英语000002.docx

英语000002.docx

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英语000002

英语（000002）

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,whichmeansthattherelationsaresubstitution.

2.2Resource-seeki