Analysis of the Bri and China’s Ofdi in Sub-Saharan Africa

Abstract

The “Belt and Road Initiative” (BRI) has been launched by the Chinese government in 2013. The aim was to stimulate cross-border economic development in massive geographical areas covering Asia, Oceania, Europe, Africa, and Latin America which accounts for 80% and 40% of the world population and gross domestic product (GDP), respectively. The BRI has devised an extension of the “going global” strategy to reconfigure China’s overseas sector in order to extend its spillovers, and create more development opportunities for participating countries. In practice, cross-border infrastructure was a comprehensive role to reduce transportation cost; however, the BRI was vast by nature that includes financial support, policy cooperation, investment, trade facilitation, and people-to-people exchanges for the humanitarian strategy. Against this backdrop, the overarching objective of this study was to analyze the impact of the BRI and Chinese outward foreign direct investment (OFDI) on the bilateral trade between China and Sub-Saharan Africa countries. The investigation was carried out using a trade gravity model, balanced panel dataset, and multivariate regression estimation strategy for robustness checks covering 16 years. The result showed that Chinese OFDI, home, and host country’s GDP and GDP per capita income variables have a positive and statistically significant impact on the bilateral trade. Moreover, the BRI has explained positively on the bilateral trade; however, it does not have enough evidence to stimulate significantly, and it usually takes a long time for the effects of the BRI investment on trade and OFDI. The study also found that geographical distance and official exchange rates have explained negatively and statistically significant impact on the bilateral trade.

Situating Africa in the exports patterns of China's Belt and Road Initiative: A network analysis

“…In the perspective of the BRI, trading networks among the 65 BRI economies have also become a major topic of interest among scholars (Chong & Pan, 2019) with the implementations of the social network, fuzzy analytical network, and consistent subgroups techniques to expose the features of the BRI trading networks (Zhang et al, 2019). For instance, Y. Wang et al (2020) analyzed spatial‐temporal dynamics and the topological frameworks on the development of the BRI exchange network. In particular, the authors examined the community dynamics of the trading networks by employing a community recognition algorithm and subsequently evaluated the various exchange groups' spatial interaction.…”

“…Other researchers have used sophisticated techniques of network analysis to analyze the BRI trading networks for particular goods (Z. Wang et al, 2020). However, existing research has not paid attention to the BRI trade network's topological structure and its status within the SSA trading network.…”

“…Simultaneously, the program has been expanded in scope, with various investment initiatives, people‐to‐people exchange, logistics facilities, financial support, trade facilitation, and policy cooperation to relieve bottlenecks among the participating countries (Shahriar et al, 2019). In particular, there is still a shortage of cross‐border infrastructure and communication growth in Africa; thus, the BRI is deemed as China's most important project for Africa (Z. Wang et al, 2020). For example, the power industry requires US$450 billion to fulfill its 2030 development targets, whereas the oil and natural gas sectors collectively require US$2 trillion to harness the endowment of natural resources (Z. Wang et al, 2020).…”

“…In particular, there is still a shortage of cross‐border infrastructure and communication growth in Africa; thus, the BRI is deemed as China's most important project for Africa (Z. Wang et al, 2020). For example, the power industry requires US$450 billion to fulfill its 2030 development targets, whereas the oil and natural gas sectors collectively require US$2 trillion to harness the endowment of natural resources (Z. Wang et al, 2020). Moreover, Africa still needs US$37 billion for infrastructure and $38 billion for service and repair per year to maintain its current growth pace (Z. Wang et al, 2020).…”

“…For example, the power industry requires US$450 billion to fulfill its 2030 development targets, whereas the oil and natural gas sectors collectively require US$2 trillion to harness the endowment of natural resources (Z. Wang et al, 2020). Moreover, Africa still needs US$37 billion for infrastructure and $38 billion for service and repair per year to maintain its current growth pace (Z. Wang et al, 2020). The BRI genuinely has an immeasurable positive consequence on Africa via the 'China Development Model' for infrastructural development to promote outward investment and exchange (Allou et al, 2020).…”