Determinants of Chinese and Western-backed development finance in the global electricity sector

Despite China’s recent rise as a major public finance provider for theelectricity sector of the developing world, there is limited knowl-edge on the determinants of the allocation of its portfolio. Buildingon a newly constructed unit-level dataset with global investmentsinto power plant infrastructure from Chinese development institu-tions (CDIs) and multilateral development banks (MDBs), a two-part model (1999–2018), and 39 primary interviews, we investigatethe influence of variables related to self-interest, need, and merit.We find that countries politically aligned with China on human rightsand with low control of corruption and institutional quality scoresare more likely to receive CDI finance. In contrast to common claims,resource endowments do not play an important role. Furthermore,over time, CDIs move closer to the MDB portfolio, increasingly sup-porting plants in wealthier countries with lower investment risks andhigher electrification rates—a trend that might aggravate thealready severe investment gaps for low-income countries.