The Impact of Chinese Aid on the African Continental Free Trade Area (AfCFTA)'s Exports

Abstract

This study examines the impact of Chinese official development assistance (ODA) on the export performance of African Continental Free Trade Area (AfCFTA) member countries using a structural gravity model. The study uses a balanced panel dataset covering 54 African countries from 2000 to 2023 (a unified sample window that resolves inconsistencies across cross-sectional data periods). It applies the Poisson pseudo-maximum likelihood (PPML) method and a stringent instrumental variable (IV) strategy to address zero trade flows, heteroskedasticity, and endogeneity. The model includes exporter-time, importer-time, and country-pair fixed effects to account fully for the outward and inward multilateral resistance terms (MRTs). The empirical results indicate that Chinese aid significantly promotes AfCFTA's total exports; specifically, a 1% increase in Chinese aid is associated with a 0.30% increase in total regional exports. The effect is heterogeneous, with a stronger association for intra-AfCFTA trade (coefficient = 0.35) than for extra-regional trade (coefficient = 0.28). Furthermore, the mechanism analysis indicates that Chinese aid promotes export expansion through a dual-channel mechanism that reduces both outward multilateral resistance (OMR) and inward multilateral resistance (IMR), with the indirect effect through IMR accounting for 40% of the total effect. Moreover, Chinese aid and AfCFTA regional integration exhibit a synergistic relationship: the trade-creation effect of AfCFTA strengthens the export-enhancing role of foreign aid. Unlike previous studies, this study develops a comprehensive analytical framework that combines dual-MRT and regional-integration perspectives, thereby addressing limitations in the existing literature. It contributes to the application of gravity models in aid-trade research and provides empirical evidence and policy implications for strengthening China–Africa aid cooperation and promoting regional trade integration among African countries.