The Effects of Trade, Aid, and Investment on China's Image in Developing Countries

University of Heidelberg Department of Economics Discussion Paper Series No. 646

49 Pages Posted: 27 Mar 2018  

Vera Z. Eichenauer

KOF Swiss Economic Institute at ETH Zurich

Andreas Fuchs

University of Heidelberg - Alfred Weber Institute for Economics

Lutz Brückner

University of Heidelberg - Alfred Weber Institute for Economics

Date Written: March 2018

Abstract

One goal of China’s Go Out policy is to create goodwill in countries around the world. At the same time, China’s growing economic engagement has provoked much criticism. This paper is the first to study whether these activities change the attitudes of individuals in developing countries towards China at both the national and subnational level. Using repeated cross-sectional survey data from the Latinobarómetro, we analyze whether and how growing amounts of exports, foreign aid, and foreign direct investment from China to Latin America affect opinions on China within 18 Latin American countries over the 2002-2013 period. We run instrumental-variables regressions by exploiting exogenous variation in the supply of Chinese exports, aid, and investment proxied by China’s market penetration of developing countries outside Latin America. In contrast to the widespread criticism, we do not find evidence that China’s growing economic activities in the respective countries deteriorate average attitudes towards China—neither at the national nor the provincial level. However, our results show that the young, educated, and economically privileged population develops more positive views of China. We interpret this as evidence that China’s economic engagement creates winners and losers.

Keywords: public opinion, exports, development assistance, foreign direct investment, China, Latin America, anti-Sinicism, soft power

JEL Classification: F14, F15, F21, F35, F61, O54, P33

Suggested Citation

Eichenauer, Vera Z. and Fuchs, Andreas and Brückner, Lutz, The Effects of Trade, Aid, and Investment on China's Image in Developing Countries (March 2018). University of Heidelberg Department of Economics Discussion Paper Series No. 646. Available at SSRN: https://ssrn.com/abstract=3147206 or http://dx.doi.org/10.2139/ssrn.3147206

Vera Z. Eichenauer

KOF Swiss Economic Institute at ETH Zurich ( email )

Leonhardstrasse 21
Zürich, 8092
Switzerland

HOME PAGE: http://https://sites.google.com/view/vera-eichenauer/home

Andreas Fuchs (Contact Author)

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

HOME PAGE: http://www.uni-heidelberg.de/fakultaeten/wiso/awi/professuren/intwipol/fuchs_en.html

Lutz Brückner

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

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