Does China’s Aid Promote Recipient Countries to be Embedded in Global Value Chains

ABSTRACT

Although aid is an important tool for facilitating the integration of developing countries into global value chains (GVCs), there is lack of empirical research to support this view. This study thus examines the impact of China’s aid on the development of GVCs in recipient countries. The conclusions of this study are as follows: (1) China’s aid can significantly promote recipient countries to transform into GVCs. (2) The improvement of infrastructure in recipient countries is the main channel through which China’s aid affects the degree of integration of recipient countries’ GVCs. (3) Aid type, technology distance, and trade complementarity have a certain heterogeneity in the current study’s research results. From the perspective of GVCs, this study proves the effectiveness of foreign aid in the economic development of recipient countries and helps expand the research boundary of foreign aid.

KEYWORDS:

• China’s aid
• GVC embeddedness
• infrastructure

JEL:

• F35
• F10

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2022.2108698

Notes

1. World Investment Report 2013: Global Value Chains: Investment and Trade for Development.

2. OECD. Aid for trade at a glance 2013: connecting to value chains[J]. 2013.

3. Among them, given the industrial stage of developing countries, endowments specifically refer to FDI, financing and labor costs; market size specifically refers to access to factors of production (tariff and non-tariff measures, reform of services) and market access (trade agreements); location specifically refers to the connectivity of trade infrastructure and basic information and communication technologies; and institutions specifically refer to the promotion of political stability and the establishment of good institutions.

4. Due to space constraints, we present in Appendix 1 the classification of China’s infrastructure aid and non-infrastructure aid (Table Appendix 1) and a trend chart of these two types of aid over the sample period (Figure Appendix 1).

5. In the AidData database, China aid projects have been clearly classified according to ODA and OOF.

6. Data sources of “AidData Database”: https://www.aiddata.org/.

7. The unit logistic linear transformation formula is Z = ln (P/ (1-P)), where P represents the index that needs to be transformed, and Z represents the index after the transformation. Obviously, Z and P change in the same direction.

8. Among them, GVC is calculated from the world input-output table data in the EORA database; lnAid comes from China’s aid data in the “AidData database”; GDP_per, Pop, Trade, FDI, Agricultural, Service, Resources are from the “World Development Index (WDI) Database”; lnOECD_Aid is from the OECD official website; Institution is calculated by the “World Governance Index (WGI)”; Conflict is from the “Center for Systemic Peace.”

9. Due to space constraints, we have included all appendices in a supplementary document to the paper. May be got from the author, if required.

Additional information

Funding

This study is funded by the National Social Science Fund project “Research on ‘One Belt And One Road’ Regional Value Chain Construction and China’s Industrial Transformation and Upgrading” (No. 18ZDA039), the Natural Science Foundation of Guangdong Province project “A Study On The Impact Of Changes In Political Relations Between Countries On Participation In Global Value Chains” (No. 2021A1515011452), and Whampoa Research Institute of Guangdong University of Foreign Studies tendering project “Research on Building a New Platform for One Belt And One Road Full Openness and Cooperation in Guangzhou Knowledge City” (No. HP2021010).