Friends with money? a political-economic analysis of chinese foreign aid-induced tourism demand

From a political-economic perspective, this research examines the nexus between Chinese foreign aid and tourism demand in 138 recipient countries. Specifically, it investigates two mechanisms and their interplay: (1) an economic channel that entices an influx of international tourists through infrastructure development; and (2) a political channel that attracts Chinese tourists by diminishing political distance. A cross-country panel dataset on Chinese aid projects is analyzed. The results suggest that Chinese aid has a significant impact on Chinese tourists after a 1-year lag through the political channel, while the economic channel's effect on Chinese/other international tourists is not salient within 5 years. Significant long-run equilibrium relationships are found between aid and both tourist segments. The economic effect emerges in the long term, while the political effect fades out. This study provides a novel political-economic perspective for tourism research and presents new into China's soft power in tourism.