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The impact of China's trade, aid and FDI on African economies

Derrick Anquanah Cudjoe (School of Economics and Management, Southeast University – Jiulonghu Campus, Nanjing, China)
He Yumei (School of Economics and Management, Southeast University – Jiulonghu Campus, Nanjing, China)
Hanhui Hu (School of Economics and Management, Southeast University – Jiulonghu Campus, Nanjing, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 9 November 2021

Issue publication date: 21 November 2023

677

Abstract

Purpose

This study examines the impact of China’s trade, aid and foreign direct investment (FDI) on the economic growth of Africa.

Design/methodology/approach

Our study covered 41 countries in Africa, cutting across the western, eastern, central, southern and northern sub-regions. The study adopted the dynamic system generalized method of moments (SGMM), feasible generalized least squares (FGLS) and Dumitrescu–Hurlin Panel Granger causality techniques for estimations.

Findings

Overall, FDI, trade and aid from China have a nonlinear relationship with Africa’s economic growth. The findings reveal a key novelty in that the marginal effect on real per capita GDP increases when China’s FDI interacts with the manufacturing sector in Africa. These findings are robust to long-run estimations.

Research limitations/implications

Given that we have examined the short-and long-run symbiotic effects of China’s FDI and Africa’s manufacturing sector and China’s aid and Africa’s manufacturing sector, more studies are warranted in this area, particularly to produce further empirical evidence of these findings. Moreover, future work could focus on investigating the country-specific effects of China’s trade, China’s FDI and China’s aid on real GDP per capita in each African country as our results reflect within-country elasticities.

Originality/value

This study provides new evidence on the impact of China’s trade, aid and FDI on the growth of African economies. To the best of our knowledge, this is the first study to empirically explore the long-run effects of China’s trade, FDI and aid on economic growth in African countries. This study also tests the claim of the displacement of Africa’s manufacturing industry by its Chinese counterparts.

Keywords

Acknowledgements

The authors gratefully acknowledge the financial support from the National Natural Science Foundation of China (No. 71873030). The Research of Mechanism, Path and Policy for “One Belt, One Road” Innovation to Attract Industrial Transfer, Transformation and High Quality Development in China.

Citation

Cudjoe, D.A., Yumei, H. and Hu, H. (2023), "The impact of China's trade, aid and FDI on African economies", International Journal of Emerging Markets, Vol. 18 No. 10, pp. 3528-3549. https://doi.org/10.1108/IJOEM-10-2020-1180

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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