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Does India use development finance to compete with China? A subnational analysis

Author

Listed:
  • Asmus, Gerda
  • Eichenauer, Vera
  • Fuchs, Andreas
  • Parks, Bradley
Abstract
China and India increasingly provide aid and credit to developing countries. This paper explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China (and vice versa). To do so, we build a new geocoded dataset of Indian government-financed projects abroad between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2,333 provinces within 123 countries demonstrate that India's Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where China has made public opinion gains relative to India and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects.

Suggested Citation

  • Asmus, Gerda & Eichenauer, Vera & Fuchs, Andreas & Parks, Bradley, 2021. "Does India use development finance to compete with China? A subnational analysis," Kiel Working Papers 2189, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:2189
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    References listed on IDEAS

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    Cited by:

    1. Olivier Najar, & Pascale Scapecchi & et Ysaline PADIEU, 2023. "Development finance fragmentation and diversification: the case of China, India and Türkiye," Working Paper 81567fdf-0daf-470c-9844-f, Agence française de développement.
    2. Wellner, Lukas & Dreher, Axel & Fuchs, Andreas & Parks, Bradley & Strange, Austin M., 2022. "Can aid buy foreign public support? Evidence from Chinese development finance," Kiel Working Papers 2214, Kiel Institute for the World Economy (IfW Kiel).
    3. Olivier Najar, & Pascale Scapecchi & et Ysaline PADIEU, 2022. "Fragmentation et diversification du financement du développement : les cas de la Chine, de l’Inde et de la Turquie," Working Paper 81567fdf-0daf-470c-9844-f, Agence française de développement.

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    More about this item

    Keywords

    development finance; foreign aid; social development assistance; official credits; new donors; China; India; geospatial analysis;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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