Development aid is a potentially powerful tool for promoting economic growth among the world’s poor. However, development aid is plagued by corruption, in no small part because many of the poorest areas are also the most susceptible to corruption. In addition to that dilemma, some research suggests that the injection of outside funds into existing corrupt societies can actually exacerbate governance problems. Is this true? And does the impact of development aid on corruption (and development) depend on the source of the aid? An important new paper by Ann-Sofie Isaksson and Andreas Kotsadam suggests that the answers are yes and yes—in particular, they find that Chinese aid projects in Africa may worsen local corruption.
To investigate the question whether Chinese aid projects affect local corruption in Africa, the authors combine data from separate sources. For data on local corruption, the authors make use of the Afrobarometer surveys, with data on nearly 100,000 respondents in 29 countries, collected over a 12 year period (2000-2012) in four separate surveys. The authors focus in particular on respondents’ answer to questions about the frequency of paying bribes to avoid problems with the police or to obtain documents or permits. The authors use the geographic location of survey respondents, together with information on the geographic location of 227 Chinese-aid-supported projects in Africa, in order to identify those respondents who live geographically close to a project supported by Chinese development aid. The results are stark: African citizens who live in areas with Chinese-sponsored projects are 4 percentage points more likely to pay a bribe to police, and 2 percentage points more likely to pay a bribe for permits or documents. Given baseline reported bribery rates of about 13-14%, this means that citizens living near a Chinese aid project are about 30% more likely to report paying a bribe to the police, and about 15% more likely to report paying a bribe for a permit or document.
The most natural explanation is that Chinese aid projects tend to stimulate more corruption. There are, of course, a number of other possible explanations, which the authors address and for the most part rule out, or at least suggest are unlikely:
- First, it could be that the Chinese government tends to target its aid projects in areas where corruption is already worse, for whatever reason. (Most charitably, the Chinese government might target needier areas, which are also more corrupt; less charitably, the Chinese government may find it easier to operate in more corrupt regions.) But the authors test this by comparing respondents who live near Chinese projects that are already underway with respondents who live near projects that are planned but not yet implemented. They find that reported corruption in those areas where a project is underway is notably higher than in areas where a project is planned but not yet started, but no difference between not-yet-active planned projects and areas away from projects. This suggests that the higher corruption rate in areas with a Chinese development project cannot be explained solely by the fact that the Chinese government is more likely to target projects at areas with more pre-existing corruption.
- Second, while the pessimistic interpretation of the main finding is that Chinese aid contributes to corruption, a more optimistic interpretation is that the reason this occurs is because these Chinese-sponsored development projects are successful in generating economic activity, and that the rise in corruption is a natural consequence of a more robust economy. When there’s more to steal, people steal more, even if underlying rates of integrity are unaffected. But the authors control for the overall amount of economic activity by using “lights at night” data (a measure of nighttime light emission per square kilometer), which many economists consider to be a reliable method for measuring economic activity, especially in underdeveloped rural areas. When comparing active to planned Chinese projects, the authors find no differences in this measure of economic activity, which indicates that the increase in corruption is not due to increased economic prosperity (and, perhaps more damningly, suggests that the Chinese aid projects do not produce a substantial increase in economic activity).
- Third, maybe the difference in reported bribery rates is due to an increase in police presence near the project, along with an increase in the number of citizens who need to apply for permits or documents (again, possibly because of the project’s effects on local economic activity). But the authors convincingly show the opposite: those living near Chinese aid projects have less contact with the police, and apply for fewer documents, than do other citizens, yet they still report greater experience with corruption in both contexts. (The decreased contact with police and permitting authorities may be due to the fact that, when corruption increases, people avoid the police and bureaucracy.)
If we rule out these other, more benign possibilities, we are left with the conclusion that Chinese development projects seem to increase corruption. Moreover, the article provides some evidence that is a phenomenon particular to Chinese projects, rather than to development aid projects more generally. The authors run the same battery of tests using World Bank projects rather than Chinese aid projects, and find that citizens who live near a World Bank development project are not more likely to report bribery experience, but those areas do see an increase in nighttime light activity. In other words, World Bank aid projects seem to be associated with a measurable increase in local economic development, but no measurable increase in local corruption, while Chinese aid projects appear to be associated with a measurable increase in local corruption, but no measurable increase in local economic development. Why would this be?
The authors suggest that the answer may have to do with the transmission of norms. In particular, the authors argue that China has weak anticorruption norms, and that these norms spread through development aid projects to local police and bureaucrats—in part because the Chinese government takes little active role in fighting corruption in its projects, and also because the Chinese government and its contractors themselves engage in corrupt practices. The authors don’t really have the data that would allow them to test this mechanism. They do find that respondents who live near a Chinese project are less likely than other respondents to say that the media should investigate and report on corruption, which they argue supports the view that the Chinese presence weakens anticorruption norms. I’m skeptical, though, that this finding tells us much. There are many potential mechanisms by which Chinese projects might increase corruption, and the authors have not convincingly shown that they can measure norms in a robust way.
While questions regarding the mechanism remain open, the fact that Chinese-sponsored development projects are associated with worse corruption, and are not particularly good for development, reflects poorly on China and raises questions as to whether African countries should be skeptical of Chinese development assistance, given that the costs of such aid may outweigh the benefits.
GAB | The Global Anticorruption Blog 
Jetson, thanks for this interesting post. I wonder if the authors broke down their findings by country, region, or in any more granular way. Chinese-sponsored development involves a variety of projects taking place in a variety of countries, contexts, and regimes, and it’d be helpful to learn if there are certain kinds of projects or certain contexts in which corruption seems most apt to increase. I wonder too if, in the course of your research, you came across any parallel studies examining Chinese development projects in other regions of the world, say Central or Southeast Asia. Such comparisons could also help illuminate exactly what factors seem to lead to greater corruption and which don’t. Lastly, while other BRICS countries don’t sponsor as many overseas development projects as China does, it’d be instructive to learn too whether we see similar results around development projects funded by countries with anticorruption norms roughly akin to those of China. Lots for empirical researchers to do!
Having recently read Howard French’s “Second Continent,” I’m fascinated by Chinese development work in Africa. I’d be curious if the article you analyze distinguished (or should have distinguished) between “types” of development projects, as opposed to their sponsors. It seems plausible (and indeed TI argues) that certain sectors (e.g. construction, defense) are more prone to corruption than others. Were Chinese development to be concentrated in these more risk-prone sectors, it would make sense why we might see a higher rate of corruption.
I had a similar thought, Hilary! I would expand the question even further – I wonder if the Chinese aid projects differ significantly from the World Bank aid projects in their type of funding (potential beneficiaries, funding schemes, inclusion of communities, etc). If that would be the case, it could mean that, for example, the Chinese aid projects increase the amount of public procurement in the region and increase the value of tenders in one concrete region, which, in turn, increases the incentives for bribery there, while the World Bank projects have a different implementation scheme that does not have this particular effect. I would not be convinced that this cannot be the case solely by the night lights test. Unfortunately, more and bigger procurement does not always mean an increase in local economy (especially if most of the procurement are rigged) in general.
I also found it interesting that the authors of the article seem to state that along with the Chinese aid projects, Chinese contracts come – is that true? Does this mean that when China invests in aid in a region, its contractors are somehow exclusively hired to implement the projects in that region? If that was the case, it would not explain the change in corruption levels in the local population, would it? Unless of course there are both Chinese contractors and local contractors / sub-contractors.
Thanks for sharing! The topic of Chinese investment in Africa is fascinating, and I’m glad to see a rigorous examination of how Chinese development projects might affect local communities.
I scanned the Isaksson and Kotsadam article, and I was interested to see that corruption was defined in the following way:
“Respondents are asked if they, during the past year, have ‘had to pay a bribe, give a gift, or do a favor to government officials in order to’ a) ‘Avoid a problem with the police (like passing a checkpoint or avoiding a fine or arrest)’, b)‘Get a document or a permit’” (149)
This raised two methodological questions, which I wonder if you might have seen addressed by other researchers. First, the definition of corruption seems to focus on petty corruption — have you seen any scholars attempt a similarly formal measurement of grand corruption? Second, it seems plausible to me that “gift giving” might be viewed in some Chinese business contexts as a fairly normal, benign activity. Do you have any knowledge about whether / how the people collecting the information about corruption tailored the question to recognize differences in “gift-giving” culture?
Jetson, thank you for the analysis and putting this interesting research on my radar. I’d be curious to know if any analysis has been done to measure corruption levels in an area where the Chinese aid has run its course (i.e., whatever development project was underway was completed). In particular, this data would be interesting if we accept the authors’ suggestion that Chinese norms play a role in increasing corruption activity in areas receiving Chinese aid. If the increased corruption levels maintained after the Chinese aid project concluded, then one could perhaps infer that the Chinese norms became ingrained in the local culture; if the increased corruption levels decreased after the Chinese aid project concluded, then one could perhaps infer that the Chinese norms were never actually adopted by the locals (and thus, the increased corruption was due to the Chinese presence / presence of Chinese contractors).
I was wondering the same thing too, Ross. I think it would be really interesting to know whether there are long-lasting increases in corrupt activities. If corrupt practices decline after the completion date, to what extent are corrupt practices ceasing (i.e., is it a moderate decline in corrupt activity, or a return to the pre-development project status?)
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