Does financial aid from the Chinese government promote investment? An empirical study based on Chinese subsidy and ODI in Africa

DONG Yan1 FAN Cijun1

(1.Research Institute of Economics Management, Southwestern University of Finance and Economics)
【Knowledge Link】the Monterrey Consensus

【Abstract】Based on System GMM estimation and quantile regression analysis of dynamic panel data, this article examines the effect of China’s aid on its overseas foreign direct investment in African countries. After controlling factors of market size, economic resources, population and degree of openness, we find that the relationship between foreign aid and ODI varies according to different categories of foreign aid. Aid invested in social infrastructure has a significantly positive impact on Chinese ODI to African countries, and aid invested in economic infrastructure increases ODI first before diminishing it, resulting in an inversed “U” shaped curve. Meanwhile, the relationship between aid invested in the manufacturing sector or governments of the host country and China’s ODI in Africa took a “U” shaped curve.

【Keywords】 aid; overseas foreign direct investment (ODI); Africa;

【DOI】

【Funds】 National Natural Science Foundation Project “Study on Motivations, Risks and Benefits of Chinese Investment in Africa” (71203183)

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(Translated by SHEN Meilin)

    Footnote

    [1]. (1) In addition, we took DIFF-GMM estimation to test for robustness. There is no significant difference in the result. Limited by the length of article, it is not further elaborated here. [^Back]

    References

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 03, Pages 59-69

March 2016

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Article Outline

Knowledge

Abstract

  • Introduction
  • 1 Literature review
  • 2 Model, methodology and data
  • 3 Empirical results
  • 4 Conclusion
  • Footnote

    References