World Summit on Management Sciences
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Accepted Abstracts

The Impact of China on Africa through the Lens of Output Growth and Foreign Direct Investment

Marvellous Ngundu*, Nicholas Ngepah
University of Johannesburg, South Africa

Citation: Ngundu M, Ngepah N (2020) The Impact of China on Africa through the Lens of Output Growth and Foreign Direct Investment. SciTech Management Sciences 2020. Thailand 

Received: January 29, 2020         Accepted: January 30, 2020         Published: January 31, 2020

Abstract

This paper uses a vector of FDI weighted real GDP growth rates to proxy for output growth of China, United States (US), European Union (EU), and Asia excluding China. Using 2SLS estimator over a sample of 42 sub-Sahara African countries for the period (2003-2012), our findings reveal that only output growth of EU can directly impact growth in the entire region. Thus, a 1% increase (decrease) in the EU's output growth can lead to a 0.02% increase (decrease) in real per capita GDP growth of sub-Sahara Africa. However, the results obtained from the Panel Threshold Regression (PTR) analysis indicate that African countries with resource rents of at least 24.3% and 24.1% receive significantly positive output growth spillovers from China and US, respectively. These are mostly oil abundant countries. Our findings confirm that FDI from both China and US is earmarked for natural resources in Africa whereas EU’s FDI seems to be relatively diversified. While efforts targeted to increase resource rents can place Africa in a better position to benefit from output growth of China and US through FDI lens, diversified FDI is also necessary to minimize the risk associated with resource paradigm growth and hedge against negative shocks arising from the economic rebalancing of FDI sources.
Keywords: China, Foreign direct investments, Output growth, Shocks, Resource rents