theeconomicdeterminantsofchinesefditoafrica英语论文.docx
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theeconomicdeterminantsofchinesefditoafrica英语论文
TheEconomicDeterminantsof
ChineseFDItoAfrica
Name:
TianwenHuan
Department:
EconomicDevelopmentandPolicies
KobeUniversity
Summary
Foreigndirectinvestment(FDI)hasbecomeanincreasinglypopulartopicinrecentdecadesandChina,asanewmajor‘emerging’investor,hasdrawnmoreandmoreattentionamongworldeconomies.AsChineseforeigndirectinvestmenthasplayedaveryimportantroleineconomicactivitiesinAfrica,thispaperempiricallyanalyzestheeconomicdeterminantsofChineseFDIto37Africancountriesfrom2003to2012.
ThispaperfirstmeasuresexchangeratevolatilityusingtheGARCH(1,1)model.Then,allthevariablespresentedincurrentUS$wereadjustedbyusingtheUSGDPdeflatorinunitsofonemilliondollars.Astheargumentabouttheunitroottestforpaneldata,twointerpretativemodelsareusedinthefinalcalculationtoanalyzetherelationshipbetweenvariablesandChineseFDItoAfrica.
Theresults,whichillustratehowChineseFDItoAfricaisdrivenbycharacteristicsofthehostcountries,canbesummarizedasfollows:
First,GDPcanbeseenasoneofthemostimportantconsiderationstoattractChineseFDItoAfrica,whichmeansAfricancountrieswithalargermarketsizenormallyreceivemoreChineseFDI.Inaddition,ChineseinvestmenttoAfricaisempiricallygeneratedasasupplementaryparttoChineseexportstoAfrica.Interestingly,iftheamountofimportsfromChinatoasinglecountrygrowstooquickly,ChineseOFDIdecreasestothatcountry.
Second,anotherdeterminantofChineseOFDItoAfricacanbeexplainedbythephenomenaofresourceseeking.Inthispaper,fuelexportsareusedasaproxyforresourceseeking.TheresultshowsthatChineseOFDIisattractedtocountrieswithlargerenergyresources.
Finally,thispaperfindsthattherelationshipbetweenmacroeconomicinstabilityandChineseOFDItoAfricaisinsignificant.However,countrieswithalowerexchangerateattractmoreChineseOFDIthancountrieswithhigherexchangerate.
Contents
Abstract1
TheEconomicDeterminantsofChineseFDItoAfrica
Abstract:
Foreigndirectinvestment(FDI)hasbecomeanincreasinglypopulartopicinrecentdecadesandChina,asanewmajor‘emerging’investor,hasdrawnmoreandmoreattentionamongworldeconomies.AsChineseforeigndirectinvestmenthasplayedaveryimportantroleineconomicactivitiesinAfrica,thispaperempiricallyanalyzestheeconomicdeterminantsofChineseFDIto37Africancountriesfrom2003to2012.Thispaperfirstmeasuresexchangeratevolatility,stemmingfromtheexchangerate,asoneofthedeterminantsbyusingtheGARCH(1,1)model.Theresultsofthisstudyshowedthefactthatbigmarketsize,importsfromChina,abundantenergyresourcesandlowexchangerateofthehostcountrywouldattractChineseFDI.However,atoospeedygrowthofimportsfromChinawoulddecreasetheFDIflowingintoAfricaneconomies.
Keywords:
ChineseFDI;Africa;Economicdeterminants;GARCH
1.Introduction
AccordingtoRuizaandPozob(2008),foreigndirectinvestment(FDI)hasbecomeanincreasinglyimportantenginetofostergrowthandeconomicdevelopmentindevelopingcountries.Becauseofthelong-termnature,FDIisseenasbeinglesssusceptibletoacrisisandhasthepotentialtoincreaseproductivityviageneratingemploymentopportunitiesandtransferringskillsandtechnology.Ontheotherhand,Nourbakhshianetal.(2012)pointoutthathomecountriesarehopingtopushFDIintodevelopingcountriesusingguaranteefundsandmatchmarketing.Incomparisontoothertypesofcapitalinflows,theseforeigndirectinvestmentbenefitshavemadeitanattractiveeconomicdevelopmentstrategyinmanydevelopingcountries.
Amongthesedevelopingcountries,Chinaisarisingeconomicpower.Anditseconomyanditsrelationshipwithothercountriesbecomemoreandmorearresting.Sanfilippo(2010)showsthatChina’svigorousgrowthoverthepastdecadeshasnowdevelopedtoanewstage.Officialanalysisinthemostrecentyearsshowthat,Chinaisnolongeronlyparticipatedintheworldeconomyasoneofthelargestrecipientsofforeigndirectinvestment,butalsoregardedasamajorsourceofforeigndirectinvestmentamongdevelopingcountries.UNCTAD(2013)pointsoutthatChinabecametheworld’sthirdlargestinvestorin2012forthefirsttimeever,rightaftertheUnitedStatesandJapan.
ThedevelopingcountriesseemtoaccountforalargepercentoftherecipientsofChineseFDI.Africa,astheonlyregionthatsawforeigndirectinvestmentflowsrisingin2012,ispartofthedevelopingcountriesreceivinglargeinflowsfromChina.InreviewingChineseFDItoAfricafrom2003to2012,theamountofFDIincreasedalongasmoothtrajectoryexceptfordramaticpeakvaluein2008(Figure1).ThisunusualpeakvaluemaybeascribedtoaChina’sAfricanpolicydocumentpublishedin2006.Inthefollowingtwoyearsafter2008,theamountofcapitalflowthenreturnedtoanormalstate.
ThoughtheflowofFDIgrowsyear-by-year,notmuchisknownaboutthekeyfactorsdrivingthedecisionsofChinesecapitaloutflowstoinvestabroad.AstheofficialdatafordifferentcountriesprovidedbytheChinesegovernmentonlystartedfrom2003,thereislittleresearchthatempiricallyanalyzestheeconomicpatternofChineseFDItoAfrica.Thispapertriestoclarifythepicture,andanalyzesthedeterminantsofChineseFDIto37AfricancountriesusingofficialdatasuppliedbytheChineseMinistryofCommerce.
Figure1:
ChineseOFDItoAfrica(realUS$million,2005).
Source:
Author’selaborationonChinaStatisticalYearbookandMOFCOM(2013).
Thispaperisorganizedasfollows.Section2presentsareviewoftheliterature.Section3introducesthedataandtheinterpretativemode.ThemethodologyandestimationproceduresareexplainedinSection4.TheresultsoftheempiricalanalysesareexplainedinSection5andfollowedbyconclusionsinSection6.
2.LiteratureReview
MoreandmoreresearchhasbeenconductedonFDI.LookingthroughtheeconomicliteratureonFDI,studiesmainlyfocusonthedeterminantsofFDIandtherelationshipbetweenFDIandspecificcountries’economicgrowth.Theresearchrelatedtothispapercanbeclassifiedinfourparts:
thedeterminantsofFDItoAfrica,theresearchaboutChineseoutwardforeigndirectinvestment(OFDI),theliteratureaboutChineseFDItoAfricaandtherelationshipbetweenexchangeratevolatilityandFDI(seeAppendix1forthedetails).Inreviewingthefourdifferentpartsofliterature,Sanfilippo(2008)notesthatthedeterminantsofFDIcouldbeattributedtothreemainaspects:
theaimofmarketseeking,thepurposeofresourceseekingandtheavoidanceofrisk.
2.1Market-seekingandFDI
Asmentionedabove,forbothChineseOFDIandFDItoAfrica,onemainmotivationismarketsearching.ThemarketsizeofthereceivingcountryisalwaysusedasanindicatortoexaminetherelationshipbetweenmarketseekingandFDI,andthecurrencyinfluencebetweenthetwocountriescanclearlymeasuretheframeworkofChineseinvestmentinAfrica.
MostoftheempiricalstudiesanalyzedthemarketsizeasoneofthemostimportantdeterminantsofFDIusingdataonspecificcountries.TheempiricalevidencefromBende−Nabende(2002)suggeststhatmarketsize(GDPandGDPgrowth)isalong-rundeterminantofFDIinSub-SaharanAfrica.Asiedu(2006)thenanalyzedtherelationshipbetweenmarketsizeandFDIin22countriesinSub-SaharanAfricabyusingdatafrom1984to2000,andherempiricalresultshowedthatthereexistsapositiveandsignificantcorrelationbetweenthemarketsizeandtheamountofFDI.Later,in2009,BiggeriandSanfilippo(2009)empiricallyexploredthedeterminantsofSino-Africanrelationsbyusingthepaneldatasetovertheperiod1998-2005,for43Africancountries.Attheendofthispaper,theauthorsfoundthattherelationshipbetweenmarketsizeandFDIisnegativebutinsignificant.Asthetopicbecamemorepopular,twootherpapersaboutthedeterminantsofChineseFDIandAfricaFDIwerepublished.BothpiecesofresearchesshowedthatmarketsizehaveasignificantpositiveeffectonFDI.Basedondatafrom61countriesthataccountedfor97%ofChina'stotalOFDIstockfrom1993to2008,Chou,ChenandMai(2011)pointoutthatlargermarketsizehasremarkablebenefitstoChina'sOFDI.AccordingtoClaassen,LootsandBezuidenhout(2011),marketsizeisinfactimportantfactordemonstratingthatChineseinvestmentisnotsolelyresource-driven,butalsomarketseeking.Inaddition,Sanfilippo(2010)notesthatbecauseoflowcostsandhugepotential,ChinaconsiderssomeAfricancountriesasagoodpotentialmarket.
Intermsofotherelementsthanmarketsize,someotherscholarsincludingChinesescholarsalsosurveyedtherelationshipbetweenimportsfromChinaandFDI.Alon,MolodtsovaandZhang(2012)havepresentedevidencebyusingpaneldataonChineseoutwardforeigndirectinvestmentduring2003-2007.Theestimatesfromthisarticlesuggestthata0.15%changeinChineseOFDIwouldresultina1%changeinimportsfromChina.ButChou,ChenandMai(2011)pointoutthattwooppositeviewpointsexistinliterature,substitutionandsupplementaryrelationsbetweenOFDIandexports,witheachstandpointsupportedbyseveralempiricalresearches.Buckleyetal.(2007),Morcketal.(2008)andWuetal.(2007)havefoundapositivecorrelationbetweenOFDIandexports,meaningthattherelationshipbetweenChina'sOFDIandexportsaresupplementary.Onthecontrary,theworksofVernon(1966),Blonigen(2001)andSwenson(2004)showaninversecorrelationbetweenexportsandChina'sOFDI,whichmeansthattherelationsaresub