ECONOMIC INVESTMENT, CORRUPTION, FRAGILITY, AND FREEDOM: HOW THE PRC LEVERAGES STATES’ PRE-EXISTING INTERNAL CONDITIONS TO GAIN ADVANTAGE

Abstract

As the PRC has drastically increased its level of foreign direct investment (FDI) in the developing and developed worlds, a growing number of observers claim the PRC engages in “neocolonialism” and “debt-trap diplomacy.” Currently, the U.S. government lacks indicator patterns that could predict areas where the PRC will attempt to exploit investment to gain strategic concessions. Through the use of statistical analysis and the combination of multiple open-source datasets, this thesis attempts to answer the question: How does the PRC’s use of economic investment exploit pre-existing levels of corruption, fragility, and democracy to gain strategic concessions? We identify six criteria exercising substantial influence over the amount of Chinese investment flowing into a given country between the years 2006 to 2015. These criteria, ranging from a state’s fragility score, democracy rating, and rates of perceived corruption, demonstrated statistically significant effects and foretold rates of Chinese investment globally. We recommend U.S. diplomatic, economic, and defense officials use this research to more accurately predict which countries are susceptible to PRC strategic concessions and to systematically categorize countries on a spectrum ranging from “high leverage” to “low leverage” states.