Effect of Chinese development assistance on compliance with Western aid conditionality

This study investigates the effect of Chinese development assistance on compliance with Western aid conditionality. I develop a formal model that incorporates Chinese development assistance into the existing aid-for-policy framework commonly used to model aid conditionality. The model is utilized in an infinitely-repeated simultaneous game to analyze the impact of Chinese development assistance on recipient country compliance with Western aid conditionality. The model predicts that Chinese development assistance has a negative impact on recipient country compliance with conditionality attached to Western aid. The empirical analysis focuses on compliance with World Bank conditionality and utilizes recent China AidData and World Bank Independent Evaluation Group (IEG) Project Assessment Ratings datasets that cover 135+ developing countries over the 2000-2010 time period. The empirical results find consistent support for the hypothesis under multilevel random effects and country-level fixed effects model frameworks.