Financing for Status: Evidence from Chinese Megaprojects Abroad

• In Event: The Changing Landscape of Aid: Conflict, Natural Disasters and New Donors

Abstract

How do states' demands for status impact the allocation of development finance? In particular, what explains the allocation of megaprojects---large-scale, visible and expensive investments---in developing countries? Despite their exceptional features, extant theory and empirical evidence often fails to distinguish megaprojects from routine development projects. Building on earlier research on domestic infrastructure financing as well as the role of status in international relations, I argue that both donors and recipients invest in megaprojects in part to pursue political prestige. For recipients, these projects can provide domestic political capital in times of need by promoting national development narratives emphasizing regional or international status. For status-seeking donors, megaprojects can reinforce a donor's relative status in other countries, both within and beyond the localities in which they are implemented. I develop these arguments in the context of historical and contemporary Chinese development finance abroad. Using national and subnational datasets combined with qualitative evidence, I demonstrate that factors traditionally thought to explain aid allocation do not fully explain the allocation of Chinese megaprojects worldwide. To demonstrate the argument in a broader context, I also briefly survey other historical instances of prestige financing of megaprojects from other donors.

Author

• Austin Michael Strange, Harvard University