Foreign Aid and Recipient Countries' Participation in Global Value Chains: A Comparative Study Based on Chinese and US Aid

Participation in global value chains (GVCs) offers new opportunities for developing countries' economic development. Foreign aid may contribute to the participation of recipient countries in GVCs. However, due to various differences, foreign aid from different donors may have different impacts on recipient countries' GVC participation. Using relevant data, we comparatively examine the impact of Chinese and U.S. aid on recipient countries' GVC participation. We find that Chinese aid contributes to the GVC participation of recipient countries, while U.S. aid has no such effect. This is caused by differences in the allocation of aid sectoral between China and the U.S., as well as differences in the technical distance between the U.S.-China and the recipient countries.