Chinese Development Finance and Greenhouse Gas Emissions: Political Regimes and the Heterogeneous Environmental Effects

This study examines the environmental consequences of Chinese development finance.Despite the growing volume of studies on the economic and political determinants of Chinese aid, relatively little attention has been paid to its environmental consequences.Given that Chinese development finance typically lacks the strict environmental conditionality characteristic of Western aid, we argue that the recipient's domestic political institutions-specifically the level of democracy-serve as the primary filter determining the environmental sustainability of these projects.Using cross-national panel data covering 118 developing countries from 2001 to 2022, we show that Chinese development finance does not exert a uniform effect on greenhouse gas (GHG) emissions across all recipient countries.Rather, its association with higher emissions is concentrated primarily in authoritarian contexts, where institutional checks on environmentally harmful projects are weaker.In democratic regimes, by contrast, such adverse environmental effects are substantially mitigated.These findings underscore the conditional nature of Chinese aid's environmental impact and highlight the importance of domestic political institutions in shaping whether external finance contributes to environmental degradation.