International Relations of the Asia-Pacific Volume 00, (2022) 1–27
https://doi.org/10.1093/irap/lcac003

Taegyun Lim1,2, and Sung Eun Kim

2,

*

1

Department of Government, Harvard University, Cambridge,
MA, USA; 2Department of Political Science andInternational Relations, Korea University, Seongbuk-gu,
Seoul, The Republic of Korea*Email: sung_kim@korea.edu
Accepted 30 March 2022

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 theASEAN 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 ofChinese aid allocation between 2000 and 2017 finds that taking theleadership position at ASEAN appears to be significantly associated withan increase of official development aid flows from China, while other

International Relations of the Asia-Pacific Vol. 00 No. 0# The Author(s) 2022. Published by Oxford University Press in association with the Japan
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Buying influence? Rotating
leadership in ASEAN andallocation of Chinese
foreign aid

2 Taegyun Lim and Sung Eun Kim

1 Introduction
Southeast Asia is one of the most contested regions in the world, particularly given the intensifying strategic competition between the
United States and China. In response to President Obama’s ‘pivot’ policy toward Asia, Beijing has strived to expand its presence in the region via diverse channels including diplomatic, cultural, economic, andsecurity instruments. The 10 Member States of the Association ofSoutheast Asian Nations (ASEAN) have long pursued a ‘hedging’strategy to juggle their relationships with the world’s two major powers. Yet recently, many observers of the region have noticed signs of ashift toward China. One area where China’s inﬂuence is particularly evident is the economic sphere, as China is now by far the largest tradeand investment partner of countries in the region (Shambaugh, 2018).
China’s expanding economic footprint in ASEAN can also be seenin the rapid growth of its development ﬁnance in the region. Amongthe various tools China can use to promote its interests in the region,
provision of development ﬁnance plays a crucial role. A growing
amount of China’s development ﬁnance has ﬂowed to the region, serving the country’s foreign policy objectives there. China’s Ofﬁcial
Development Assistance (ODA) to ASEAN increased from 127 million
USD in 2000 to 270 million USD in 2017 after reaching a peak of 2.2
billion USD in 2015. Similarly, China’s other ofﬁcial ﬂows (OOF),
which are also government funded but more commercially oriented, increased from 729 million USD in 2000 to 10.8 billion USD in 2017 (allin constant 2017 USD). However, the increase in Chinese development
ﬁnance has not been evenly distributed across ASEAN member countries over time.
What determines China’s allocation of development assistance toSoutheast Asian countries? Who receives more aid or other forms ofstate ﬁnancing from China? China’s foreign aid is often considered‘rogue aid’ in that it is dictated by selﬁsh interests alone, rather thanDownloaded from https://academic.oup.com/irap/advance-article/doi/10.1093/irap/lcac003/6582968 by Seoul Science Library user on 24 January 2023

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 adonor can target a regional organization to exert its political influencein the region.

ASEAN leadership and Chinese aid allocation 3

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recipient countries’ level of need (Naim, 2007). While Dreher andFuchs (2015) ﬁnd the concern over ‘rogue aid’ to be exaggerated, theirempirical analysis also ﬁnds evidence that political motives are important drivers of China’s aid allocation. Recipient countries are rewarded
for not recognizing Taiwan and for voting in line with China at theUnited Nations General Assembly (UNGA). Dreher et al. (2018) distinguish ODA from OOF and ﬁnd that the allocation of Chinese ODA
is largely guided by foreign policy considerations, while economic interests better account for other forms of less concessional ﬂows.
In this article, we further explore how China strategically allocates
its development assistance in Southeast Asia. While previous studies ofChinese aid have mostly focused on Africa (e.g. Naim, 2007; Jakobson,
2009; Dreher and Fuchs, 2015; Dreher et al., 2018; Guillon andMathonnat, 2020), China’s strategy for aid allocation may vary signiﬁcantly across different regions. Yet, it remains under-explored how
China uses its foreign aid to pursue its strategic interests in Southeast
Asia. On the one hand, Lum (2009) suggests that China’s foreign aid
activities in Southeast Asia serve its long-term diplomatic and strategic
objectives, while its aid to Africa and Latin America may relate more
to economic interests. On the other hand, a more recent analysis by
Oh (2020) suggests that foreign policy determinants are not strongly related to Chinese aid in Asia, but do play a signiﬁcant role in China’s
allocation of ODA in Africa. We contribute to this line of inquiry.
While previous studies have focused on recognition of Taiwan or voting alignment with China at the UNGA as a proxy for China’s strategic interests (e.g. Dreher et al., 2018; Oh, 2020), it is necessary toconsider region-speciﬁc contexts. China’s strategic interests in different
regions cannot be measured in a uniform way because China pursues
different strategic objectives in different regions.
To understand the strategic motivation for China’s provision of development ﬁnance in Southeast Asia, we examine how China rewards
the country that assumes the chairship of ASEAN. ASEAN has playeda major role in promoting regional economic integration among its
Member States with the aim of building a prosperous community forSoutheast Asian nations (Al-Fadhat, 2019). The ASEAN Chair possesses agenda-setting power both externally and internally, hosting
ASEAN meetings and representing the organization in its external
relations with 16 developed countries, including major donors to the4 Taegyun Lim and Sung Eun Kim

1

See https://asean. org/asean/external-relations (Accessed on March 3, 2021).

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region.1 This agenda-setting power enables the ASEAN Chair to set
priorities among a wide range of issues in the region. If China or any
other donor countries intend to project their political inﬂuence in theregion, targeting the ASEAN Chair as they strategically allocate foreign aid to the region could be an effective strategy.
We estimate the effects of ASEAN chairship on the extent ofChina’s foreign aid, leveraging the annual rotation in the ASEAN leadership position among member countries. Our analysis addresses theidentiﬁcation problem posed by the possibility that the regional organization’s leadership position is endogenously determined. If a country
that is more inﬂuential or strategically important to China assumes theASEAN chairship, identifying the independent effects of ASEAN
chairship on the amount of China’s foreign aid poses a challenge. The
association between the chairship and Chinese foreign aid may reﬂect
the effects of the chairing country’s inﬂuence or its strategic importance rather than its chairship of ASEAN. Because the annual rotationin ASEAN’s chair position is alphabetical, uncorrelated with other
determinants of aid allocation, it provides a unique opportunity toidentify the causal effects of the regional organization’s leadership on
countries’ receipt of foreign aid.
Our analysis of Chinese aid allocation patterns between 2000 and2017 ﬁnds that China allocates more foreign aid to an ASEAN member country when that country assumes the leadership position in
ASEAN. Taking the leadership position at ASEAN appears to be signiﬁcantly associated with an increase in ODA ﬂows from China, a ﬁnding that remains robust to different model speciﬁcations. We also ﬁndthat the ﬁnancial reward for the ASEAN chair is not limited to the allocation of ODA. While the allocation of OOF is known to be largely
driven by China’s commercial interests rather than its foreign policy
interests (Dreher et al., 2018), our ﬁndings suggest that China uses
both ODA and OOF as a strategic instrument to buy inﬂuence within
the ASEAN by allocating more development ﬁnance to the ASEAN
Chair, a position endowed with important agenda-setting power within
the regional organization.
Our ﬁndings contribute to the broader understanding of how China
uses foreign aid in Southeast Asia. Despite the region’s signiﬁcance,

ASEAN leadership and Chinese aid allocation 5

2 Strategic allocation of foreign aid
A long line of research suggests that states strategically allocate foreign
aid to advance their foreign policy goals. Morgenthau (1962, p. 309),
for instance, states, ‘a policy of foreign aid is no different from diplomatic or military policy or propaganda. They are all weapons in thepolitical armory of the nation’. This framework suggests how states

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given the strategic competition for inﬂuence between the United States
and China, previous studies on China’s foreign aid allocation havemostly focused on the African continent (Naim, 2007; Dreher andFuchs, 2015; Dreher et al., 2018; Guillon and Mathonnat, 2020). Our
research highlights the importance of considering region-speciﬁc contexts to understand how China allocates its foreign aid to recipient
countries in different regions.
Furthermore, our ﬁndings underscore how a donor country can target a regional organization to increase its political inﬂuence in theregion as a whole. The literature on the strategic allocation of aid has
focused primarily on the context of bilateral relations between donor
and recipient countries (Alesina and Dollar, 2000; Lai, 2003; Fleck and
Kilby, 2010; Boutton and Carter, 2014). However, as developing countries are organized around regional organizations, donor countries may
shift their allocation of aid to expand their inﬂuence on these organizations. Our research demonstrates that donors can exert indirect inﬂuence on member countries of regional organizations by strategicallyallocating more aid to recipient countries with more inﬂuence within
the regional organizations. In a world with institutional regionalism,
targeting such an organization can be an effective strategy that serves
donors’ interests.
Below, we review the relevant literature on strategic allocation offoreign aid. We then provide historical context for Chinese foreign policy toward Southeast Asia, followed by a discussion of the theoretical
expectations for the relationship between the ASEAN chairship andChina’s aid allocation. The subsequent sections present our data, empirical strategy, and empirical results. The concluding section discusses
the broader implications of our ﬁndings for understanding the aid allocation strategies of emerging donors and their effects on developing
countries.

6 Taegyun Lim and Sung Eun Kim

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can use foreign aid to serve their interests abroad ‘which cannot be secured by military means and for the support of which the traditional
methods of diplomacy are only in part appropriate’ (Morgenthau,
1962, p. 301). This view emphasizes that foreign aid can serve the strategic interests of donor countries, in a manner distinct from other military and political instruments.
Donors can pursue their strategic interests by allocating more aid totheir allies. The strategic use of foreign aid has attracted scholarly attention since the Cold War. Studies focusing on the United States demonstrate that its foreign aid allocation during that period was largely
guided by strategic competition with the Soviet Union (e.g. McKinlay
and Little, 1977; Lebovic, 1988). In the post-Cold War period, such research has continued. For instance, Lai (2003) demonstrated that theUnited States provides more foreign aid to states that are more important to its national security (e.g. Latin American nations or states thatbordered a rogue state). Following the September 11th attack, US foreign aid allocation was largely shaped by its strategic interests in countering international terrorism (Fleck and Kilby, 2010; Boutton andCarter, 2014). Carter and Stone (2015) also ﬁnd that the United Statesuses its aid to reward or punish other democratic countries for theirvoting behavior at the UNGA, although its use of aid is not as responsive to the voting behavior of autocratic countries.
More broadly, the seminal work by Alesina and Dollar (2000) expanded the empirical scope of the literature by exploring how major
donor countries consider various strategic and political factors whenallocating bilateral foreign aid to recipient countries. Examining therelative signiﬁcance of various determinants of foreign aid, Alesina andDollar (2000, p. 34) ﬁnd that ‘the direction of foreign aid is dictated asmuch by political and strategic considerations, as by the economic
needs and policy performance of the recipients.’ They ﬁnd that a pastcolonial relationship and political alliances, measured in terms of similarity in voting patterns at the UNGA, are the major predictors of aid
allocation. Ohtsuki (2016) also shows that donors seek to optimally allocate foreign aid to speciﬁc recipients with speciﬁc concessions in return. In a similar vein, Kuziemko and Werker (2006) have examinedthe effects of United Nations (UN) Security Council membership on
foreign aid receipt. By leveraging the fact that 10 out of 15 seats areheld by rotating members for 2-year terms, they ﬁnd that recipientASEAN leadership and Chinese aid allocation 7

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countries serving on the Security Council receive considerably more
foreign aid from the United States as well as the UN.
Recently, with the emergence of new donors, studies have begun to
explore the determinants of aid allocation by donors who are notmembers of the Organisation for Economic Co-operation andDevelopment (OECD)’s Development Assistance Committee. For instance, Dreher et al. (2011) examine how aid allocation by new donors
differs from the aid allocation of longtime donor countries. They ﬁndthat new donors care less about recipients, need, and provide more aid
to countries with corruption than longtime donors do. The ﬁndings ofFuchs and Vadlamannati (2013) suggest that when distributing aid,
India prioritizes both commercial and political beneﬁts. On the whole,these studies suggest that emerging donors, like traditional donors,
consider strategic self-interest when allocating foreign aid to recipient
countries.
A large body of literature has examined China’s role as an emerging
major donor to developing countries. On the one hand, there are critical perspectives on Chinese foreign aid, which is often viewed as ‘rogueaid’ (e.g. Naim, 2007). Skeptics allege that Chinese foreign aid is almost entirely guided by self-interest, based on China’s commercial
interests and the geopolitical beneﬁts of its aid allocation. On the other
hand, Dreher and Fuchs (2015) demonstrate that China considers political factors when allocating aid, but the inﬂuence of such factors is
not stronger than it is for Western donors. These competing perspectives on the determinants of Chinese foreign aid allocation call for further empirical research to develop a comprehensive understanding of
how and to what extent Chinese foreign aid is guided by the country’s
strategic and political interests.
The advent of AidData, which tracks development ﬁnance projects
by China and other major donor countries, has enriched the discussionof the determinants and the effects of Chinese foreign aid (Dreher
et al., 2021). For instance, Broich (2017) ﬁnds that political regimes do
not signiﬁcantly affect Chinese aid allocation decisions, contrary to thewidespread criticism that Chinese foreign aid supports authoritarianregimes. The study by Dreher et al. (2018) underscores the importanceof distinguishing the different sources of Chinese capital ﬂows todeveloping countries, showing that Chinese foreign policy considerations shape the allocation of Chinese ODA considerably, while less

8 Taegyun Lim and Sung Eun Kim

3 Chinese Foreign policy toward Southeast Asia
The current form of Sino-ASEAN relations date to the 1997–99 Asian
Financial Crisis, when Chinese relations with Southeast Asian countries were signiﬁcantly strengthened (Ba, 2003). The crisis shattered thecohesion of ASEAN, revealing the limits of the institution’s ability toaddress the ﬁnancial hardships in the region (Narine, 2008). While
ASEAN countries were deeply disappointed by the harsh conditions
imposed by the International Monetary Fund and the limited role of
US leadership in overcoming the ﬁnancial crisis, China provided vital
support to ASEAN members (Ba, 2003). China’s policies toward
the region, including its $1 billion in assistance to Thailand and its
decision not to devalue the Yuan, helped alleviate the ﬁnancial
crisis, consolidating China’s leadership position in the region(Shambaugh, 2005).
The period from the Asian Financial crisis in 1997 to China’s entry
into the WTO in 2001 was a ‘critical juncture’ in China’s policies toward Southeast Asia (Chin and Stubbs, 2011, p. 281). Strengthening its
cooperation and integration with regional organizations became a key

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concessional ﬁnancial ﬂows are more driven by economic interests.
Other studies have further disentangled the logic of China’s foreign aid
allocation by examining the allocation patterns across different industry sectors and sub-regions (e.g. Dreher et al., 2019; Guillon andMathonnat, 2020).
The extant literature provides valuable insights into the allocation ofChinese foreign aid, but China’s aid allocation in regions other thanAfrica remains underexplored. Although African countries are the major recipients of Chinese foreign aid, the ﬁndings from these countries
may not be applicable to other regions. Moreover, a common pitfall of
the literature is the implicit assumption that China’s strategic or political interests can be captured in a uniform way regardless of regional
context. While a country’s recognition of Taiwan or its UNGA voting
similarity with China can be an important indicator of its strategic importance or its political relations with China, there are other importantregion- or country-speciﬁc variations that are not captured by these
indicators. Our study contributes to the literature by articulating the
logic of China’s strategic allocation of aid to Southeast Asia.

ASEAN leadership and Chinese aid allocation 9

2

For more on ASEAN’s relations with China, see https://asean.org/asean/external-relations/china/.

3‘Charter of the Association of Southeast Asian Nations’. Available at https://asean. org/
wp-content/uploads/images/archive/publications/ASEAN-Charter.pdf

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strategy of China’s foreign policy toward the region. China’s perception of the regional organizations ‘evolved from suspicion, to uncertainty, to supportiveness’ (Shambaugh, 2005, p. 69). In the early 2000s,
China and ASEAN began to hold regular dialogs at the summit andministerial levels.2 The ASEAN–China Export Group was establishedin 2000, and served as the ground for a free trade agreement (Chinand Stubbs, 2011). China has further engaged with the region on various fronts, and ‘China’s support has been critically important for
ASEAN’s efforts to maintain a prominent role in the regional institutional framework’ (Narine, 2008, p. 424).
In its recent engagement with the region, China has used diplomatic,
cultural, economic, and security instruments (Shambaugh, 2018, p. 87).
Among the multiple channels China has used to expand its inﬂuence inthe region, allocation of foreign aid also ﬁts within the larger framework of foreign policy. While China’s decision to allocate foreign aid
to Southeast Asian countries may be inﬂuenced by multiple factors, we
argue that China has a strategic incentive to allocate more foreign aid
to the country that assumes the role of Chair at ASEAN. As theASEAN Chair enjoys agenda-setting power within the institution,
China can attempt to buy inﬂuence within the region by strategicallyproviding more aid to the country serving as Chair.
Formally, the ASEAN Chair is supposed to organize two annual
ASEAN summits and to arrange ministerial meetings among
Member States, according to the Article 31 of the ASEAN Charter.
Further, the Article 32 states that the Chair shall ‘actively promoteand enhance the interests and well-being of ASEAN [.] ensure an effective and timely response to urgent issues or crisis situations affecting ASEAN [.] and carry out such other tasks and functions as may
be mandated’.3
Beyond simply hosting the summits, the Chair can exercise its inﬂuence through its agenda-setting power. While all member countries canmake proposals and exchange compromises or concessions during thenegotiation, the Chair can guide the discussion to reach to the zone of

10 Taegyun Lim and Sung Eun Kim

4

https://asean2019.go.th/en/infographic/the-asean-japan-cybersecurity-capacity-building-cen
tre-ajcc-bc/

5

ASEAN Chairman Statement, 2016, https://asean.org/wp-content/uploads/2016/08/FinalChairmans-Statement-of-the-28th-and-29th-ASEAN-Summits-rev-fin.pdf

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possible agreement among all members. In the process, the Chair can
decide to prioritize or exclude proposals (Suzuki, 2021).
The agenda-setting power of the ASEAN Chair is derived from two
main factors: (i) consensus-based decision making and (ii) rotating
leadership. First, the Chair can exert more inﬂuence over decisionmaking due to the consensus-based model. While ASEAN has adopted
decision-making by consensus, famously characterized as the ‘ASEAN
Way’, a coordination process is needed to reach agreements among
Member States with conﬂicting interests. Since each member state essentially has veto power as they work toward consensus, the role of the
Chair of setting the agenda and guiding discussions is critical to reachan agreement.
Second, the rotating leadership creates diffuse reciprocity which
induces the Member States to delegate more discretion to the Chair.
Compared to alternative forms of leadership selection (e.g. electing
state representatives or appointing supranational ofﬁcials), rotation ofleadership is more likely to open up logrolling dynamics that grant the
Chair room for maneuvering. In particular, this dynamic is likely to bestable when a limited number of parties hold the chairship at regularintervals (Tallberg, 2010). This is clearly observed in the case of
ASEAN as Member States allow strong agenda-setting power to the
Chair because each member also expects to take on the leadership rolein the near future (Suzuki, 2021).
Examples of how countries assuming the chairship have led agendas
within the organization abound. For example, Thailand suggested thefounding of the ASEAN-Japan Cybersecurity Capacity Building Centre
located in Thailand through the ASEAN Political and Security
Community.4 Under the chairship of the Lao PDR in 2016, the ASEAN
Summit declared plans to launch the Lao–Thailand–Malaysia–Singapore(LTMS) Power Integration Project.5 These cases illustrate the signiﬁcant
power of the ASEAN Chair driving the regional agenda.
One recent case that directly illustrates the agenda-setting power ofthe ASEAN Chair is ASEAN’s position on territorial disputes in the

ASEAN leadership and Chinese aid allocation 11

6‘China gives Cambodia aid and thanks for ASEAN help’, Reuters, 4 September 4,2012.

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South China Sea, a subject over which ASEAN Member States are divided. While Brunei, Malaysia, the Philippines, and Vietnam have territorial disputes with China, other Member States such as Cambodia,
the Lao PDR, Myanmar, and Thailand have no such territorial disputes and prioritize maintaining economic relations with China.
Indonesia viewed itself as a nonclaimant in the South China Sea territorial disputes. Although the exclusive economic zone of its Natuna
Islands overlaps China’s ‘nine-dashed line’, it was not subject to territorial disputes with China until the early 2010s. It was only in 2015
when Indonesia began to increasingly discuss the Natuna Islands issue
in the context of national security (Meyer et al., 2019).
When Indonesia chaired ASEAN’s Foreign Ministers’ Meeting(AMM) in 2011, the country insisted that territorial disputes should be
addressed bilaterally and use its agenda-setting power to deliberately
exclude the Philippines’ proposal to resolve the disputes at ASEAN. In
2012, as territorial disputes with China continued in the South China
Sea, the Philippines and Vietnam sought ASEAN support for their position. While most Member States generally supported the proposals
by the Philippines and Vietnam to express concern about China’s
actions through the AMM joint communique, Cambodia, which served
as Chair at the time and received substantial amounts of development
aid from China, declined to do so (Suzuki, 2021). Following this decision, some observers began to characterize Cambodia as a Chinese ‘client state/and China announced over $500 million in new loans andgrants to Cambodia’, noting ‘the part played by Cambodia as the chairof ASEAN to maintain good cooperation between China and
ASEAN’6 (Ciorciari, 2015).
The Philippines’ stance on the South China Sea softened upon
the election of President Rodrigo Duterte. The Philippines used theASEAN to promote its appeasement policy on China when it took the
ASEAN’s Chairship position in 2017. Although the arbitral tribunal
under the UN Convention on the Law of Sea (UNCLOS) ruled in favor of the Philippines, President Duterte decided not to raise the rulings during the ASEAN summit in 2017. Indeed, the arbitral ruling
was not put on the agenda at any of the ASEAN-related meetings in2017 (Shoji, 2019). Castro (2020, p. 348) notes, ‘By accepting Chinese

12 Taegyun Lim and Sung Eun Kim

7

While we cannot make any causal claim on the effect of the Philippines’ chairship role on
the amount of Chinese development finance, China made commitment to provide $464 million in development finance in 2017, while its average annual commitment was $74.1 million between 2012 and 2016.

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economic aid and rejecting former President Aquino’s confrontational
stance on the South China Sea dispute. President Duterte dismissed
the idea that any beneﬁts could come out from the arbitral ruling. [. . .]As summit chairperson, he made sure that the communique did not include any reference to Chinese island-building and weapons development on the reclaimed land features nor did it touch on the[Permanent Court of Arbitration] ruling that declared China’s excessive
claim in the South China Sea as a violation of international law.’
Similarly, Shoji (2019, p. 35) writes, ‘the behavior of the Philippines as
the ASEAN chair created a magnetic ﬁeld that drew the whole of
ASEAN strongly toward China’. This case is again illustrative of theagenda-setting power of the ASEAN Chair.7
These cases also illustrate why China would be incentivized to strategically allocate its development ﬁnance to the chairing state of
ASEAN. The consensus-based decision-making model effectively gives
each member veto power, meaning that China can inﬂuence any member to veto proposals that may go against China’s interests. However,
Member States would typically reserve their veto power only to crucial
cases because they also recognize the costs of nonagreement that would
result from its exercise of veto power. Thus, it can be more costly to induce member countries to veto negotiated proposals unless their interests are already well-aligned with China. From China’s standpoint, it
would be also in its strategic interests to exclude any potentially problematic issue from the agenda to begin with rather than waiting for theﬁnal negotiation outcome to be vetoed by one member state. Even if a
proposal is ‘successfully’ vetoed at the ﬁnal stage, the vetoed proposal
will likely receive much attention from policymakers from the region
and around the world and unavoidably reveal the tension between
China and the other ASEAN members, which can be a costly diplomatic challenge for China.
Drawing on the history of China’s strategic interactions with theASEAN Chair, we expect that China distributes more foreign aid tothe country that assumes the role of Chair. While China can increase
its aid allocation to all member countries to exert inﬂuence over theASEAN leadership and Chinese aid allocation 13

4 Data and empirical strategy
To test whether China allocates more foreign aid to an ASEAN
Member State when that state assumes leadership of ASEAN, we assemble annual time-series data capturing China’s development ﬁnanceto recipient countries between 2000 and 2017. Our data are drawn
from AidData’s Global Chinese Development Finance Dataset(Version 2.0) released in September 2021 (Custer et al., 2021). The
dataset includes detailed information on 13,427 Chinese development
ﬁnance projects worth $843 billion USD across 165 countries from2000 to 2017. This is an updated version from AidData’s Global
Chinese Ofﬁcial Finance Version 1.0, which captured 4,374 projects
worth $354.4 billion between 2000 and 2014.
Drawing on information on individual projects, we construct aggregate data on the amount of China’s ofﬁcial ﬁnancial ﬂows at the levelof recipients and commitment years. We also disaggregate development
ﬁnance into ODA and OOF. AidData 2.0 classiﬁes development ﬁnance projects as ODA-like projects when they meet three conditions:(i) the donor’s intent is development; (ii) they are concessional incharacter, with a grant element of at least 25%; and (iii) the recipient
qualiﬁes for ODA based on its income level. Projects are classiﬁed as
OOF-like if they are supported by ofﬁcial ﬁnance but do not meet all
three criteria. The rest of the projects are classiﬁed in the ‘Vague(Ofﬁcial Finance)’ category due to insufﬁciently detailed information
for classifying the projects in either category.
Figure 1 illustrates the regional distribution of Chinese development
ﬁnance by the classiﬁcation of ﬂow types. Between 2000 and 2017,24.6, 22.8, and 21.0% of Chinese aid went to Africa (206 billion USD),
America (192 billion USD), and Asia (excluding ASEAN, 176 billion

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region, all else equal, China will be more likely to allocate its ﬁnancial resources to buy inﬂuence over the ASEAN Chair within thebudget limit. As the ASEAN Chair is empowered to set the agenda
for the regional organization, the Chair’s position on relations with
China can be a key determinant of the overall direction of ASEAN–
China cooperation. Thus, China is better able to realize its foreign
policy goals vis-a-vis ASEAN if it provides more foreign aid to the
ASEAN Chair.

14 Taegyun Lim and Sung Eun Kim

USD), respectively.8 During this period, ASEAN countries received
8.2% of Chinese aid, worth over 69 billion USD. While ASEAN countries received a relatively small amount of aid compared to countries inAfrica during this period, Chinese development ﬁnance to ASEAN increased signiﬁcantly in recent years, indicating the region’s increasing
strategic importance to China (see Fig. A1 in the Supplementary appendix for the trend in Chinese aid allocation over time).
Another notable pattern in Fig. 1 is a low share of ODA (12%) in
Chinese development ﬁnance. This is very different from the pattern ofother major donors who provided most of its development ﬁnance via
ODA.9 For ASEAN, China provided 14% of its development ﬁnance
via ODA, 84% via OOF, and 2% via vague projects. For our analysis,
we examine the total amount of Chinese development ﬁnance commitments including all types of projects (ODA, OOF, and vague) as wellas the amount of Chinese development ﬁnance in the form of ODA
and OOF separately.
The dependent variable is the logged amount of China’s ofﬁcial ﬁnance commitment to ASEAN member countries. We consider all projects commitments in a given year, only excluding umbrella projects to
8

Since China does not systematically publish data on its development finance, we calculate
this aggregate number based on AidData 2.0. We include those projects formally approved,
active, and completed projects, excluding all canceled projects, suspended projects, andprojects that never reached the official commitment stage. We also exclude ‘"umbrella"’
agreement to avoid double counting.

9

During the same period, more than 73% of official financing from the United States, 90%from the UK, and 87% from France was provided via ODA, whereas the ratio of ODA to
OOF is more evenly distributed for Germany, Japan, and Canada (Custer et al., 2021: 12).

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Figure 1 China’s official finance across regions, by flow classification.

ASEAN leadership and Chinese aid allocation 15

10

One recent departure from this norm was Indonesia’s swapping of the Chairship with
Brunei in 2011. Indonesia requested for the swap due to its scheduled hosting of the Asia

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avoid double-counting. We construct three variables for all ﬂows, ODA,
and OOF. As the logarithm of 0 is undeﬁned, we add 1 to all observations before taking logarithm. The amount is considered 0 when there is
no record of relevant development ﬁnance project for a given recipient ina given year. As both donor and recipient governments have incentives
to publicly announce new development projects, the AidData is likely tocapture all major development projects allocated to recipient countries.
For this reason, the existing empirical studies utilizing AidData consider
observations with no record of aid projects to have received zero amountof aid (e.g. Dreher et al., 2018; Brazys and Vadlamannati, 2021; Dreher
et al., 2021). While we follow this approach in the main analysis, we additionally estimate the same models by treating those observations withno record as missing observations. Table A3 in the Supplementary appendix still shows that countries receive more aid from China when theytake the leadership position at the ASEAN.
Figure 2 presents the distribution of China’s ofﬁcial ﬁnance commitment to ASEAN member countries between 2000 and 2017. Indonesia
has been the largest recipient of Chinese development ﬁnance, followed by
Malaysia, Vietnam, and Lao PDR, while Brunei and Thailand have received the least amount of development ﬁnance. There is a signiﬁcant variation in the composition of development ﬁnance portfolio across member
countries. Indonesia, Myanmar, and Cambodia are the top three ODA
recipients, while Indonesia, Malaysia, and Vietnam are the top three OOF
recipients. As Singapore is a high-income country, it has not received any
development ﬁnance from China and is excluded from our analysis. While
Brunei is also a developed country and not eligible to receive ODA
according to OECD’s DAC categorizations, it has received OOF from
China during this period and is thus included in the analysis.
The independent variable is the rotating chairship within ASEAN,
which takes a value of 1 if a country is ASEAN Chair, and 0 otherwise. ASEAN has maintained rotating leadership since its foundation.
Since the current 10 Member States joined the organization, the leadership role has been shared relatively equally among them. The leadership has rotated based on the alphabetical order of member countries,
English names from 2001, with very few exceptions.10 Since the16 Taegyun Lim and Sung Eun Kim

variation in the chairship is largely uncorrelated with other politicaland economic determinants of ODA, we can exploit this variation totest the causal effects of assuming the chairship position on inﬂows ofChinese ODA. We present balance statistics in Table A2 in the
Supplementary appendix. We expect the chairship to be positively correlated with China’s ODA-like ﬂows, which are guided more by its foreign policy interests relative to OOF.
Before we turn to discuss our full statistical models and results, we
visually compare the amount of Chinese development ﬁnance commitment to ASEAN’s chair and nonchairs between 2000 and 2017 inFig. 3. For each year, we present the total commitment amount ofChinese development ﬁnance for the ASEAN Chair (dark gray) and its
average value for all nonchairing states (light gray). Except for a few
years when the chairship position was taken by developed countries
such as Brunei and Singapore, which do not generally receive development ﬁnance, the ﬁgure clearly demonstrates a chairship premium thatgives more aid to the ASEAN Chair relative to nonchairing states.
While the Philippines received a noticeably less amount of aid
Pacific Economic Co-operation meeting in 2013, which coincided with its scheduled chairship of ASEAN. This request was unanimously accepted by the other ASEAN Member
States. Another case to mention is Myanmar which was pressured to forfeit its turn atchairship due to its human rights controversy in 2005. Myanmar took the chairship position in 2014 after its political and economic reform. See Sun, Yun. ‘Myanmar’s ASEAN
Chairmanship: An Early Assessment’, Stimson Center, September 10, 2014 (Available athttps://www.stimson.org/2014/myanmars-asean- chairmanship-an-early-assessment/.)

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Figure 2 China’s official development finance toward ASEAN, 2000–17.

ASEAN leadership and Chinese aid allocation 17

compared to other countries in 2017, it should be noted that theamount of development ﬁnance increased by more than six times compared to the prior years as discussed in footnote 7. Overall, this pattern is on average consistent with our expectation of China rewarding
the ASEAN chair with development ﬁnance.
To further ensure that our ﬁndings are not driven by any other observable characteristics, we add a wide range of covariates that may inﬂuence China’s foreign aid allocation.11 We ﬁrst consider member
countries’ level of economic need by controlling for the logged valuesof Gross domestic product (GDP) per capita and the mortality rate forthose under 5.12 If Chinese aid projects are intended to promote development in recipient countries, China would allocate foreign aid tocountries in greater need of development assistance.
To control for other self-interested political factors China may consider when allocating foreign aid, we consider member countries’ nonpermanent UN Security Council (UNSC) status and their voting
behavior in the UNGA.13 Studies have noted that recipient countries

11

We do not include any time-invariant covariates (e.g. an indicator for English-speaking
countries) because we estimate models with country fixed effects as discussed below.

12

We use data from the World Development Indicators (https://data.worldbank.org/).

13

None of the ASEAN countries have recognized Taiwan, which has been a profound political factor in China’s allocation of aid. As there is no variation in this factor across
ASEAN member countries, we do not consider it in our analysis.

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Figure 3 China’s official development finance toward ASEAN by chairs and nonchairs,
2000–17.

18 Taegyun Lim and Sung Eun Kim

14

Data were drawn from the UN Comtrade database accessed on 24 July 2021.

15

The data on population size and natural resource rent are drawn from the World
Development Indicators (https://data, worldbank.org/)

16

We rely on information on aid commitments from the OECD Statistics (https://stats.oecd.
org/Index.aspx?DataSetCode=TABLE3A).

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with nonpermanent UNSC status receive more aid from Western
donors aiming to expand their inﬂuence in the decision-making process
at the UN (Kuziemko and Werker, 2006; Vreeland and Dreher, 2014;
Reynolds and Winters, 2016). China could punish these countries foraligning with Western donors by curtailing the amount of Chinese foreign aid they receive (Dreher et al., 2018). We also consider recipient
countries’ political alignment with China based on the recipient countries’ voting behavior in the UNGA and the extent of their alignment
with the United States (Bailey et al., 2017). We expect that countries
with greater voting similarity with China (the United States) receive
more (less) foreign aid from China.
We add several variables to measure China’s economic interests withregard to recipient countries. We ﬁrst consider China’s trade relationships with recipient countries, measured as the logged value of Chinese
trade with each recipient.14 Foreign aid could function as part of an
economic strategy to strengthen China’s trading relationship with recipient countries, with China giving more aid to recipient countries
that trade with it in larger volumes. The logged population size captures the potential market size of recipient countries. Foreign aid canraise positive awareness of the donor, which could lead citizens in recipient countries to purchase more of the donor’s goods in the future.
China could target larger countries from which it could expect to boost
sales of its products. Natural resource rent captures China’s intention
to gain greater access to countries with more natural resources.15
We include a variable on control of corruption to examine how thequality of governance in recipient countries affects China’s aid allocation. The data come from the Worldwide Governance Indicators(Kaufmann and Kraay, 2021). With this indicator, we can test whether
China indeed provides ‘rogue aid’ by supporting countries with morecorrupt regimes (Naim, 2007; Dreher and Fuchs, 2015).
Lastly, we consider whether ODA commitments from DAC donors
impact the allocation of Chinese aid.16 Previous studies have noted

ASEAN leadership and Chinese aid allocation 19

Yit ¼ b1  Chairit þ Xit þ ki þ ct þ lit(1)

where Yit is the logged amount of Chinese ofﬁcial ﬁnancial ﬂows to recipient country i in year t. We are interested in b1 , the coefﬁcient on
Chair, which would be positive and statistically signiﬁcant if China ﬁnancially rewards the country that assumes the position of ASEAN
Chair. The model includes X, a set of control variables for country i inyear t. Our model also includes k, a vector of country ﬁxed effects, inorder to control for country-speciﬁc factors related to China’s foreign
aid allocation. Since we are interested in how assuming the chairship
position changes the amount of foreign aid member countries receivefrom China, we employ ﬁxed effects models. The ﬁxed effects model
estimates the effect of taking the chairship position on the amount of
aid ﬂows, essentially controlling for the average amount of Chinese aid
a country received during the whole period under examination.17 The
model also includes c, a vector of year ﬁxed effects, to account for temporal trends in Chinese aid allocation over time.

5 Results
Table 1 presents the results. Model 1 depicts the total amount of ﬁnancial ﬂows, aggregating all types of development ﬁnance including
17

We additionally estimate models with alternative specifications. In Supplementary
Appendix Table A4, we present the results from the pooled OLD models without country
fixed effects. The main results remain robust to these alternative model specifications. In
Supplementary Appendix Table A5, we estimate the same models additionally controlling
for the amount of development finance received in the previous year. Controlling for theamount of aid received in the previous year, we still find a significant effect of taking thechairship position on Chinese aid. In this model, our observation starts from 2001 because
we cannot estimate the models from 2000 due to the lack of information on the level ofChinese development finance in 1999.

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that China competes with traditional donors in its expansion of inﬂuence through foreign aid policies (Sarma and Pais, 2008; Fuchs,
Nunnenkamp, and Ohler, 2015; Bueno de Mesquita and Smith, 2016).
Following the approach by Dreher et al. (2018), we control for potential competition among donors using the residuals of an ordinary leastsquares regression of logged ODA from all DAC donors on all righthand side variables.
With these variables, we estimate the following model:

20 Taegyun Lim and Sung Eun Kim

Variables

(1)

(2)
þ

(3)
**

3.950*

Chair

2.404

3.258

(1.401)(1.027)(1.877)GDP per capita (log)0.572

2.805

1.221

(4.446)(4.715)(7.416)0.060

0.003

0.151(0.063)(0.065)(0.126)

0.069

0.097

0.017

(0.109)(0.116)(0.164)2.367

3.303þ

4.010(2.084)(1.891)(3.119)UN voting with China

7.034*

2.295

9.148þ

(3.203)(3.186)(4.877)UN voting with the United States2.058

1.652

0.931

(3.358)(3.445)(5.790)0.173þ

0.120

0.234

(0.090)(0.106)(0.161)

Mortality under 5Affected from disasters (log)
UNSC

Trade with China (log)11.7403.400

6.937(28.527)(22.807)(38.652)

Natural resources rent

0.2010.179

0.407(0.173)(0.164)(0.253)Control of corruption

1.264

0.233

1.697(2.347)(2.602)(3.385)DAC OF (log, residuals)

1.574

1.295

1.894(1.031)(0.907)(1.580)Country FE

Yes

Yes

Yes

Year FE

Yes

Yes

Yes

Observations

162

162

162

Population (log)Robust standard errors in parentheses.
p < 0.10, *p < 0.05, **p < 0.01.

þODA, OOF, and other vague ofﬁcial ﬁnance. Models 2 and 3 disaggregate the ofﬁcial ﬁnancial ﬂows into ODA and OOF, respectively. ODA
is more concessional in nature, as it is designed to promote development in recipient countries. In contrast, OOF includes loans andDownloaded from https://academic.oup.com/irap/advance-article/doi/10.1093/irap/lcac003/6582968 by Seoul Science Library user on 24 January 2023

Table 1 ASEAN chairship and China’s development finance (logged amount, 2000–17)

ASEAN leadership and Chinese aid allocation 21

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export credits that are not concessional or that are not primarily
designed for economic development or welfare in the recipient country(Dreher et al., 2018).
The results suggest that assuming the ASEAN chairship is positively
associated with ofﬁcial ﬁnancial ﬂows received from China (Model 1).
We ﬁnd that the effects of the ASEAN chairship are positive and statistically signiﬁcant for both ODA (Model 2) and OOF (Model 3). Ourﬁndings show that foreign policy considerations have a meaningful effect on China’s allocation of foreign aid to Southeast Asian countries.
In particular, the results are consistent with our expectation that China
has a strategic incentive to increase development ﬁnance to the country
that assumes the ASEAN leadership position. Given the substantial inﬂuence by the ASEAN Chair in setting the overall direction of
ASEAN’s relationship with China, China can expect more policy concessions from the region if it provides more aid to the country serving
as ASEAN Chair.
It is notable that we ﬁnd the chairship premium for both ODA andOOF. This suggests that the position of the ASEAN Chair is a signiﬁcant political consideration for the allocation of Chinese development
ﬁnance to Southeast Asian countries. While Dreher et al.’s (2018)
analysis of Chinese aid to African countries ﬁnds that ODA ﬂows are
more subject to China’s foreign policy considerations than more commercially oriented OOF ﬂows, our analysis focused on Southeast Asian
countries ﬁnds that both ODA and OOF ﬂows are guided by the consideration about ASEAN’s leadership position. As OOF ﬂows are also
funded by government agencies as ODA ﬂows, the Chinese government
can exert inﬂuence to increase OOF ﬂows to the chairing country.
Indeed, OOF can be an important strategic instrument for buying
inﬂuence from receiving countries. OOF accounts for more than ODA
in the portfolio of Chinese development ﬁnance, as shown in Fig. 1.
O’Neill (2018) explains that China can maintain long-term inﬂuence
over the receiving state by providing loans (classiﬁed as OOF) thanconcessional aid (classiﬁed as ODA) because China can use loans as leverage over recipient countries. When recipient countries build closer
relationships with China, Beijing can then decide to gradually forgive
OOFs. For these reasons, China may use both ODA and OOF strategically to buy inﬂuence over the ASEAN Chair. While China increases
aid in concessional nature as a short-term incentive to the ASEAN

22 Taegyun Lim and Sung Eun Kim

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Chair, it also makes commitments to provide OOF in the forms ofloans which should be repaid, but which China can later decide to forgive depending on its relationship with recipient countries.
We next test for another theoretical possibility that China tries tobuy inﬂuence over the ASEAN Chair prior to serving its term or after
having served its term as the Chair. As the order of the chairship ispredetermined according to the alphabetical order, China knows in advance which country will assume the chairship in the next year andmay attempt to buy inﬂuence before the chairship term starts. At thesame time, it is also equally plausible that China may ‘reward’ thecountry after it serves the chairship position. Carter and Stone (2015)indeed found that the United States increased its aid to countries forvoting in line with the United States interests at the UNGA. This canbe applicable in the context of Chinese aid allocation in that China
may decide to ‘reward’ the Chair after its term.
We test for this possibility by including the lagged and the leadterms for the ASEAN Chair in Table A6 in the Supplementary appendix. We do not ﬁnd any signiﬁcant effects of the lead or the lagged variables of the ASEAN Chair. We ﬁnd that China does not allocate more
aid to recipient countries in a year prior to or after its chairship term.
This suggests that China strategically commits to increase its development ﬁnance during the chairship term. As China has limited resources
to allocate to development ﬁnance, it is in its strategic interests to ﬁnd
an optimal timing to increase its aid and China seems to have decided
to concentrate its resources to the incumbent chair instead of distributing resources to the prior and the next chairing countries. At the sametime, China can ‘reward’ the countries for serving Chinese interests after the term by utilizing its OOF commitments. It is plausible that
China provides loans to the chairing state and forgives its loans afterwards depending on the degree of policy concession made during theterm. This may explain why China does not necessarily increase newaid commitments after a recipient country serves its term.
Turning to other variables, we ﬁnd that serving as a nonpermanent
member of the UNSC is positively associated with receiving Chinese
foreign aid, although it is statistically signiﬁcant for explaining the pattern of ODA allocation. This is in contrast to the earlier ﬁndings thatanalyzed aid to countries in Africa, which show that China punishes
countries for serving in the UNSC, as this aligns such countries more

ASEAN leadership and Chinese aid allocation 23

6 Conclusion
As strategic competition between the United States and China has intensiﬁed, China has strived to expand its regional leadershipin Southeast Asia. Among the various diplomatic and economic tools
in its toolkit, development ﬁnance to Southeast Asian countries has
been a major economic instrument China has used to project its inﬂuence in the region.
In this research note, we have examined China’s strategic use of foreign aid to support the country serving as ASEAN Chair. Our analysis
of China’s foreign aid allocation to ASEAN member countries demonstrates that China increases its ODA- and OOF-like ﬂows to the country that assumes leadership of ASEAN. Our results suggest that in its
strategic use of foreign aid, China not only considers its bilateral relations with recipient countries, but also its relations with the region as a

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closely with Western donor countries (Dreher et al., 2018). In addition,
we ﬁnd that political alignment with China, measured using UNGA
voting patterns, is positively associated in explaining China’s aid allocation to Southeast Asian countries. The results suggest that China
rewards countries for voting in line with their interests with an increased amount of development ﬁnance, especially in the form of OOF.
As for other control variables, we ﬁnd that Chinese development ﬁnance to Southeast Asian countries does not necessarily go to thecountries with the greatest economic or development need. The coefﬁcient on Mortality under 5 is not statistically signiﬁcant in explaining
the amount of all ofﬁcial ﬂows and with ODA and OOF amounts
from China, indicating that countries in greater need do not necessarily
receive more development assistance from China, all else being equal.
Also, the coefﬁcient on GDP per capita (log) is not statistically signiﬁcant at the conventional level. We also ﬁnd that China does not necessarily provide more assistance to countries that are affected bydisasters. The results on the whole suggest that recipient countries, levelof need does not account for much of China’s foreign aid allocation.
Lastly, we also ﬁnd that Chinese aid tends to go to countries withpoor governance, as indicated by the negative coefﬁcient on Control ofcorruption, although statistically indistinguishable from 0. The ﬁndings
are in line with those from the analysis of recipient countries in Africa.

24 Taegyun Lim and Sung Eun Kim

Funding
This work was supported by the Ministry of Education of the Republicof Korea and the National Research Foundation of Korea (NRF2020S1A5A2A03045536).

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whole. Providing more support to the ASEAN Chair is an effective
strategy because the Chair has a substantial inﬂuence on the overall direction of ASEAN’s relations with China.
This research note makes an important contribution to the literature
on foreign aid in two ways. First, we demonstrate the importance ofconsidering the regional context in unraveling the strategic allocationof foreign aid. While previous studies have examined how donors consider their strategic interests, focusing on a few measures that apply
equally to different regions, such as voting similarity, our ﬁndings highlight the importance of considering regional contexts to better understand the motivations of donors’ allocation of aid. For instance,
countries’ recognition of Taiwan, one of the most profound determinants of China’s aid allocation, does not inﬂuence aid allocation within
Southeast Asia, since no ASEAN countries have recognized Taiwan.
Instead, our ﬁndings suggest that the aid allocation strategy for eachregion has its own unique logic. Our results suggest that greater attention be paid to the political factors tied to regional dynamics.
Second, our approach helps identify the causal effects of assuming
leadership of a regional organization on foreign aid receipt. Whileprevious studies have examined the effects of assuming various positions at international organizations (e.g. Kuziemko and Werker, 2006;
Vreeland and Dreher, 2014; Reynolds and Winters, 2016), our study is
one of the ﬁrst to examine whether a country’s role in a regional organization can also inﬂuence donors’ aid allocation decisions.
While our empirical ﬁndings pertain to ASEAN, we expect that asimilar pattern can be observed in other regional organizations, suchas the African Union. As regional organizations can play a central
role in shaping a region’s relations with countries outside of it, future
work should broaden the scope of this analysis by examining how
donors allocate aid to different Member States within regionalorganizations.

ASEAN leadership and Chinese aid allocation 25

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