Impact Of China-East Africa Trade Relation On The Industrial Growth In East African Countries

The trade relationship between China and East Africa countries plays a huge role in industrial and economic development in East African countries.This study aims to empirical analyze the impact of trade relations between East Africa and China on industrial growth in East African countries.The secondary panel data will cover 5 countries across the region spanning 27 years（1990-2017）.The main dependent variable will be the industrial value-added and the main independent variable will be the trade openness between East African countries and China.Other specific dependent variables will be manufacturing,medium and high tech industries.Control variables which also affect industrial growth such as foreign direct investment,education（human capital）,labor force,electricity output,credit to private sectors,infrastructure,foreign direct investment,and capital formation are included in the analysis.Estimation techniques deployed in the study are Ordinary Least Square（OLS）,Fixed Effects,System Generalized Method of Moments（GMM）which is a superior estimator explaining heterogeneity bias,Prais-Winsten model and Feasible Generalized Least Squares（FGLS）model which deals with serial autocorrelation,heteroskedasticity and cross-sectional dependence and finally panel Error Correction Model（ECM）using Pooled Mean Group（PMG）and the Dynamic Fixed Effects（DFE）.The results suggest that trade openness both exports and imports between East Africa countries and China has a positive and significant impact on industrial growth,manufacturing and technology industry in East Africa.This call for government and policymakers in these countries to take full advantage of this trade relationship and not lose sleep over the trade deficit these East Africa countries have with China because it is a good thing regardless.Therefore these countries should formulate open trade policies which will facilitate more trade relationship with China if they want to industrialize more for example by reducing tariffs and quotas of commodities coming from China.