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The effects of China's aid and trade on its ODI in African countries

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  • Dong, Yan
  • Fan, Cijun

Abstract

This paper examines the effects of China's aid and trade on its overseas direct investment (ODI) in 50 African countries from 2002 to 2013. We find that exports of natural resources significantly increase China's ODI; this suggests that China's ODI is “vertical.” Despite this, the relationship between aid and ODI varies according to different types of aid. Aid invested in social and economic infrastructure raises ODI, and the marginal effect diminishes as aid increases. Aid invested in the productive sector and the government, however, negatively impacts ODI, thereby suggesting that China's aid will crowd out its investment in these countries.

Suggested Citation

  • Dong, Yan & Fan, Cijun, 2017. "The effects of China's aid and trade on its ODI in African countries," Emerging Markets Review, Elsevier, vol. 33(C), pages 1-18.
    • Handle: RePEc:eee:ememar:v:33:y:2017:i:c:p:1-18
    DOI: 10.1016/j.ememar.2017.09.003
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    Cited by:

    1. Fon, Roger & Alon, Ilan, 2022. "Governance, foreign aid, and Chinese foreign direct investment," LSE Research Online Documents on Economics 113678, London School of Economics and Political Science, LSE Library.
    2. Batten, Jonathan A. & Kinateder, Harald & Szilagyi, Peter G. & Wagner, Niklas F., 2019. "Time-varying energy and stock market integration in Asia," Energy Economics, Elsevier, vol. 80(C), pages 777-792.
    3. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Wage Inequality in the manufacturing sector of recipient-countries," EconStor Preprints 213936, ZBW - Leibniz Information Centre for Economics.
    4. Coletta Frenzel Baudisch, 2019. "Chinese Capital Flows to African Economies and Real Bilateral Exchange Rates," MAGKS Papers on Economics 201910, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Alice Nicole Sindzingre, 2021. "Economic Relationships Between Sub-Saharan Africa and China: An Alternative Theoretical and Policy Paradigm?," Post-Print halshs-03625159, HAL.

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    More about this item

    Keywords

    Aid; Overseas direct investment (ODI); Trade; Africa;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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