The Impact of Chinese Foreign Aid on the Local Digitalization Development of Recipient Countries

Abstract

In the context of China’s Belt and Road Initiative, Chinese investment and entities are increasingly involved in the construction of digitalization projects in overseas developing countries. As for the impact of Chinese foreign aid on the local digitalization development in developing countries, this study raises a research question: what is the impact of Chinese foreign aid on local digitalization outcomes? Answering this research question, this study uses the World Bank Development Indicators data, Chinese aid data sets including the data of Chinese technology aids, as well as the Internet users and penetration rates data, to test the relationship between them. The paper uses a fixed effect models to analyze the correlation between China's foreign aid and the local digitization construction of the recipient countries, and then on the basis of the results, discusses about the possibility for China to establish a long-term foreign aid mechanism of "aid——digital infrastructure——digitization". Using a fixed effects model, my findings indicate that Chinese aid does not contribute to the digitalization of the recipient countries’ societies. From a policy perspective, it is likely that Chinese PPP and other financing instruments play a more important role in facilitating the spread of Chinese technology and digitalization in emerging and developing economies.