Research On The Relationship Between China’s Direct Investment To South Africa And Trade

Since China established formal diplomatic relations with South Africa, China and South Africa have presented rapid and healthy development of bilateral relations, carried on deepening and expending cooperation constantly in all areas, and become each other’s most important economic and trade partners.On the one hand, since the reform and opening up, China’s foreign trade showed rapid growth, and in2013, China overtook the United States as the world’s largest trading nation, meanwhile, trade volume between China and South Africa have been rising, as of2013, China remains the largest trading partner of South Africa in the four consecutive years. However, there still exist lots of issues between China’s trade with South Africa, such as the long-term deficit, irrational trade structure and increasing trade friction and so on. On the other hand, since2002, China’s foreign direct investment has a very fast growth. According to the2012Statistical Bulletin of China’s foreign direct investment, China’s foreign direct investment flows have achieved growth for10consecutive years, the average annual growth rate from2002to2012reached41.6%. In the meantime, China’s direct investment stock in South Africa is also growing, as of the end of2012, reaching this new summit4.77507billion U.S. dollars. But due to the late start of China’s foreign direct investment, the total stock of China’s direct investment in South Africa is not large, accounting for only3.7%of the total stock of foreign investment in South Africa. Thus, the role of China’s direct investment in South Africa and China’s trade with South in the trade and economic activities is gradually converted:Chinese direct investment in South Africa is not only facing a variety of challenges, but also tremendous growth potential while development of bilateral trade encountered all kinds of bottlenecks.This article mainly adopted the methods of dynamic analysis, comparative analysis, quantitative analysis and empirical analysis to describe the development overview of China’s economic and trade with South Africa(SA) and study the relationship between China’s FDI to SA and China’s trade with SA. At last, the article concluded with some targeted policy recommendations, which has some theoretical and practical significance. This paper was divided into five chapters, the specific content framework are as follows:The first chapter consists of research background, research significance, literature review, research innovation, research methods and the disadvantages of this paper.The second chapter mainly demonstrated the development overview of China’s direct investment in South Africa. Firstly, it analyzed the overall status of China’s direct investment in SA according to the data of China’s FDI stock and flows in South Africa stock; then, it showed the the distribution of Chinese investors’FDI in SA; Subsequently, it analyzed the main problems that faced the China’s FDI to SA and their respective causes. The main conclusions are as follows:China’s direct investment in SA has not been in full swing, especially investment in the financial sector, which is still in the exploratory stage; additionally, Chinese investors still faces many uncertainties during the process of investing in SA, such as the South African investment relevant laws stringency and instability, huge cultural differences, the lack of qualified staff in SA and so on.The third chapter chiefly analyzes the development profiles of the bilateral trade between China and S A. This chapter, firstly, stated the general trend of the bilateral trade basing on the trade data from1995to2013, then studied the trade commodity structure. Finally, the problems existing in trade and their corresponding reasons were analyzed. Below are the main conclusions of this chapter:total trade volume between China and SA is growing, and the trade deficit became larger and larger due to the reason that import growth was far greater than the export growth, which caused the serious trade imbalance; Besides, South Africa bilateral trade structures are highly complementary, but there is the problem of irrational trade commodity structure; In addition, Chinese companies also face the difficulties including South Africa’s frequent use of anti-dumping measures, trade barriers and restrictions, and other trade-related laws and regulations, etc.Chapter IV, from both a theoretical and empirical perspective, researched the relationship between China’s direct investment and trade in South Africa. Firstly, the theoretical part, from an investment point of view of the investment types and motivation, analyzed the relationship between investment and trade; then, the empirical part, basing on related investment and trade data, had conducted ADF stationary test, Johansen co-integration test and Granger causality test through Eviews6.0software, leading to some conclusions, and then the empirical results were analyzed. The main empirical conclusion:changes of China’s direct investment flows in SA and changes in Chinese exports to S A are mutual causality, the causality relationship between changes of China’s direct investment flows in SA and changes in Chinese imports from SA is not quite specific, China’s direct investment stock changes in SA and China inventory changes either in Chinese exports to SA or in imports from SA have no significant causal relationship to each other.The fifth chapter is the main conclusions and recommendations part of this article. The first section, extracted the main conclusions from the full text. From the perspective of investment and trade’s mutual promotion and common development, Section two, provided some specific policy recommendations.In terms of investment, it proposed the Chinese investors to broaden investment areas to SA, focus on SA local blacks staff training, keep flexible response to instability in the SA investment-related laws and regulations, and expand investment cooperation the South African local businesses; with respect to trade, it recommended China-related companies to broaden the field of trade, improve trade structure, take flexible actions to tackle the limitations and changes in SA’s trade-related laws and regulations, and actively respond to trade friction and anti-dumping investigations, and so on.