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China's Impact on Africa - the Role of Trade, FDI and Aid

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  • Busse, Matthias
  • Erdogan, Ceren
  • Mühlen, Henning

Abstract

We investigate the impact of Chinese activities in sub-Saharan African countries with respect to the growth performance of economies in that region. Using a Solow-type growth model and panel data for the period 1991 to 2011, we find that African economies that export natural resources have benefited from positive terms-of-trade effects. In addition, there is evidence for displacement effects of African firms due to competition from China. Chinese foreign investment and aid in Africa does not have an impact on growth.

Suggested Citation

  • Busse, Matthias & Erdogan, Ceren & Mühlen, Henning, 2014. "China's Impact on Africa - the Role of Trade, FDI and Aid," IEE Working Papers 206, Ruhr University Bochum, Institute of Development Research and Development Policy (IEE).
    • Handle: RePEc:zbw:ieewps:206
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    2. Marvellous Ngundu & Nicholas Ngepah, 2020. "Comparative Effects of Foreign Direct Investment from China and Other Sources on Africa’s Economic Growth," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(4), pages 382-408, November.
    3. Lindlacher Valentin & Gustav Pirich, 2024. "The Impact of China’s “Stadium Diplomacy” on Local Economic Development in Sub-Saharan Africa," CESifo Working Paper Series 10893, CESifo.
    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. Liu, Ailan & Tang, Bo, 2018. "US and China aid to Africa: Impact on the donor-recipient trade relations," China Economic Review, Elsevier, vol. 48(C), pages 46-65.
    6. Mullings, Robert & Mahabir, Aruneema, 2018. "Growth by Destination: The Role of Trade in Africa’s Recent Growth Episode," World Development, Elsevier, vol. 102(C), pages 243-261.
    7. Njangang, Henri & Nawo, Larissa, 2018. "Relevance of governance quality on the effect of foreign direct investment on economic growth: new evidence from African countries," MPRA Paper 90136, University Library of Munich, Germany.
    8. Lisa Chauvet & Marin Ferry, 2023. "L’efficacité de l’aide : quelles évolutions de la littérature depuis deux décennies ? WP329," Working Papers hal-04141543, HAL.
    9. Awad, Atif & Albaity, Mohamed, 2022. "ICT and economic growth in Sub-Saharan Africa: Transmission channels and effects," Telecommunications Policy, Elsevier, vol. 46(8).
    10. Semanur Soyyiğit & Murat Nişanci, 2021. "Examination of Chinese "Chopsticks" Mercantilist Policies in Africa," Politická ekonomie, Prague University of Economics and Business, vol. 2021(1), pages 99-134.
    11. Odd-Helge Fjeldstad & Ivar Kolstad & Arne Wiig, 2018. "Most people are not economists: Citizen preferences for corporate taxation," CMI Working Papers 11, CMI (Chr. Michelsen Institute), Bergen, Norway.
    12. Jacopo Timini & Ayman El-Dahrawy Sánchez-Albornoz, 2019. "The impact of China on Latin America: trade and foreign direct investment channels," Economic Bulletin, Banco de España, issue JUN.
    13. Dinkneh Gebre Borojo & Yushi Jiang, 2016. "The Impact of Africa-China Trade Openness on Technology Transfer and Economic Growth for Africa: A Dynamic Panel Data Approach," Annals of Economics and Finance, Society for AEF, vol. 17(2), pages 403-431, November.
    14. J. Alexander Nuetah & Xian Xin, 2019. "Has China’s Investment Pattern in Sub-Saharan Africa Been Driven by Natural Resource Quest?," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 215-231, September.
    15. 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.

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    More about this item

    Keywords

    China; Sub-Saharan Africa; Trade; FDI; Foreign aid; Economic growth; South-south cooperation;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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