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The rapid rise of China as an international lender creates concerns at the world level on both geopolitical and economic grounds. There seems to be a clear pattern in China development Aid financing in EMEs: via sovereign debt borrowing until 2000, via project-financing (mostly in infrastructure) with the BRI. This paper contributes to a broader understanding of how China lends and which are the implications of its strategy. To do so, we first provide evidence of the new trends in China's lending and in particular on the shift in development aid financing procedures in EMEs. We then build a state-of-the-art quantitative economic model to rationalize these facts focusing on the choice between project financing and government borrowing. We then use the model to build hypothetical scenarios, which highlight and disentangle the role of factors as the development stage of a country; local investment capabilities; government fiscal space; and/or lenders' preferences/project riskiness evaluation.
