The Gravity Of African Labor Force On China's Outward Direct Investment In Africa

In 2001,China launched the global policy of "going out" to promote overseas investment,which started the wave of large-scale outward investment by Chinese enterprises.Africa has been one of China's main destinations for ODI since 2003.Many researchers have studied the main reasons why Africa attracts Chinese direct investment,including infrastructure,consumer price index,exchange rate,trade openness,political stability,natural resources and other factors.But I think the more important reason is missing,and that is the African labor factor,so this paper is going to look at this very important labor factor.Firstly,this paper takes the size of African population and labor force as quantitative indicators,human capital as quality indicators,adopts random effect and systematic GMM method,and uses panel data of 50 African countries from 2003 to 2016 to analyze the attraction of African labor force to China's ODI.Overall sample regression results show that China's ODI flow in Africa is significantly correlated with its population size and labor force size.Secondly,according to the level of economic development and geographical distance,this paper further investigated the heterogeneity of labor force gravity.The impact of labor force on China's ODI is significantly different between countries with high economic development level and those with low economic development level.In countries with high levels of economic development,population size,labor force size and human capital are not statistically significant.But in countries with lower levels of economic development,all three factors are statistically significantly positive.This result shows that the labor force factor of countries with lower economic development level is more attractive to China's ODI than that of countries with higher economic development level.From the regression results of geographical distance sub-samples,it can be seen that the population size and labor force size are significantly positive no matter the countries are close or far away.But these two labour-force factors matter more in distant countries.Human capital is not significant in distant countries,but it is significant in closer countries.Therefore,the factor of labor force in distant countries is mainly in the aspect of quantity,but in the aspect of labor force quality that attracts China's ODI in close countries.Thirdly,this paper uses labor cost as the mediating variable of labor quantity index and labor productivity as the mediating variable of labor quality index to test the action mechanism of three labor factors,namely population scale,labor scale and human capital.The empirical results show that the increase of the size of labor force and population directly leads to the decrease of labor cost,thus prompting China to increase the number of local ODI.The human capital factor boosts productivity and,in turn,makes the region more attractive to foreign direct investment.Finally,the study puts forward policy Suggestions to promote the improvement of labor force development,which is,to promote the implementation of labor force attraction,further improve the level of education and training input,and adopt differentiated labor strategy.