/World Bank)
Metro Manila -- my current home -- is a metropolis of extraordinary contrast.  Referred to as the National Capital Region, it is the workhorse of the country, housing about 12.8% of the total population and producing about 38% of national GDP.  Metro Manila is a key contributor to the country’s dynamic and vibrant economy, which has been among the fastest growing in East Asia in recent years.  With glittering high rise buildings, a Starbucks on seemingly every corner, and bustling commerce wherever you look, one could be lulled into thinking that the citizens of Metro Manila all have a comfortable life.

The role of development financial institutions in the new millennium

José de Luna-Martínez's picture
Around the world, development financial institutions help to promote economic growth, support social development and alleviate poverty.
Photo: bigstock/Elena Larina
Are national development financial institutions (DFIs) still relevant? What are the critical factors that make these institutions succeed? What are concrete examples of sound, well-administered and innovative DFIs? Why do they still remain in business in countries with large and sophisticated financial systems? How can we assess their economic and social impact? Have our views on DFIs evolved in the past decades?
 

PPI Database users leave their mark on the new resources section

Deblina Saha's picture


Photo: yuttana Contributor Studio / Shutterstock.com

Most of us carry out research and report our findings with the expectation—or at least a hope—of an audience.
 
Yet fewer amongst us are familiar with our audience, even though their feedback may help us improve our work.
 
We, the team behind the Private Participation in Infrastructure (PPI) Database—the most comprehensive database of private investments in infrastructure in the developing world—continue to strengthen the database and our ensuing analyses. Learning more about our audience is an important component of these efforts. 

A crisis in learning: 9 charts from the 2018 World Development Report

Tariq Khokhar's picture

There’s a crisis in learning. The quality and quantity of education vary widely within and across countries. Hundreds of millions of children around the world are growing up without even the most basic life skills.

The 2018 World Development Report draws on fields ranging from economics to neuroscience to explore this issue, and suggests improvements countries can make. You can get the full report here and to give you a flavor of what’s inside, I’ve pulled out a few of the charts and ideas that I found most striking while reading through it.

Each additional year of schooling raises earnings by 8-10 percent

 

The report sets out several arguments for the value of education. The clearest one for me? It’s a powerful tool for raising incomes. Each additional year of schooling raises an individual’s earnings by 8–10 percent, especially for women. This isn’t just because more able or better-connected people receive more education: “natural experiments” from a variety of countries - such as Honduras, Indonesia, Philippines, the U.S., and the U.K. - prove that schooling really does drive the increased earnings. More education is also linked with longer, healthier lives, and it has lasting benefits for individuals and society as a whole.

Hope for the future: Key to peace lies with the Filipino youth

Mara Warwick's picture
Women beneficiaries from Maguindanao, southern Philippines, with World Bank Country Director Mara Warwick. These women are participating in livelihood projects under the multi-donor Mindanao Trust Fund. Photo: Justine Letargo/World Bank

Peace – something that many of us take for granted in our own lives – is elusive for millions of people around the world, including in southern Philippines. Long-standing conflict between the government and rebel groups, and a complicated patchwork of clan and family conflicts, has led to decades of economic stagnation and poverty in one of the Philippines’ most beautiful and productive regions – Mindanao. A peace process is hopefully nearing its conclusion and is expected to bring autonomy and with it, greater opportunities for peace and development to the people of the Bangsamoro.

The Philippines is a middle-income country – with GDP at $2,953 per capita and a robust economy, with almost 96% enrollment rate in basic education, and improving health indicators such as child mortality; overall the country is doing well. But these numbers mask sharp regional contrasts: in the Autonomous Region in Muslim Mindanao (ARMM) the GDP per capita is only $576 – equivalent to countries like Rwanda and Afghanistan – the poverty rate is 53.7%, and more than 50% of its employed population are in agriculture with 80% of them working as subsistence farmers, living precariously from crop to crop.  One crop failure can mean ruin for a family.


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