Research On The Influence Of China’s OFDI On The Economic Development Of African Countries Under The Background Of "the Belt And Road"

With the in-depth development of the the Belt and Road initiative in Africa,China’s direct investment in Africa has continued to increase,bringing great opportunities to the development of African countries.The experience of developing countries shows that foreign direct investment(FDI)is an important engine for promoting national and regional economic growth.Existing studies have also verified that FDI can promote economic growth,and found that FDI can increase wages,promote human capital and financial development,promote economic integration,and then stimulate economic growth.In addition to its positive contribution to growth,in the long run,FDI is also of great significance to the overall development of an economy and society.FDI also has an impact on poverty reduction,social welfare improvement,income inequality reduction and export diversification.With the deepening of China-Africa investment and economic cooperation,it is of great theoretical and practical significance to examine the impact of China-Africa cooperation on African economic development at both theoretical and empirical levels.At present,there is no comprehensive and in-depth study on the impact of China’s OFDI on African economic development.In view of this,this study analyzes the impact of China’s OFDI on African economic development from the following aspects.First,based on dynamic ordinary least square(DOLS)estimation and common correlated effect(CCE)estimation,this study uses data from 48 African countries from 1996 to 2020 to explore the impact of Chinese OFDI and African governance quality on income inequality in Africa.and explore the moderating effect of government governance quality on China’s OFDI impact on income inequality.Gini index and Palma ratio have been used to proxy income inequality.China’s outward foreign direct investment in Africa is used to proxy Chinese foreign direct investment.Several governance indicators,namely rule of law,regulatory quality,control of corruption,voice and accountability,political stability and governance effectiveness have been used to proxy governance quality.Additionally,urbanization,trade openness,human capital,and economic growth have been used as a control variable to ensure that results are not unbiased.The research results show that the improvement of both Chinese OFDI and African governance quality can help reduce income inequality in Africa.Besides,the improvement of African governance quality can further expand the role of China’s OFDI in reducing income inequality in Africa,which shows that the improvement of the host country’s governance quality can promote China’s OFDI to play a better role in reducing income inequality.Second,this study based on the two-step generalized method of moment(GMM)technique,examines the moderating effect of governance quality in 48 African countries on the relationship between China’s OFDI and poverty in Africa from 1996 to 2020.although previous studies have examined the relationship between FDI and poverty reduction,there are still fewer studies on the relationship between Chinese OFDI and poverty reduction in Africa.In addition,the moderating effect of governance quality on the relationship between Chinese FDI and poverty reduction in Africa has not been thoroughly studied.The research results show that the role of Chinese OFDI in poverty reduction in Africa depends on the quality of African governance.Although Chinese OFDI does not necessarily directly promote poverty reduction,the improvement of governance quality can help promote Chinese OFDI to play a positive role in poverty reduction.Third,this study examined the combined impact of Chinese OFDI and African governance quality on African welfare levels based on the fully modified ordinary least square(FMOLS)and panel corrected standard errors(PCSE)estimation techniques,using data from 47 African countries between 1996 and2020.Previous studies have examined the relationship between FDI and social welfare,but few studies have specifically focused on the relationship between Chinese FDI and social welfare in Africa.Moreover,few studies have examined the role of governance quality in the OFDI affecting social welfare in Africa.In the face of the COVID-19 hit,Africa has further increased in poverty,and social welfare conditions have further deteriorated,and a strong policy is urgently needed to quickly restore Africa’s economic growth.The study found that China’s foreign direct investment has a positive and significant impact on the welfare level in Africa,while the impact of governance quality on welfare is negative and significant.In addition,the results also found that improving the quality of governance in Africa will help to further play the positive role of Chinese OFDI in improving welfare levels in Africa.Fourth,based on the Generalized Method of Moments(GMM)estimation approach,using data from African countries,this study examined the relationship between Chinese OFDI in China,tourism development in Africa and income inequality in Africa between 2003 and 2017.Although research is increasingly focused on the relationship between tourism and income inequality,little literature examines how Chinese OFDI affects the relationship between tourism and income inequality in Africa.The results indicate a significant negative relationship between Chinese OFDI and income inequality in Africa,which means that Chinese OFDI helps to reduce income inequality in Africa.The results also show that Africa’s tourism industry intensifies income inequality due to poor government governance,while Chinese direct investment in Africa helps to reduce the negative impact of Africa’s tourism development on income inequality.Fifth,this study explores the impact of Chinese OFDI on export diversification in African countries using data from African countries from 2002 and 2020.Although previous studies have examined the determinants of export diversification,the impact of Chinese OFDI on the diversification of African exports has not been deeply explored.In contrast to previous studies that emphasized that the government should promote comparative advantage through developing export specialization to spur economic growth,this study believe that export diversification is a key factor in economic growth and greater employment increase.Based on the two-generalized method of moment(GMM)technique,The results show that China’s OFDI has a positive contribution to the diversification of exports in Africa.Similarly,human capital,domestic credit,the rule of law and trade openness have also helped diversify Africa’s exports.The innovations of this study are as follows:First,study regional innovation.Based on the regional perspective,this paper takes 48 African countries,including 8 Central African countries,12 East African countries,4 North African countries,16 West African countries,and 8 South African countries as the research objects,and takes the “ Belt and Road ”construction as the background.Economic development is analyzed into multiple dimensions such as income inequality,poverty,social welfare,export diversification,etc.,and the impact of China’s OFDI on African countries in these aspects is explored.Second,research perspective innovation.Different from the existing literature that only studies the single impact of China’s OFDI on the economies of African countries,this paper,after focusing on the impact of China’s OFDI on the development of African countries in all aspects,also realizes that the quality of African governance will have a certain impact on the effect of China’s OFDI.Therefore,this paper also focuses on examining the moderating role of African governance quality in the process of China’s OFDI affecting African income inequality,African poverty reduction,social welfare improvement,export diversification,etc.,which is a further enrichment and improvement of existing research.Third,research method innovation.Compared with previous studies,this paper uses the Pesaran method(2004)to test the cross-sectional correlation of each variable in the empirical test,and further based on the estimated results obtained from the cross-sectional correlation test,uses the Pesaran method(2007)to test the variables.The stationarity test is a feature that distinguishes it from other studies.At the same time,when examining the relationship between China’s OFDI and income inequality in Africa,the use of the panel corrected standard error model of the full sample and the feasible generalized least squares method of the sub-sample is also a feature that is different from previous related studies.