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Chinas Effect on Governance Reform in Angola What Evidence is There? Bobbie NJ Macdonald MSc Student, London School of Economics.

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Presentation on theme: "Chinas Effect on Governance Reform in Angola What Evidence is There? Bobbie NJ Macdonald MSc Student, London School of Economics."— Presentation transcript:

1 Chinas Effect on Governance Reform in Angola What Evidence is There? Bobbie NJ Macdonald MSc Student, London School of Economics and Political Science London, UK Source:

2 Summary Core Question: What effect is Chinas growing presence in Angola having on governance in Angola? Main Results: 1. Ambiguous and Indeterminate evidence of Chinas 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 Chinas impacts on governance in Africa. 2.China in Africa discourse and research should shift to a much greater focus on African agency. Source:

3 The Rise of China in Africa

4 China overtook the US to become Sub-Saharan Africas largest trading partner in The Rise of China in Africa Source:

5 The Rise of China in Africa

6 The China Alternative Chinese aid and finance is purportedly undermining the Wests 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:

7 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 ). The Chinese are not investing to develop the country. They have brought more corruption and, consequently, more poverty (Marques de Morais, August ). China in Angola

8 But… Its 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 Chinas total oil imports came from Angola, accounting for over 30% of Angolas crude oil exports. China in Angola

9 Research question: what effect is Chinas growing presence in Angola having on governance in Angola? Source: Source:

10 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 CountryYear Voice & Acct. Political Stability Gov. Eff. Regulatory Quality Rule of Law Control of Corruption Ethiopia

11 Chinese Trade Data Total trade with China Available from UN Comtrade database, Sum of Chinese imports and exports Chinese aid data not available Source:

12 WGI indicators Africa Avg Angola Avg Mean Diff. T scoreP-value Angola percentile rank Voice & Acct Pol. Stability Gov. Eff Reg. Quality Rule of Law Control of Corr Mean Differences: Average Changes in Governance, (one sample ttests)

13 Governance in Angola:

14 Partial Correlations: Chinese Trade and Governance in Angola, Total Trade with China (%GDP) Voice & Acct. Pol. Stability Gov. Eff. Reg. Quality Rule of Law Control of Corr. No lag year lag year lag Note: Pearsons r reported. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

15 Partial Correlations: Chinese Trade and Governance in Africa, Total Trade with China (%GDP) Voice & Acct. Pol. Stability Gov. Eff. Reg. Quality Rule of Law Control of Corr. No lag *** *** *** * 2 year lag ***-0.434***-0.336***-0.200** 4 year lag ***-0.480***-0.363***-0.297*** Note: Pearsons r reported. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

16 (1) Gov. Eff.(2) Rule of Law (3) Control of Corr. Trade with China (%GDP) t *** (0.0021) ** (0.0028) *** (0.0027) ODA (%GNI) ** (0.0012) ** (0.0012) *** (0.0014) Total FDI (%GDP) *** (0.0011) *** (0.0012) ** (0.0016) Trade, all countries exc. China (%GDP) (0.0011) (0.0012) (0.0014) X it Year dummies F-test for joint signif.6.2 ***5.27 ***3.91 *** n374 # of countries observed45 Obs per country (avg)8.3 Fixed Effect Regressions: Trade With China Note: Robust standard errors in parentheses. *** = p < 0.01; ** = p < 0.05; * = p < 0.10.

17 Summary of Results: Is There Evidence of a China Curse in Angola? 1.Ambiguous and indeterminate evidence of Chinas relationship with governance in Angola. Angolas 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.

18 Discussion: Looking Ahead 1.Strong need for more sophisticated thinking about the political economy of Chinas impacts on governance in Africa. 2.China in Africa discourse and research should shift to a much greater focus on African agency. Source:

19 Chinas Effect on Governance Reform in Angola What Evidence is There? Bobbie NJ Macdonald MSc Student, London School of Economics and Political Science London, UK Source:


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