Navigating the Minefield: De-Risking Strategies in Chinese Aid in Response to Security Threats

This paper argues that Chinese aid adopts a deliberate de-risking strategy in response to heightened security salience: implementers re-site projects away from identity-salient locations, and policy banks soften financing features most likely to trigger backlash. Leveraging the July 5, 2009 Urumqi riot as an exogenous shock, I combine geocoded Chinese aid data with mosque locations and estimate difference-in-differences models alongside a local differencein-discontinuities design. Post-2009, projects in Muslim-majority countries proximate to Xinjiang are 9–17 percentage points less likely to be placed near mosques (within 1–10 km). In parallel, policy banks reduce collateralization for mosque-proximate projects in proximate countries, consistent with curbing “debt-trap” narratives at religiously salient sites. Protest exposure around project locations also declines significantly in countries proximate to Xinjiang after 2009. Together, these patterns show that location and finance adjust jointly to mitigate risk.