ADAPTED fellow and PhD IDS alumni Muhammad Saleh has published a new article based on his dissertation in the renowned journal International Review of Economics and Finance titled "Flying dragon in the Eagle's sky: Is Chinese and US aid a vanguard of their FDI flows to the developing world?"

In his paper, Muhammad investigates whether foreign aid from China and the United States facilitates foreign direct investment (FDI) from the same donor country in developing economies—the ‘vanguard effect’. His paper examines corresponding and competing aid flows. Based on donor and recipient specific costs and benefits, it introduces an aid identification model that conceptualizes aid allocation as a simultaneous optimization problem. Empirical results reveal that while Chinese aid shows positive, though inconsistent, association with Chinese FDI, this pattern is less evident for the US. Notably, higher US aid correlates with increased Chinese FDI, but higher Chinese aid does not lead to more US FDI. Muhammad's findings suggest recipient countries may face a trade-off between the Eagle and the Dragon: attracting US FDI may require openness, stronger institutions, and export growth, while courting Chinese FDI in the presence of Chinese aid may come at the expense of these very factors.

Saleh, Muhammad (2026): Flying dragon in the Eagle's sky: Is Chinese and US aid a vanguard of their FDI flows to the developing world?. International Review of Economics and Finance, Vol. 108, 105188: https://doi.org/10.1016/j.iref.2026.105188.