China's Entry into the Foreign Aid Game: Implications for the Donor-recipient Relationship

Abstract: We develop an analytic narrative with focus on the recent entry of China into the foreign aid game in Africa, with particular emphasis on the interaction between China and Western donors. We first model a recipient country’s decision to accept aid from either just one, or two (competing), donors as a dynamic game where aid by the traditional donor, but not by the new donor, is characterised by political conditionality in the form of good governance reforms. The implications of the model are then applied to Ethiopia using both data and qualitative evidence for the post-Cold War era.