Understanding Chinese Economic 3 Engagement in the Africa Continent

This thesis intends to investigate China’s economic engagement in Africa, which has been of great debates. Currently, China has become one of the most influential partners of African countries, and China has been seeing an increasingly important presence in the global financial market. Also, the global economic landscape has changed dramatically on account of the fact that the emerging economies have been driving global economic growth. Hence, it is impossible to investigate the global economic landscape without considering the economic development and engagement of emerging economies. Whereas, their economic engagement in the global market has been also received a great deal of criticisms. For instance, researchers concern that natural resources extraction is the primary objectives of China’s economic engagement in Africa where natural resources are abundant. Also, they doubt the effectiveness of Chinese aid projects in the African regions. Therefore, this thesis aims to empirically examine Chinese economic engagement in Africa, and thus test relevant concerns about this engagement. Our first paper empirically investigates the nexus of China’s direct investment in and international trade with 54 African countries between 2003 and 2014 to estimate the extent to which Chinese investments affect its trade with the continent, with the intention to shed light on the political motivation behind these economic activities. Our overall findings suggest that Chinese investments are correlated with more subsequent exports of consumption and processed goods from China, an indicator of market-seeking motivation of the country’s investment activities in the continent. In our second paper, we employ the georeferenced and subnational dataset on China’s aid projects, nighttime light intensity and local corruption collected by the Afrobarometer surveys in order to estimate the effectiveness of China’s aid projects in Africa and test whether local corruption negatively affects this effectiveness. Our empirical results demonstrate the promoting impact of Chinese aid projects on local economic activities, and that this promoting effect is not negatively affected by local corruption which is measured by two questions from Afrobarometer surveys. In particular, the effectiveness of Chinese aid projects varies across African clusters with different corruption level. In other words, Chinese aid projects are more likely to fuel economic activities to a greater extent in more corrupted clusters, compared with less corrupted clusters in Africa. Our third paper empirically estimates the impact of China’s aid projects on local employment by using the subnational dataset on employment experiences of individuals, in order to map out a picture of Chinese aid and its impact on local employment in Africa. Using temporal-spatial estimate, we find that Chinese aid project sites are always associated with more job opportunities for local citizens, and this result is robust to using alternative tests. Furthermore, we use nighttime light intensity as a proxy for local economic activity to test the possible mechanism through which Chinese aid projects affect local employment. It is found that the employment-promoting effect of Chinese projects is driven by the increase in economic activity.