Abstract

The purpose of this paper is to investigate the impact of Chinese direct investment in Africa on Sino-Africa bilateral trade. To achieve this objective we used two approaches. First we utilized a panel data to analyze the impact of Chinese foreign direct investment (FDI) on its own exports to Africa, and secondly, a time series data to investigate the effect on its imports from Africa. Our analysis shows that Chinese direct investment in Africa has contributed significantly to increased Chinese exports to Africa as well as imports from Africa. This means Chinese direct investment in Africa is an important factor for explaining the growth of the bilateral trade. Furthermore, we found that the per capita income, annual percentage growth of domestic product, inflation and credit available to domestics sector in those African countries investigated have significant positive effect on china’s exports while real exchange rate (depreciation of local currencies against RMB) and military expenditure have negative effect. On the other hand per capita income and annual percentage growth of domestic product of china have a positive effect on its import.

Key words: Foreign direct investment (FDI), trade, China, Africa-countries.