Empirical Research On Direct Investment And Trade In Africa

As we all know, China's overseas direct investment initiated late. However, in order to expand the demand of import and export, China's overseas direct investment has been developing gradually with the rapid growth of external trade. Therefore, China's overseas direct investment has a close relation to the business. In the present, comparing to the total amount of China's import and export, it is relatively lower for overseas direct investment of billions of dollars.In the field of China's overseas direct investment, Asia and Latin America, two largest destinations for China's outward FDI, hold the important status, while Africa holds a lower one. But with the continuous development of China's economy and a long-lasting trade complementarities between China and Africa, China has increased rapidly the overseas direct investment to Africa, which is not only represented on the annual investment flow and stocking but also on the expansion of investment field and scope.What's more, given the influence of financial crisis, bilateral trade between China and Africa showed a rising trend and volume of trade was up to 100 billion dollars in 2008.In the former documents, we can find that complementary function of direct foreign trade to mother-country's trade usually is larger than that of substitution. With measuring model, this thesis researches the relationship between China's overseas direct investment to Africa and the trade at the aspect of empirical analysis, and probes preliminarily the great significance of China's direct investment to the development of China's trade as well as the whole national economy.At the first, this paper will introduce the theory and empirical research results of ODI effects on country trade, including investment and trade replaceable theory, the product life cycle theory and so on; then analyze the trade effects of China's foreign investment, especially in Africa as well as give the summary of empirical studies. As for the aspects of theory, it discusses the main reasons and influencing factors of trade complementary and replaceable role. While as for aspects of empirical study, it mainly introduces the former research results about China's direct investment to Africa and trade relationship with Africa. In Empirical Analysis, we choose the gravitational model and ten African countries whose trade and investment with China are close, and use method of panel data regression. As to the result, the effects of ODI in Africa on China's exports and imports are both created. Finally, we analysis the causes for the creation effects, and put forward recommended policy for direct investment to Africa in accordance with the current economic situation.