Buying influence? Rotating leadership in ASEAN and allocation of Chinese foreign aid

Abstract

China has expanded its economic footprint in Southeast Asian countries by providing a growing amount of development finance to the region. We examine the allocation of Chinese foreign aid toward Southeast Asian countries exploiting the exogenous variation of rotating leadership within Association of Southeast Asian Nation (ASEAN). As the ASEAN Chair possesses the agenda-setting power and represents the organization, China strategically allocates more development aid to the ASEAN Chair to augment its influence in the region. Our analysis of Chinese aid allocation between 2000 and 2017 finds that taking the leadership position at ASEAN appears to be significantly associated with an increase of official development aid flows from China, while other commercial flows are only weakly associated with the leadership position. Our findings underscore the importance of considering the regional context in examining foreign aid allocation and show that a donor can target a regional organization to exert its political influence in the region.