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Can Aid Mitigate the Effect of Corruption on Investment?——The Sino-Africa Trade and Economic Cooperation Strategy Based
on the Belt and Road Initiative

【Authors】
YANG Yaping,LI Linlin
【WorkUnit】
College of Economics, Jinan University, 510632.
【Abstract】

The Belt and Road (B&R) Initiative provides a golden opportunity to enhance Sino-Africa trade and economic cooperation. Adopting the panel data of 47 African countries from 2002 to 2013,and using the System GMM method and 2SLS approach, this paper empirically examines the effects of the host country corruption on China's foreign direct investment, and discusses the role of China's aid to African countries. The results show that: (1) The corruption of African countries “sand the wheels” of China's outward foreign direct investment (OFDI) rather than “grease the wheels” of China's OFDI; (2) China's aid to Africa, especially the aid in the economic infrastructure, has a significant effect on improving China's OFDI through the “infrastructure effect”; (3) Sub-sample regression analysis indicates that the aid in non-economic infrastructure can effectively mitigate the adverse effect of corruption on China's OFDI. However,the moderation effect of the aid in production and other sectors is not obvious.
 
JEL:F21, F35, P33

【KeyWords】
The Belt and Road Initiative, Corruption, Aid to Africa, Outward Foreign Direct Investment