DP17128 Can Aid Buy Foreign Public Support? Evidence from Chinese Development Finance
Bilateral donors use foreign aid to pursue soft power. We test the effectiveness of aid in reaching this goal by leveraging a new dataset on the precise commitment, start, and end dates of Chinese development projects. We use data from the Gallup World Poll for 126 countries over the 2006-2017 period and identify causal effects with (i) an event-study model that includes high-dimensional fixed effects, and (ii) instrumental-variables regressions that rely on exogenous variation in the supply of Chinese government financing over time. Our results show that the completion of Chinese development projects increases popular support for the Chinese government in recipient countries. In the short run, this effect increases with the size of the project and the generosity of the financial commitment; in the longer run, it is lower among people who live in close proximity to completed Chinese development projects. Analyzing the impact of Chinese projects on global perceptions, we find that Chinese development projects create a more favorable public opinion environment for China among countries in Africa, potential "swing states" in the United Nations General Assembly, and countries with higher baseline (ex ante) levels of public support for the Chinese government.