What Brings China to Africa? An Analysis of Market Size, Natural Resource Availability and Macroeconomic Risk

Abstract

This study applies the fixed effects vector decomposition procedure on a panel of 38 African countries to analyze factors that determine China's trade engagement with African countries. Results show that China's trade engagement with Africa is driven mainly by African countries' market size, natural resource availability, and bilateral trade cooperation with China. Macroeconomic and infrastructural risk factors in African countries do not seem to be major considerations in China's trade engagement with Africa. These findings highlight key factors that should be at the core of regional and international level discussions on China-Africa trade strategy and policy.