China’s bilateral trade in Africa: is institutional structure a determinant?

Abstract

Purpose The purpose of this paper is to empirically examine the institutional structures and other predictors that determine bilateral trade between Africa and China from 1995 to 2017. Design/methodology/approach In line with the gravity model of trade, institutional, geographical and socio-economic determinants of China’s bilateral trade with 18 African oil/minerals exporting countries are examined by deploying Poisson pseudo-maximum likelihood and dynamic bias-corrected least squares dummy variable econometric techniques. Findings The results indicate that China’s oil/minerals imports from Africa are higher than imports of manufacturing and agricultural goods, and institutional structures indicate that a weak politically stable region with less control of corruption has a discernible effect on trade. Research limitations/implications Further insight can be gained if the type of manufactured goods being exported to China is examined; this is necessary given that China crowds out Africa’s manufactured goods. Therefore, this study recommends the need for Africa to continually strengthen its institutional structures to stimulate trade from other regions. Originality/value This study examines the quality of the institutional structures (political stability and corruption) in African oil/minerals exporting countries, considering that China has been alleged for capitalising on Africa’s weak institutional structures to trade with the resource-endowed region. For the first time, the UN COMTRADE HS product-country-partner-year trade data is used to examine on bilateral sector trade China–Africa links rather than proxies used in the studies of Biggeri and Sanfilippo (2009), De Grauwe et al. (2012) and Foad (2011) that did not capture the real trade value.

The determinant of Chinese foreign direct investments in oil exporting African countries

“…This pattern of trade from Africa to China is detrimental to local industries as it deters their growth (Edwards & Jenkins, 2014; Murtala et al., 2017; Oyejide et al., 2009; Schott, 2008). Although China's dominance justifies its economic development status that is attributed to its going global strategy ( Zou chu Qu) launched in 1999 and its accession into the WTO in 2001 (Alon et al., 2014; Gold & Rasiah, 2021). This is understandable, considering African exports are limited to natural resources, while China is maximizing its comparative advantage in the manufacturing sector over Africa whose major export is primary commodities which include oil/minerals resources.…”

“…For the trade variables, this study differs by using disaggregated bilateral imports‐by‐products from the UN‐Comtrade (2020) database that has the values of cross‐exportation and cross‐importation by country‐products‐year (Gold & Rasiah, 2021) to test for the importance of trade on China's FDI. The structural trade data composition is based on the UN‐Comtrade Harmonized System (HS) 1–99 nomenclatures.…”

“…3 3 The unprecedented rise in China's economic relationship with Africa since the beginning of the new millennium can be related to four main factors. First, China in the pursuit of ‘Going Global strategy’ (Zou chu Qu) launched in 1999 (Alon et al., 2014; Gold & Rasiah, 2021). Second, Forum for China–Africa Cooperation (FOCAC) formation in Beijing in the year 2000 with a follow‐up forum held every 3 years to create a fair and just international political order in the 21st century (Gold et al., 2017, 2021).…”

Changes in Trade Structure and Social Relationship between China and Malaysia Under Cross-border E-commerce Culture

“…Over time, the succeeding generation of family enterprises tends to minimize risks and prioritize harmony. Gold and Rasiah (Gold and Rasiah, 2022) examined the institutional structure and other predictors of Africa-China bilateral trade from 1995 to 2017. Using the trade gravity model, they employed the maximum likelihood value and the dynamic deviation modified least-squares dummy econometric method to examine the institutional, geographic, and socio-economic determinants of bilateral trade between China and 18 African oil/mineral exporting countries.…”

Determinants of bilateral trade flows of Vietnam: evidence from panel fixed effects estimation approaches

“…Recent empirical studies have tried to augment the gravity model and divulged some interesting results. Gold and Rasiah (2021) apply the Poisson pseudo-maximum likelihood and dynamic biascorrected least squares dummy variable to demonstrate that the weak control of corruption has a negative eect on the trade ows between Africa and China. Meanwhile, the trade openness has a reverse eect.…”