Containing China’s rising power in international organizations: earmarked funding and influence in multilateral development banks

Abstract What explains the rapid rise of earmarked multilateral development aid in the past two decades and the variation in its use among different donors? While existing literature suggests that political benefits that accrue to individual donors or recipient needs drive earmarking, these studies do not fully account for the notable increase in earmarked aid at the beginning of the new millennium. We argue that this trend can be attributed to an additional political benefit to earmarking from governments’ perspective: i.e., containing the rise of China’s influence in international development organizations. China tends to diverge from traditional donors’ development priorities; hence, as China’s formal influence in these organizations grows, so does the potential for China to influence how, when and where international organizations’ resources are allocated. In this context, donor governments may choose to earmark their multilateral contributions as a strategy to mitigate China’s influence while still enjoying the benefits of delegation to international development organizations. Using the Earmarked Funding Dataset, we find that increases in China’s contributions to multilateral development banks from 2000 to 2020 are associated with greater earmarking stringency of contributions from countries whose foreign policy preferences diverge from those of China.