Research On The Effect Of China-africa Investment And Trade On The Economic Growth And Sustainability Of Africa

Promoting international trade and foreign direct investment in developing countries like Africa are important in order to fill the technological gap and improve energy efficiency.In this regard,the advanced investment and capital importation from China is playing significant role in many African countries.China has become the major consumer of African commodities and a leading investor in many African countries.Recently,China has emerged as Africa’s largest economic partner in terms of international trade,foreign direct investment（FDI）inflows and other development cooperation.The strong Sino-African economic relation in terms of international trade and investment has impact and implications on technological spillover and energy efficiency of African countries.Despite expansion of trade and FDI relations between China and African countries,there is lack of empirical evidence that investigate how technological spillovers effects of trade and FDI influences energy intensity in Africa.Firstly,the study tried to investigate the effects of China’s technological spillovers through imports and FDI on energy intensity in Africa.It employed a new framework to measure the technology spillovers of trade and FDI and a dynamic estimation methods.The study uses fixed effects,fixed effects with instrumental variable and dynamic system GMM estimation methods.Moreover,dynamic panel threshold model were employed.The fixed effects and system GMM estimation results demonstrate that China’s technology spillovers through import and FDI has significantly improve energy intensity in Africa.The results are consistent with different specifications and sample groups.The results reveal that technological transfer from China significantly improved energy efficiency in Africa.Additionally,energy price is found to be negatively associated with energy intensity,while economic growth and industrialization has positive effect.The dynamic threshold estimation results suggest that the absorptive ability of countries matter for technology spillovers effects of FDI and imports on energy intensity.The results shows that African countries that can achieve sufficient absorptive capacity can benefits largely from imports and FDI spillovers.The result implies that there is need to increase absorptive capacity of countries in order to maximize the benefits of technology spillovers of trade and investment.In this regard,promotion of higher education and skills development programs are important to enable firms to imitate and adopt imported energy efficiency technologies from China.The study also suggests that governments and policy makers in Africa need to reduce subsidies on energy services,which will have the tendency to reduce energy intensity and promote energy efficiency.Additionally,attempts should also be made to shift from energy intensive economic growth and industrialization strategies to alternative structural green growth strategies.Secondly,the study empirically examines the technological spillover effects of Sino-African trade relation on CO₂ emissions intensity in Africa.It tried to investigate how bilateral trade relations and other determinant factors affect carbon emissions intensity using panel data from 1992 to 2015.In this case,the study employed panel quantile regression method in order to show the heterogeneous effects of trade and other determinant factors on carbon emissions intensity.The estimation results indicate that bilateral trade relations with China have heterogeneous effect on carbon emissions intensity in African countries.Specifically,imports are negatively and significantly related with carbon intensity.The results are consistent across various specifications and quantile distributions.The results show that machineries and advanced technologies imported from China are relatively energy efficient and contributing for carbon reductions.Additionally the quantile regression reveals that the effects of exports on CO2 emissions intensity are heterogeneous and significantly varies across quantile distribution points.Moreover,economic growth,urbanization and energy intensity are positively associated with CO₂ emissions intensity,whereas foreign direct investment significantly reduces carbon emissions.The results confirm the environmental Kuznets curve hypothesis of income and Halo effect hypothesis of trade and investment in most of the specifications.A further analysis using sectoral carbon emissions shows that the impacts of trade and other determinant factors are heterogeneous and varies with type of emission sources.The policy recommendation of this study is that governments and policy makers in Africa needs to focus on energy efficiency and maximize trade and investment benefits which will enhance carbon efficiency and environmental sustainability.China and African’s should continue to promote and strength their bilateral trade relations and more emphasis should be given to trading qualities,low carbon technologies and environmentally-friendly value chains.In this case,the belt and road initiatives（BRI）provide a great opportunity for green developments and high tech investments.Policy incentives should be adopted to encourage the development of low-carbon and high-tech industries.Thirdly,this thesis empirically investigates the contribution of Sino-African economic relations on renewable energy transition in Africa.It tried to examine how international trade and investment relations with China affect renewable energy consumption in Africa.Two indicators of renewable energy transition are used in the study.These are the percentage of renewable energy consumption out of total energy consumptions and the percentage of population access to clean energy and technologies.The Panel Corrected Standard Errors（PCSE）and Fully Modified Ordinary Least Squares（FMOLS）estimation methods are adopted.Additionally,panel causality tests are performed to show the long run directional relationship among the variables.The estimated results revealed that both imports and investment inflows from China had positively associated with renewable energy transition in Africa.The results further show that economic growth and domestic financial marker developments are found be ideal in promoting renewable energy consumption.The panel causality results also indicate that there is significant bidirectional causalities among renewable energy consumption,FDI inflows from China and economic growth.The results suggests the importance of Africa’s economic cooperation with China in terms of benefiting from renewable energy technologies,which are expected to expand under belt and road initiatives（BRI）in coming years.African governments need to adopt appropriate incentives to encourage Chinese investments in different sectors of renewable energy sources,such as solar,wind and hydro energy power sectors.Besides,sound macroeconomic policies which promote economic growth,stock market expansions and promotion of credit facilities are equally important in order to expand renewable energy investments.Finally,the last part of the thesis examines the effect of China-Africa cooperation on economic growth and industrial development of African countries.The finding of the study reveal that trade links with China and investment inflows from China had significantly improved per capita growth rate of GDP in African countries.The results further show that China’s economic cooperation in the form of higher trade and investment flows can invariably play a critical role in promoting industrialization in Africa.It reveals that capital investment from China is found to be a stimulant of industrialization process in Africa.The results are robust across the various specifications and sample groups.Additionally,energy supply is found to be a critical factor for industrial growth performance of countries.The finding recommends that governments and policy makers in African countries must prioritize trade and investment relations with China which has significant impact on growth and individualization.In this regard,advanced manufacturing sector investment should be prioritized in order to expand capital stock and industrial productivity of the continent.Finally,further development and expansion of energy supply infrastructures are critically important.