Empirical Analysis of Trade Effects of China’s Outward FDI to Africa

This paper tries to re-examine both positive and negative effects of trade and China’s outward foreign direct investment (FDI) to Africa. We focus on the achievement of China’s outward FDI to Africa and whether the trade impacts of China on Africa are positive by making regression equations of panel data of the major African countries which have the most stock of China’s outward FDI. Due to the results, we find that trade creation exists rather than trade substitution if China’s outward FDI increases. Therefore, China’s increased engagement with Africa could generate important gains for African economies. Trade openness of host country and economic scales of both traders have positive impacts on the export of both sides. Additionally, the influence of China’s outward FDI is limited and the development of African countries mostly depend on the growth of their own economies. In terms of policy implications, these results clearly demonstrate the opportunities and challenges that African countries are facing when dealing with a partner like China.