China’s FDI Inflows In Africa, China-africa Trade And Their Impacts On Economic Growth In Africa

This thesis empirically examines the linkages between China’s FDI inflows in Africa and China-Africa bilateral trade; as well as the joint impacts of the above factors on economic growth andemployment in Africa. Using datasets from a selection of African countries over1990-2012, weemployed both the static and the dynamic panel techniques in STATA first to evaluate the nexusbetween China’s Foreign Direct Investment (FDI) inflows in Africa and China’s exports andimports trade with Africa. Next, we examined their joint effects as determinants of hostcountries’ GDP growth, real per capita GDP growth as well as on host countries’ employment.To do this, we structured the study around four major axes. First, we engaged in a prior empiricalreview of determinants of China’s FDI inflows in Africa, focussing on the effects of China’sexports to and imports from Africa, turnover of China’s economic cooperation with Africa, theFOCAC platform and host countries’ endowments in natural resources. All those variables showa significantly positive effect on China’s FDI inflows in Africa, except for China’s exports toAfrica. Secondly, we examined the determinants of China’s exports to Africa laying an emphasison China’s FDI inflows, total amount of China’s contracted projects in host countries, totalamount of China’s labour cooperation with host countries, growth of value added in themanufacturing sector in China as well as credit facilities available for private sector in China. Wefound that China’s FDI flows into Africa have a positive effect on China’s exports to Africa,jointly with positive effects from other factors cited above; except for credit facilities to privatesector in China. Moreover, among other control variables, we estimated the roles of China’s FDIinflows in Africa and host countries natural resources endowments as determinants of China’simports from Africa. We found that China’s FDI inflows in Africa and host countries’ naturalresources endowments have been active drivers for China’s imports from Africa. There is strongevidence of complementarities between China’s FDI and trade with Africa, these vertical FDImostly have an upstream resource-seeking or downstream export-servicing orientation. Thirdly,we examined the roles of China’s FDI inflows in Africa, together with China’s exports to Africaand China’s imports from Africa on economic growth in host countries through their jointimpacts on GDP growth and real per capita GDP growth. We found that part of observedincrease in African countries GDP growth since2003is due to China’s occurrence as a player onthe African economic stage. Besides, combined with China’s FDI inflows in Africa, China’simports from Africa have been positively affecting real per capita GDP in Africa, while China’sexports to Africa on the contrary proved to be a negative factor for real per capita GDP growth.Finally, we found strongly positive joint effects of both China’s FDI and China’s imports fromAfrica on employment in host countries. On the contrary, natural resources endowments have ahindering effect on employment in Africa while exports from China have no impact onemployment in Africa.