Export Incentive Effects Of Chinese OFDI In Host Countries

In recent years,economists,policymakers,and other observers have shown considerable interest in the link between investment and trade.By definition,OFDI correspond to the various financial operations intended to affect the operation and management of companies established in a country different from that of the parent company.They relate to an export of capital from one country to another for the purpose of acquiring an asset.It is widely accepted that foreign direct investment is beneficial for both countries of origin and host countries:First they create externalities for companies,then contribute to the growth of trade productivity,create jobs.OFDI and trade are two main means by which China operates in countries,specifically in developing countries.Similarly,attracting OFDI seems to be necessary for developing countries,as it increases their productivity and therefore fends off competition.Since the 2000 s,the Chinese presence has been growing in Africa,especially with the implementation of the “one belt,one road” initiative.Trade with Africa and investment from China is the main engine for the economic development of African countries,and one-tenth of outward investment comes from China,said Gobind Nankani,Deputy Governor of the World Bank in charge of the African region.In this case,the study of the relationship between OFDI and trade takes on great theoretical and practical importance in the African economic context.This paper selects foreign direct investment data from China and export trade data from 27 African countries for the period 2005 to 2020.Based on STATA unit root test,multicollinearity test and endogeneity test to ensure the feasibility of the model,the panel data are used to study the impact of Chinese FDI on export trade of African countries.The initial regression results are tested for robustness using proxy variables and special sample exclusion,and the results confirm the initial regression results.The endogeneity of the model is then analyzed using the main explanatory variables with a one-period lag as instrumental variables.Next,the first analysis of heterogeneity was carried out by dividing exports into exports of primary,manufactured,intermediate and final products.Secondly,the sample was divided into groups,namely: high-income and middle-income countries,low-income countries,sub-Saharan African countries and North African countries.The results show that Chinese FDI has a positive impact on the exports of African countries,so they are complementary.The results on heterogeneity also show that Chinese FDI has a significant impact on intermediate goods,but not on final goods.Finally,the paper suggests some countermeasures and recommendations to optimize exports and sustain economic and trade cooperation between China and African countries,such as African governments should improve the formation of activity and skill clusters to enhance the access of African products to the Chinese market,support strategies to increase the capacity of African countries to export products to China,and China should adopt targeted investment and trade cooperation strategies for different regions or countries.