China’s bilateral swap agreements and foreign policy

We examine the foreign-policy implications of China’s expanding network of bilateral swap agreements (BSAs). BSAs provide a line of credit that governments can draw on during times of crisis. We suspect that entering a BSA with China can bring countries that have few outside options and have been left behind by the US-led economic order into closer alignment with China. Applying a Bayesian generalized synthetic control approach, we estimate both aggregate- and individual-level treatment effects for different sets of countries. We find that, on average, a country’s participation in BSAs with China increases its short-run foreign-policy alignment with China. Comparisons of country-level causal effects reveal that the short-run effect and a medium-run finding are driven by financially vulnerable countries and those supportive of China’s global leadership. The results suggest that the introduction of Chinese BSAs as part of the global financial safety net has political implications for international affairs.