Chinas Effect on Governance Reform in Angola What Evidence is There? Bobbie NJ Macdonald...

China’s Effect on Governance China’s Effect on Governance Reform in AngolaReform in Angola

What Evidence is There?What Evidence is There?Bobbie NJ Macdonaldb.n.macdonald@lse.ac.uk MSc Student, London School of Economics and Political ScienceLondon, UK

Source: <http://www.chinaafricarealstory.com/>

SummarySummaryCore Question: ‘What effect is China’s growing presence in Angola having on governance in Angola?’Main Results: 1. Ambiguous and Indeterminate evidence of China’s

relationship with governance in Angola.2. In contrast, a significant negative relationship exists between

trade with China and several measures of governance in Africa.

Discussion:1. Strong need for more sophisticated thinking about the

political economy of China’s impacts on governance in Africa.

2. ‘China in Africa’ discourse and research should shift to a much greater focus on African agency.

Source: <www.african-politics.com>

The Rise of China in The Rise of China in AfricaAfrica

China overtook the US to become Sub-Saharan Africa’s largest trading partner in 2008.

The Rise of China in The Rise of China in AfricaAfrica

Source: <www.chinatalkingpoints.com>Source: <http://publicandculturaldiplomacy4.wordpress.com>

The Rise of China in AfricaThe Rise of China in Africa

The ‘China The ‘China Alternative’Alternative’

Chinese aid and finance is purportedly undermining the West’s efforts at promoting good governance throughout the African continent.

Collier (2007): “In the bottom billion it is unusually bad, and the Chinese are making it worse, for they are none too sensitive when it comes to matters of governance” (p. 86).

Evidence gap:Absence of empirical work on relationship between Chinese activities and governance across Africa.

Source: <www.angolaembassy-china.com>

2002:

• Official end of civil war, Angola under significant pressure to repay loans from private creditors.

• To become eligible for debt rescheduling, Angola was heavily pressured by the IMF to undertake an intensive program of political and economic reform.

2004:

• Just when Angola was about to agree to the IMF program, China Eximbank offered Angola a US$2 billion credit line.

• …leading to widespread criticism from the West:• Angola “…is avoiding pressure to clean up corruption thanks to aid from

China” (Swann & McQuillen, November 3 2006).

• “The Chinese are not investing to develop the country. They have brought more corruption and, consequently, more poverty” (Marques de Morais, August 29 2012).

China in AngolaChina in Angola

• But… It’s not that simple.• Between 2000 and 2003, Angola continued to receive billions

of dollars in loans from Western creditors.

• So, what evidence really exists to suggest that China is having a negative impact on governance in Angola?

• Since 2004, Chinese finance and investment has become increasingly important in the Angolan economy.• In recent years, 16% of China’s total oil imports came from

Angola, accounting for over 30% of Angola’s crude oil exports.

China in AngolaChina in Angola

• Research question: ‘what effect is China’s growing presence in Angola having on governance in Angola?’

Source: <http://www.chinaafricarealstory.com/>Source: <http://www.chinaafricarealstory.com/>

Governance Data Governance Data Worldwide Governance Indicators Data Set:

Six aggregated continuous measures of governance placed on a standardized scale ranging from -2.5 to +2.5

Higher score = Better performance

Six measures:

Voice and Accountability; Political Stability;

Government Effectiveness; Regulatory Quality;

Rule of Law; Control of Corruption

Country Year Voice & Acct.

Political Stability Gov. Eff. Regulator

y QualityRule of

Law

Control of Corruptio

n

Ethiopia 2010 -1.314 -1.705 -0.349 -0.884 -0.755 -0.704

Chinese Trade DataChinese Trade Data

Total trade with China

Available from UN Comtrade database, 1962 - 2010

Sum of Chinese imports and exports

Chinese aid data not available

Source: <http://edition.cnn.com>

WGI indicators

Africa Avg

Angola Avg

Mean Diff.

T score P-valueAngola

percentile rank

Voice & Acct. 0.003 0.021 0.018 0.057 0.957 0.617

Pol. Stability -0.012 0.141 0.153 1.878 0.119 0.915

Gov. Eff. -0.007 0.037 0.044 0.564 0.597 0.809

Reg. Quality 0.005 0.034 0.029 1.041 0.346 0.809

Rule of Law 0.003 0.028 0.024 0.586 0.583 0.745

Control of Corr.

0.012 -0.004 -0.016 -0.362 0.732 0.383

Mean Differences: Average Changes in Mean Differences: Average Changes in Governance, Governance,

2004-2010 (one sample ttests)2004-2010 (one sample ttests)

Governance in Angola: 1996-2010Governance in Angola: 1996-2010

Partial Correlations: Chinese Trade and Partial Correlations: Chinese Trade and Governance in Angola, 1996-2010Governance in Angola, 1996-2010

Total Trade with China (%GDP)

Voice & Acct.

Pol. Stability

Gov. Eff.

Reg. Quality

Rule of Law

Control of Corr.

No lag -0.601 0.094 -0.431 -0.167 0.539 -0.491

2 year lag 0.069 0.274 0.059 -0.198 -0.270 0.607

4 year lag 0.407 0.555 0.371 0.639 0.192 0.297

Note: Pearson’s r reported. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

Partial Correlations: Chinese Trade and Partial Correlations: Chinese Trade and Governance in Africa, 1996-2010Governance in Africa, 1996-2010

Total Trade with China (%GDP)

Voice & Acct.

Pol. Stability

Gov. Eff.

Reg. Quality

Rule of Law

Control of Corr.

No lag -0.072 -0.143 -0.442*** -0.434*** -0.350*** -0.171*

2 year lag -0.074 -0.060 -0.422*** -0.434*** -0.336*** -0.200**

4 year lag -0.116 -0.081 -0.430*** -0.480*** -0.363*** -0.297***

Note: Pearson’s r reported. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

(1) Gov. Eff. (2) Rule of Law(3) Control of

Corr.

Trade with China (%GDP) t - 4

- 0.0067 ***(0.0021)

- 0.0055 **(0.0028)

- 0.0102 ***(0.0027)

ODA (%GNI)0.0024 **(0.0012)

0.0029 **(0.0012)

0.0043 ***(0.0014)

Total FDI (%GDP)0.0053 ***

(0.0011)0.0041 ***

(0.0012)0.0039 **(0.0016)

Trade, all countries exc. China (%GDP)

- 0.0012(0.0011)

0.0002(0.0012)

- 0.0019(0.0014)

Xit ✔ ✔ ✔

Year dummies ✔ ✔ ✔

F-test for joint signif. 6.2 *** 5.27 *** 3.91 ***

n 374 374 374

# of countries observed 45 45 45

Obs per country (avg) 8.3 8.3 8.3

Fixed Effect Regressions: Trade With Fixed Effect Regressions: Trade With ChinaChina

Note: Robust standard errors in parentheses. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

Summary of Results: Is There Summary of Results: Is There Evidence of a ‘China Curse’ in Evidence of a ‘China Curse’ in

Angola?Angola?1. Ambiguous and indeterminate evidence of China’s

relationship with governance in Angola.

• Angola’s annual rate of change in governance has not been significantly worse than the average for Sub-Saharan Africa.

2. In contrast, a significant negative relationship exists between trade with China and several measures of governance in Africa.

• However: these results do not address endogeneity concerns and provide no evidence of a causal effect between Chinese trade and governance within African countries.

Discussion: Looking AheadDiscussion: Looking Ahead

1. Strong need for more sophisticated thinking about the political economy of China’s impacts on governance in Africa.

2. ‘China in Africa’ discourse and research should shift to a much greater focus on African agency.

Source: <http://corporateforeignpolicy.com>

Source: <http://www.zimbio.com>

China’s Effect on Governance China’s Effect on Governance Reform in AngolaReform in Angola

What Evidence is There?What Evidence is There?Bobbie NJ Macdonaldb.n.macdonald@lse.ac.uk MSc Student, London School of Economics and Political ScienceLondon, UK

Source: <http://www.chinaafricarealstory.com/>