Abstract:For the last few years, the execution of the Belt and Road Initiative (hereinafter referred to as the BRI) and China’s outward foreign direct investment (hereinafter referred to as OFDI) in Europe have seen a significant upward trend. For our current paper, we collected empirical data pertaining to China’s OFDI and foreign trade (gathered from 21 European countries in the trade gravity market for the period 2003 to 2016) that yielded the following results: (a) China’s OFDI to Europe has significantly promoted … Show more
“…Also, Mundell develops the argument that international trade and capital flows may substitute for each other based on the theoretical framework of the Heckscher-Ohlin model which assumes that even if two countries have the same production function, the differences in their factor endowments would cause international trade and capital flows to substitute each other, based on the factor endowment ratio theorem (Lu et al, 2018). This is because FDI would be one of the mechanisms of foreign capital inflows and used to boost the manufacturing industry and trade structure for global convergence (Ma et al, 2019). This part of the reviews of the literature studies summarized the impacts of OFDI on foreign trade in both developing and developed countries.…”
Section: Literature Reviewmentioning
confidence: 99%
“…Second, BRI had a positive effect on Chinese exports to Europe and negatively influenced Chinese imports from European counties. Third, Chinese OFDI in Europe had both complementary and substitution trade effects in European countries; however, the complementary influences much stronger effect (Ma et al, 2019). Recently, Shahriar et al 2019drew a gravity model to show the determinants of Chinese OFDI in the BRI countries for 12 years of the period from 2005 to 2014 by incorporating additional control variables.…”
Section: Literature Reviewmentioning
confidence: 99%
“…In this study, only the impact of Chinese OFDI and trade in the Sino-Africa economic linkages following the promotion of BRI in SSA was investigated. This is due to the trade and financial integration (especially OFDI) with SSA countries have been identified among the key and crucial pillars of the BRI economic strategy to improve Chinese external sectors and facilitate the conducive business environment (Huang, 2016;Lu et al, 2018;Li and Zhu, 2019;Ma et al, 2019). Indeed, in the past three decades, Chinese overseas investment has faced three phases of development: from "restricted", (2000-2016) "relaxed", and (2017 onwards) "regulated" (Wang and Gao, 2019).…”
Section: Introductionmentioning
confidence: 99%
“…Shahriar et al (2019) found that the host country's market size was the major determinants of Chinese OFDI in the BRI countries. Others Ma et al (2019) and Lu et al (2018) reported that Chinese OFDI and the BRI had equally promoted the bilateral trade between Chan and the BRI countries. Herrero and Xu (2017) suggested that landlocked European Union countries had considerably more benefits from the BRI in terms of trade.…”
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.
“…Also, Mundell develops the argument that international trade and capital flows may substitute for each other based on the theoretical framework of the Heckscher-Ohlin model which assumes that even if two countries have the same production function, the differences in their factor endowments would cause international trade and capital flows to substitute each other, based on the factor endowment ratio theorem (Lu et al, 2018). This is because FDI would be one of the mechanisms of foreign capital inflows and used to boost the manufacturing industry and trade structure for global convergence (Ma et al, 2019). This part of the reviews of the literature studies summarized the impacts of OFDI on foreign trade in both developing and developed countries.…”
Section: Literature Reviewmentioning
confidence: 99%
“…Second, BRI had a positive effect on Chinese exports to Europe and negatively influenced Chinese imports from European counties. Third, Chinese OFDI in Europe had both complementary and substitution trade effects in European countries; however, the complementary influences much stronger effect (Ma et al, 2019). Recently, Shahriar et al 2019drew a gravity model to show the determinants of Chinese OFDI in the BRI countries for 12 years of the period from 2005 to 2014 by incorporating additional control variables.…”
Section: Literature Reviewmentioning
confidence: 99%
“…In this study, only the impact of Chinese OFDI and trade in the Sino-Africa economic linkages following the promotion of BRI in SSA was investigated. This is due to the trade and financial integration (especially OFDI) with SSA countries have been identified among the key and crucial pillars of the BRI economic strategy to improve Chinese external sectors and facilitate the conducive business environment (Huang, 2016;Lu et al, 2018;Li and Zhu, 2019;Ma et al, 2019). Indeed, in the past three decades, Chinese overseas investment has faced three phases of development: from "restricted", (2000-2016) "relaxed", and (2017 onwards) "regulated" (Wang and Gao, 2019).…”
Section: Introductionmentioning
confidence: 99%
“…Shahriar et al (2019) found that the host country's market size was the major determinants of Chinese OFDI in the BRI countries. Others Ma et al (2019) and Lu et al (2018) reported that Chinese OFDI and the BRI had equally promoted the bilateral trade between Chan and the BRI countries. Herrero and Xu (2017) suggested that landlocked European Union countries had considerably more benefits from the BRI in terms of trade.…”
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.
“…Globally, governments, policy makers, corporations, and the scientific community are determining that FDI is among the factors for transforming strategic decision-making to achieve the SDGs [3]. Intensely targeting sustainable development has crucial drawbacks for developing countries, and FDI can bring about sustainable socio-economic development for resource-poor countries [4]. Moreover, the UNCTAD has also promoted FDI as being amongst the potential drivers for sustainable development and the safest type of investment for today's developing economies [5].…”
Publicized as a global call for action in 2015, the United Nations General Assembly (UNGA) has forwarded an agenda of resolutions to achieve the goals of sustainable development by 2030 (SDGs). Due to the specific challenges of funding gaps and the lack of advanced technology, the majority of Sub-Saharan African (SSA) countries are still behind the standard of world development. Since foreign direct investment (FDI) has the potential to bring much-needed capital and efficient technology, FDI has often been considered as a vigorous source of development, even for sustainable development for under-developing economies experienced today. Conspicuously, Chinese outward FDI (OFDI) into SSA has seen a strong upward trend in the 21st Century, after China proclaimed its "go global" strategy. Ethiopia is one of the favored destinations of the trend of Chinese OFDI, which also substantially continues through the SSA region. The hosting economy of Ethiopia expected that Chinese inward FDI comes with capital, efficient technology, and knowledge to contribute innovations through directly improving productivity and competitiveness via technological diffusion to domestic industries and eventually for sustainable development. Against this backdrop, this study utilizes firm-level panel datasets from Ethiopia to address the following couple of research questions. The first question is: are there any productivity differences between the establishment of Chinese-affiliated and domestic firms in the manufacturing industry in Ethiopia? The second is, does the presence of Chinese-affiliated firms provide productivity spillovers for domestic firms in the same industry level for socio-economic development? The investigation was carried out using 2554 manufacturing firm census data, from which 15.04% were Chinese firms operating in Ethiopia. We used the ordinary least squares (OLS) and generalized-method-of-moments (GMM) two-step approaches for estimations. Our findings revealed that, generally, Chinese firms were more productive than local firms and their presence can bring positive potential productivity spillover effects for domestic firms. Specifically, we found that local firms have gained significant positive spillovers when they had a high absorptive capacity, whereas low-absorptive capacity firms suffered negative spillovers. We also found that non-exporting domestic firms experience significant positive spillovers from the presence of Chinese firms.
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