Author: Xiaobing Wang, Adam Ozanne, Xin Hao.

There are currently two contrasting approaches towards aid policy in Africa: that followed by the West is well known for its conditionality and selectivity and focus on direct financial support, while the approach adopted by China eschews conditionality and concentrates on infrastructure building. The Chinese approach has been criticized for its failure to create direct employment and because, it is argued, its unconditionality hampers good governance in Africa. However, this paper argues that the West faces a dilemma in that governance and its improvements are endogenous to the economic development of a country. Making aid conditional upon governance therefore unduly penalizes countries at the bottom. The Chinese approach, in contrast, avoids this dilemma by directly targeting constraints to development; it may therefore be more effective in generating long-run growth, which may in turn foster good governance.