Chinese infrastructure lending in Africa and participation in global value chains

Abstract

We explore the extent to which Chinese lending to African countries promotes participation in Global Value Chains (GVC). Using loan-level data on Chinese and World Bank lending to 37 African countries between 2000 and 2018 we find that in contrast to World Bank lending, Chinese lending is associated positively with an increased GVC participation. This association is driven by infrastructure lending, which is likely to reduce trade costs, making it easier to participate in GVCs. This increased GVC participation is persistent over time and concentrated on the downstream sectors and, thus, is likely to contribute to export and productivity growth.