Cofinancing and Infrastructure Project Outcomes in Chinese Lending and Overseas Development Finance
Yangsiyu Lu (PSE)
Cofinancing from government agencies, development banks and private actors is acknowledged as an important tool to bridge the finance gap in developing countries, but relatively little is known about outcomes for cofinanced projects. To fill this void, we explore the role of cofinancing in shaping Chinese lending and overseas development finance infrastructure projects in terms of implementation outcomes and environmental performance. Our study shows that cofinancing correlates with higher infrastructure project completion rates, as cofinanced projects are 3.3-7.0 percentage points less likely to be cancelled or suspended than non-cofinanced ones. We also find that cofinancing with certain partners suggests specific benefits. Cofinancing with partners from the recipient country is associated with more localized implementation, whereas cofinancing with international partners has demonstrated improved environmental performance, with a 2.7 percent lower carbon dioxide emissions intensity and a 0.42 standard deviation decrease in biodiversity risks. The results suggest that cofinancing can be an effective tool to enhance infrastructure project success and achieve greater sustainable performance in Chinese lending and overseas development finance , highlighting the importance of a collaborative approach to developing infrastructure projects in the Global South.