General Business and Finance Blog

Make your own crafts and sell them for a profit at fairs, exchange meets or anyplace where people gather.

 Establish the inexpensive home business of selling information by mail.

You can get the resale rights to information for a few dollars.

Other costs will include printer cartridges, paper and postage.

Advertise your information on free classifieds sites on the net.

Write and publish your own informational booklets;

With a little know-how, a printer and stamps sell them for a price!

Sell the resale rights of your informational booklets to others, for extra income.

In this age of the Internet, you may also take advantage of the fact that selling information is one of the most profitable endeavors one can pursue online.

Offer office services for hire in your local paper.

Gather regular office business from classified ads.

Word processing, typing, accounting, data entry, proofreading, transcription, promotional letters and newsletters. All these tasks can be accomplished right from your own home office.  
Caution: 
While you search for the ideal home business in earnest, be aware of  scams that may disappear with your money.  There are thousands of scamsters out there just waiting to dupe you. Analyze things properly and invest only in proven methods of earning extra income.

With over 30,000 locations and fifty years in the burger business, the McDonalds brand is the most recognized and successful franchise in the world. Not surprisingly, before considering anything else many would-be franchise owners ask themselves: How much does a McDonalds franchise cost and how can I buy a McDonalds franchise? They hear it only costs ,000 to get a Mighty Mac franchise, an investment that’s quite within their franchise affordability range.

The McDonalds Franchise Fee
As with most things in life, a little information is a dangerous thing. While it’s true McDonalds charges a ,000 franchise fee, this is only the initial franchise fee for licensing rights – the upfront fee charged to join the network. There’s a LOT more financial commitment and cost involved to buy a McDonalds franchise after that. On top of the investment, there are other qualifications besides having the money.

Different McDonalds Franchise Ownership Options
According to McDonalds, there are two ways to buy a McDonalds franchise and enter their system. The first, and most frequently used method is purchasing an existing restaurant, either one operated directly by McDonalds or from a McDonalds franchise owner/operator. The second, infrequently used way is obtaining franchise rights for a new restaurant. Let’s consider these in reverse order, since McDonalds provides few financial details on the first, most frequently used method.

Buying A New McDonalds Franchise
For franchise licensing rights to a new McDonalds, the company charges its standard ,000 initial franchise fee, except if the franhise is for a McDonalds in a gas station or convenience store, the fee is rduced to ,500. There is also a reduced franchise fee for McDonalds Satellites located in universities, hospitals, etc.

The other cost categories for a new McDonalds franchise include real estate, signage, seats, equipment, decor, opening inventory, training and working capital. These are broken down in Item 7 of the McDonalds FDD.

For a Satellite McDonalds, the range is 8,375 to 8,400; for a McDonalds located in a gas station or convenience store, the range is 0,750 to .2 million. The standard, new McDonalds restaurant clocks in with a range of million to .8 million.

So, basically a new McDonalds franchise is a 8, 375 to .8 million investment depending on the model selected.

The factors impacting new restaurant costs are: size of the McDonalds restaurant facility, area of the country, pre-opening expenses, inventory, selection of kitchen equipment, signage, and style of decor and landscaping, McDonalds says. A detailed breakdown of the initial investment costs into discrete categories, including a working capital component, is provided in the McDonalds FDD Franchise Disclosure Document which can be obtained at the Franchise Foundations website (see link below).

Owner/operators must pay forty percent (40%) of the total cost from liquid, personal assets and may finance the remainder from traditional lending sources.

Buying An Existing McDonalds Franchise
What about the most frequently used way to buy a McDonalds franchise – purchasing an existing restaurant from a current McDonalds franchise owner or one that’s company-owned by McDonalds and sold as a “turnkey franchise”? Unfortunately, details about how much this type of McDonalds franchise costs are not specified, other than the following statement:

“The purchase price of an existing restaurant varies and is dependent upon a number of factors including sales volume, profitablity, occupancy costs, reinvestment or improvement needs, competition and location.”

To get a better handle on this statement, when existing, “turnkey franchises” are sold in any industry (McDonalds franchises included) the purchase price reflects the value of the business as a going concern, generating (in the case of McDonalds) $ X million in sales and $ Y in profits. A typical McDonalds restaurant that’s been operating for at least one year produces over ,000,000 in annual sales, with profits in the low six-figure range. I estimate the sales price of an existing McDonalds franchise (or company-owned restaurants sold as turnkey franchises) to be in the million to million range, plus or minus. Twenty-five percent (25%) of the purchase price must come from liquid, personal assets and the balance can be financed from traditional lending sources.

Ready to whip out your checkbook? Even if you are, there’s a lot more to obtaining a McDonalds franchise than just have the investment capital.

The McDonalds Franchise – Item 19 Financial Performance Representations
According to the McDonalds FDD Item 19, the average annual sales volume of traditional restaurants in the U.S. open at least one year as of 12-31-09 was ,37 million in 2009. The highest sales volume for a U.S. McDonalds in 2009 was .3 million (the “star” performer). The lowest performing McDonalds clocked in at 7,000.

Item 19 of the McDonalds FDD goes on to list proforma financial results for restaurants that hit three different sales levels – million, .2 million and .4 million, showing cost of sales, gross profit and operating profit at each level. Unlike other franchise companies with similar investment levels, McDonalds steps up to the plate and provides franchise earnings information in Item 19 of its FDD.

Getting the McDonalds FDD Franchise Disclosure Document
If you would like a copy of the entire 383-page McDonalds FDD published 2010 (or just particular sections of the FDD, like Item 19 Financial Performance Representations or Item 7 Estimated Initial Investment) to review and get further information, go to the McDonalds Franchise page of the Franchise Foundations website.

copyright 2008-2010, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

For further information, visit the Franchise Foundations website

This real estate and business financing article discusses a concept which is referred to here as “Thinking Outside the Bank”. It is meant to be a variation of the well-known “thinking outside the box”. Despite the prominence of traditional banks, they are not the only viable source which should be considered for a commercial mortgage or commercial loan. There are many reasons why a commercial borrower might not go to a traditional bank for a commercial real estate loan or other business finance circumstances.

Business borrowers have more commercial mortgage and commercial loan alternatives than they realize. As noted above, I refer to these business financing alternatives as “Thinking Outside the Bank” because a typical commercial borrower probably believes that a bank is the best source for a business loan in business investing situations. Non-traditional business lenders are usually viewed as having the competitive edge for many common commercial financing and commercial real estate investment property financing scenarios.

In some cases a traditional bank will offer to provide a business loan but will attach excessively stringent terms and covenants. In other cases a traditional bank will decline the commercial mortgage outright, perhaps because they do not even provide business financing to the commercial borrower’s particular industry. In either case, the commercial borrower is likely to benefit by “Thinking Outside the Bank” for their business investing efforts.

Commercial loan borrowers might feel that a bank is their most likely source for business financing. However, since traditional banks usually focus on a few types of businesses and commercial real estate investing, non-traditional business lenders should be emphasized for any business loan situation. Therefore the recommended business finance and commercial mortgage strategy discussed in this article is to “Think Outside the Bank”.

As I reported in a previous business financing and investing report, in many commercial mortgage situations it is common for a local bank to assess stricter commercial loan conditions than would typically be seen in a competitive business loan scenario. Such banks can often take advantage if there are few business lenders in their market.

A prudent response by business borrowers is to consider non-traditional commercial mortgage options. It is not necessary for borrowers to depend upon traditional banks for business loan strategies. For typical commercial loan scenarios, a non-bank lender can often provide better business financing terms because of the competitive market situation.

There are at least three business financing situations in which business borrowers will typically experience that non-traditional lending sources can provide conditions that are best for the borrower: (1) commercial real estate investment property loan programs; (2) credit card factoring and business cash advance programs; and (3) working capital management programs for credit card processing.

Business Loan Investing Options – Commercial Real Estate Investment Property Loan Programs -

Two of the most common commercial mortgage difficulties experienced by commercial borrowers can be avoided if they “Think Outside the Bank”. The first business financing situation is the prevailing practice of traditional banks to avoid most special purpose investment properties (such as funeral homes and golf courses).

A second business loan possibility is the frequent practice of many commercial banks to add recall and balloon conditions to their commercial loans. The bank can then require early payoff of the commercial real estate loan under stipulated conditions. Both business financing situations can easily be prevented by a non-traditional lending source.

Business Financing Choices – Business Cash Advance Programs -

Most businesses that accept credit cards will qualify for a business cash advance with their credit card receivables. Traditional banks will typically be very poor candidates to consider if a business needs assistance with credit card factoring and business cash advances.

Because successful business owners typically need more working capital than they can obtain from a bank, it is important for a business to “Think Outside the Bank” with non-traditional lenders to help with this working capital management function.

Credit Card Processing Programs – Working Capital Management Choices -

The selection of a credit card processing service can be critical in improving the cash flow of a business with significant credit card activity. Credit card processing providers can be combined with the credit card financing process mentioned earlier.

In coordinating a business cash advance and working capital business loan program, it is usually possible to achieve improvements in the business owner’s credit card processing services. Traditional banks are usually not competitive in providing assistance with a business cash advance using credit card receivables. So it is likely that a non-traditional lender will be the major source of competitive help with credit card processing improvements.

A closing business financing and commercial real estate investment property financing thought: I have written an earlier business loan article about commercial lenders to avoid. It should be noted that there are in fact both traditional and non-traditional (non-bank) lenders which should be avoided.

When business owners are “Thinking Outside the Bank”, they should be ready to avoid troublesome non-traditional business lenders in their investment quest for worthy working capital management dealing with commercial real estate loans, credit card financing and credit card processing.

Home topic proposal – Should I enthusiasm with it?

Most make somewhere your home business ideas in topic ideas by more or less situation in their life (and a a small amount of make somewhere your home organize pick them up and succeed first-rate money unfashionable of them). These in topic ideas can be whatever thing ranging from preliminary a freelancing characters service from in to setting up a small toy manufacturing corps. Whatever be your in topic proposal, you need to think it above carefully otherwise in point of fact preliminary with it.Before getting ongoing with your in topic proposal, you ought to really think just about the feasibility of your in topic proposal. Here, we are chatting just about the feasibility from two angles – lone is from the perspective of your capabilities and the other is from the perspective of how first-rate the in topic proposal is in itself.

Feasibility of your home business idea with respect to your capabilities

Here are a a small amount of things with the aim of you ought to check with respect to your capabilities instead of running the in topic proposal:

1. Your qualifications and skills instead of the in topic proposal: Since the largest part in topic ideas are instead of lone man armies, it becomes main to verify the skills and qualifications of the person (i.E. You) who would be running the topic both as a boss and as a employee.

2. Do you hold the phase instead of running with the in topic proposal?: Here you need to determine the amount of phase with the aim of you would need to allocate to this in topic proposal. Since a set of in topic ideas are run (or by smallest amount started) as a part phase job (and it does succeed a set of logic to organize that), you will need to check if your current job leaves you with a sufficient amount phase instead of running a in topic as a part phase job. You will additionally need to consider the actuality with the aim of your in topic proposal may well leave you with very little phase instead of you and your descendants.

How first-rate is your home business idea?

It’s main to check the accomplishment probability of your in topic proposal otherwise you in point of fact get a hold on with it. Here are a a small amount of factors with the aim of you have to consider:

1. The competition and demand: If your in topic proposal is unique and is in demand, your likelihood of accomplishment are increased much more. However, if a sufficient amount make somewhere your home are already running the same topic, you might stumble on it quite testing to enter the marketplace.

2. Risks: You need to consider the investment with the aim of is by threat. This is especially main as your in topic proposal requires grasp of expensive material or machinery and additionally as the produce (e.G. Food products) is rendered useless if it doesn’t persuade somebody to buy instead of sometime.

Home Business ideas intended for domicile based businesses really depend on your area of concentration. If you like advertising entry to entry or organizing domicile parties, therefore you will uncover with the purpose of in attendance are many opportunities intended for you to manage your own concern prohibited of your domicile. This still method getting dressed and on offer prohibited in all types of weather. However, in attendance are too concern ideas intended for domicile businesses somewhere you can get something done everything online taking benefit of pardon? The Internet has to offer and the options are many.

Most relations think with the purpose of in order to come up with an Internet concern, they need to take a laptop option, which barely adds to the expense of setting up a concern. All you need to manage a creation from domicile Internet concern is your own not public laptop and an Internet connection. Once you come up with with the purpose of therefore the earth is on your feet at what time it comes to concern ideas intended for domicile based businesses.

You don’t necessarily need a website of your own to get something done concern on the Internet. It all depends on pardon? You are interested in burden as part of your creation on domicile Internet concern. If you come up with a flair intended for marks, therefore you will uncover a wealth of concern ideas intended for Home Based Businesses by searching the Internet. Those who get something done regular up websites are for ever and a day looking intended for writers intended for their articles and you can register with either elance or Guru, or both. These companies allow you to proposal on marks on one occasion you reimburse the subscription fee, which is very reasonable – from to all three months.

If you get something done not feel like to reimburse everything on all to regular up a creation from domicile Internet concern, therefore this feasible as well. There are many sites with the purpose of advertise creation with the purpose of you can get something done from your own domicile, using your laptop and the Internet intended for your look into. Write articles intended for magazines and if you come up with an education background, you can develop lesson diplomacy intended for various publishers. In the function of long as you can send off and receive email and come up with a word doling out line up on your laptop, therefore you can avail of many numerous concern ideas intended for Home Based Businesses.

When you feel like to creation from domicile, the Internet is the finest place to start searching intended for concern ideas intended for domicile. Here you will uncover opportunities with the purpose of require small or veto investment to induce in progress. When you take benefit of concern ideas intended for domicile concern, therefore the sky is the limit. How much money you manufacture depends on how much epoch you feel like to apply to the Internet concern you create.

If you’re looking in place of Business Ideas for Home, you’ve approach to the appropriate place. This article specializes in home-based organization ideas. Here, you’ll unearth immediately not far off from each thought with the aim of everybody has continually approach up with in place of a home-based organization – - both the high-quality and the bad. The diagram is to introduce you to the in one piece broad spectrum of mother country based organization, and give permission you go for the organization ideas in place of mother country with the aim of superlative suit you.

When you function looking around in place of organization ideas in place of mother country it’s a high-quality thought to take a instant and think not far off from pardon? Kind of a pot you’re digging around in. There are selected high-quality sites, like this single; near are lots of other sites proposing things with the aim of maintain their drawbacks and their plus points; and after that near are selected downright scam sites. One of our goals is to educate you well an adequate amount with the aim of you can recognize folks scams a mile away. Another goal is to introduce you to an adequate amount of folks other possibilities and how they toil with the aim of you can dig through them and form an educated view not far off from both single.

The file of Business Ideas for Home is a long single, so near is a fate to discover. Each of the many ideas we’ll reveal you at this point, is appropriate in place of an important person; selected are appropriate in place of lots of citizens, and selected in place of immediately a a small number of citizens, and a a small number of immediately in place of the person promotion it. There are selected of great consequence points to consider whilst sizing up single of these ideas.

One of great consequence gadget is to approach up with a high-quality understanding of pardon? You hope to contract barred of your mother country organization. Some citizens are looking in place of a job, selected citizens are looking in place of a turn-key organization, and selected citizens are looking to start their very own organization from graze. Each level of involvement brings with it its own risks and its own would-be rewards.

Another of great consequence gadget to consider is pardon? The person who is only if the thought stands to achieve by bringing you into the fold. Setting aside in place of the instant the scam dancer who wants to immediately charge your tag and kind a run in place of it, pardon? Does the usual organization ideas in place of mother country promoter attitude to achieve by accumulation you to his settled? Sometimes their motives will dove-tail with your own; on occasion they won’t.

While the Internet provides a lofty forum in place of the organization ideas in place of mother country promoter, it besides provides single of the nearly everyone of great consequence tools you can wear out to sort barred the high-quality ones from the not so high-quality ones. Often, immediately by liability selected search engine searches on a regard thought or company, you can contract a high-quality thought of how likely you are to extent your own goals using with the aim of thought. Do your grounding, preliminary appropriate at this point on this situate, and unearth the Business Ideas for Home in place of mother country with the aim of will take you someplace you hunger to function in life.

HOME BUSINESS WITHOUT INVESTMENT IN INDIA

If you’re like nearly everyone citizens, it’s powerfully to kind split ends join with immediately single takings. If you are married, both partners ought to toil, expenditure countless thousands of dollars on childcare and organization clothes. To offset their monetary discrepancy, many citizens are looking into getting on track in their own mother country organization. Both full-time and part-time mother country businesses can be operated from the comfort of your own mother country.

Some citizens are making ultra money to wage in place of extras, while others maintain bowed their mother country organization into a primary source of takings. Some citizens wear out their mother country organization as a entertainment, to maintain fun and earn a little “pocket money.” The of great consequence gadget is with the aim of they are taking helpful dogfight, considerably than waiting in place of a economic mess. They are setting the stage to convalesce their lives – something you can resolve too.

Multi-level marketing, mail order businesses and other in-home businesses are very widely held. If this way of earning ultra takings appeals to you, by all channel check barred the possibilities. These are not the solitary ways you can work from mother country. There are many ways of getting on track in your own mother country organization with the aim of you ought to investigate.

Some other ways of getting on track in your own mother country organization include on-line businesses such as a typing service, ghost symbols in place of others, creating want ad emulate, dating services, belief counselling service, producing how-to DVD’s or videos on various topics, preparing resumes, et cetera. Clothed in truth, the options in place of getting on track in your own mother country organization are almost unrestricted.

One of your basic tasks in getting on track in your own mother country organization is to resolve selected marketplace explore. Discover in place of by hand how many competitors you will approach up contrary to. Then take a look by the side of how many would-be clients would be willing to wage in place of your services. Clothed in other lexis, characterize your marketplace and identify your would-be clients and customers. After you check the applicable data, discuss your campaign with other knowledgeable citizens and contract their ideas and suggestions. Your subsequently task will after that be to develop a detailed organization diagram. The more details you mark barred the better – cover all your bases as to immediately how you’ll resolve everything with the aim of ought to contract ready, and the schedule line in place of liability them. You hunger to kind it as stress-free as promising to be profitable.

Your organization diagram ought to reveal how much money, if some, you will maintain to invest, your diagram in place of getting the word barred with the aim of you’re release in place of organization, the exact procedures you diagram to wear out, and how much schedule you will need to invest. Avoid “jumping in feet first” not including basic getting all the specifics and numbers mutually to circumvent pronouncement barred with the aim of the schedule and overheads involved are too much, which may well prime to failure and disappointment. It will wage inedible in the long run to develop your campaign and outline them in a in black and white tell previous to getting on track in your own mother country organization. Your likelihood of achievement will be greater if you know pardon? To expect by launching your mother country organization.

After you maintain identified your target marketplace and know who your would-be customers will be, how you’re going away to contract your service to them and you’ve identified the schedule and money it will take to run your organization, you’re raring to go to locate your campaign into indicate and contract on track with your own mother country organization.

I on track barred in mother country organization following a organization classic formed by Stone Evans aka ‘The Home Biz Guy’; I found it to be an outstanding preliminary central theme in place of launching my own mother country organization. I in a jiffy maintain my own another website, blog and newsletter; you too can complete mother country organization achievement if you really hunger it. Set by hand goals and be an enthusiast of a exonerate diagram of dogfight to ensure you complete everything you plea.

PhD Research proposal:

Supervisor: Professor Lan Yisheng

Shanghai University of Finance and Economics

 

Analysis of Chinese Trade and Foreign Direct Investment on eight African countries Economic Development

  

I-Introduction

 

China’s newfound interest in trade and investment with African-home to 300 million of the globe’s poorest people and the world’s most formidable development challenge presents a significant opportunity for growth and integration of the Sub-Saharan continent into the global economy.

These emerging economic “giant” of Asia is at the center of the explosion of African-Asian trade and investment, a striking hallmark of the new trend in South-South commercial relations. Both nations have centuries-long histories of international commerce, dating back to at least the days of the Silk Road, where merchants plied goods traversing continents, reaching the most challenging and relatively untouched markets of the day.

Chinese trade and investment with Africa actually dates back several decades, with most of the early investments made in infrastructure sectors, such as railways, at the start of Africa’s post-colonial era.

China’s fast-growing economic ties with Africa are attracting considerable attention. The relationship came into the spotlight during the summit of the Forum on China-Africa

Cooperation (FOCAC) in Beijing in November 2006 and the Annual Meetings of the African

Development Bank (AfDB) in Shanghai in May 2007. While the expansion of trade and investment between Africa and China has been generally welcomed, concerns have been expressed about how China’s growing presence might affect African development (These concerns range from debt sustainability and governance reform to environmental impact; see news reports in Les Echos, October 24, 2006 (in French); Financial Times, November 28, 2006, and News Edge, May17, 2007).

Today’s scale and pace of China’s trade and investment flows with Africa, however, are wholly unprecedented. The volume of African exports to Asia is accelerating. It grew by 15% between 1990 and 1995; it has grown by 20% during the last five years (2000-2005) (Harry G. Broadman: “Africa’s silk road”; China and India new Economic Frontier).

Trade between Africa and China began to accelerate in about 2000. Between 2001 and 2006,

Africa’s exports to China increased at an annual rate of over 40 percent, rising from US$4.8 billion to reach US$28.8 billion in 2006 (Figure 1 and Table 1). During the same period,

Africa’s imports from China quadrupled to US$26.7 billion. In 2006 Sub-Saharan Africa

(SSA) accounted for the bulk of the Africa-China trade; the region’s exports to China amounted to US$25 billion, about 85 percent of all African exports to China that year.

According to statistics compiled by China, for 2004–06 Africa ran a small trade surplus, about US$2 billion each year (See IMF Working Paper (2007) “What Drives China’s Growing Role in Africa?” Jian-Ye Wang).

 

The acceleration of South-South trade and investment is one of the most significant features of recent developments in the global economy.

Trade between China and Africa is also expanding rapidly. Valued at only around $3 billion in 1995, total trade grew to an estimated $40 billion in 2005. Premier Wen Jiabao of China stated during the China-Africa Cooperation Forum summit that China hopes to increase that amount to $100 billion by 2010.

Table 1: China Imports and Exports from Africa (US$ millions)

  

Figure 1: China-Africa Trade Statistics 1995-2005

 

Source: World Atlas Trade Data, Tralac Analysis (Centre for Chinese Studies, Stellenbosch University (South Africa))

China started providing aids to Africa in 1956. By May 2006, it had contributed a total of 44.4 billion yuan (US$5.7 billion) for more than 800 aid projects, according to a researcher at the Chinese Academy of Social Science (He, 2006). The last officially reported flows were in 2002, when the Chinese government reported that it provided (US$1.8 billion) to support Africa.

China has also been providing debt relief to African countries on its own terms. At the first China-Africa Cooperation Forum in October 2000 in Beijing, the Chinese government pledged to write off in two years overdue obligations on 156 loans owed by African countries; these equaled to 10.5 billion yuan (US$1.3 billion). The pledge was fulfilled ahead of schedule (He, 2007).

Chinese capital flows to Africa in the form of foreign direct investment (FDI) are growing. While in the past many of these investments were limited to the raw materials sector, the current wave involves firms from many countries and sectors than ever before. This foreign investment also has many implications patterns and the development of the bilateral trade and integration. Many African exports are channeled through multinational enterprises, helping to integrate African countries both with one another and with the global economy.

 

Table 2: Chinese capital flows to Africa

 

Figure 2: China FDI flows to Africa

 

Source: Jonathan HOLSLAG “China’s FDI in SUB-SAHARA AFRICA” Brussels Institute of Contemporary China Studies.

So far, the nature of these flows has been quite similar to those between Africa and its traditional trading partners noted in the OECD studies (2005-2006) (OECD study, The Rise of China and India: What’s in it for Africa?). Against this backdrop, there is intense interest by policy makers and businesses in both Africa and Asia, as well as by international development partners, to better understand the evolution and the developmental, commercial, and policy implications of African-Asian trade and investment relations. This interest is reflected, perhaps most notably, in the South- South discussions held during the African-Asian summit in Jakarta in April 2005 celebrating the fiftieth anniversary of the Bandung Declaration, where the dramatic rise in international commerce between the two regions figured prominently, as well as at the July 2005 (G-8 summit in Gleneagles G8 Summit took place at Gleneagles Hotel, Perthshire, Scotland on 6-8 July 2005), where the leaders of the North underscored the growing importance of South-South trade and investment flows, especially as they pertain to the prospects for fostering growth and poverty reduction in Africa.

The importance of South-South trade has been recognized for some time; however, there has been no in-depth study conducted specifically on Africa-China trade relations to date.

The main objective of this study is to build a basic understanding of the potential of Africa-China trade and investment relations.

A literature review will be first conducted tracing the evolution of economic growth theories since Adam Smith to the present on the impact of commercial and technological aspects, resulting from international trade, on the physical accumulation and quality of productive factors.

Next, using historical data covering a sample of African countries, multiple regression analyses will be performed to determine the relationship between the specific determinants and real per capita economic (GDP) growth over a twelve year period. Using the results, conclusions will be drawn about the relationship among the determinants in their effects on long-term economic growth. Several additional trials will be carried out to determine more nuanced information and to test the reliability of the endogenous growth theory model.

The data will be collected according to the International Standard Industry Classification (ISIC).

 

II-Statement of the problem and motivation

II-1.Overview

China is not a new player in Africa. But its economic and political presence on the continent and its impact on Africa have grown exponentially in the last few years. This has huge consequences for Africa, but it also has significant implications for western policy towards the continent.

In thinking through how Africans and the wider international community should address the new challenges posed by China’s role on the continent, a critical starting point is to better understand the diverse impacts of China on Africa.

Like other parts of the world, Africa is being affected indirectly by the phenomenal growth of the Chinese economy.

It is clear that Africa must not loss its momentum and determination to tackle its development problems and attain the renewed vision of a prosperous vibrant region. In this regard the establishment of the China-Africa Forum came at a critical juncture, offering unconditional support for the AU (African Union) and its various instruments including NEPAD, which is being integrated into sub-regional and National development strategies.

Put another way the big question is how to kick start African poor countries out of a cycle of poverty throughout their trade relationship with China.

So, what is so important about economic growth? Economic growth leads to greater economic prosperity. Increasing overall prosperity improves the lives of those able to partake in the system. People are better able to provide for their needs and fulfill their wants, without the use of force. This rising prosperity is empirically linked to higher overall levels of human happiness and betterment.

Recent developments in growth theory have considered various sources of long-run growth, each of which involves an externality associated with some activity. Examples include human capital accumulation through either learning by doing or education and technological advance through R&D activities.

Additionally many policy makers and academics contend that foreign direct investment (FDI) can have important positive effects on a host country’s development effort, but that empirical evidence for FDI generating positive spillovers for host countries is ambiguous at both the micro and macro levels. In a recent survey of the literature, Hanson (2001) argues that evidence that FDI generates positive spillovers for host countries is weak. But Balasubramanayam et al. (1996) found that in developing countries pursuing outward-oriented trade policies, FDI flows were associated with faster growth than in those developing countries that pursued inward oriented trade policies (Laura Alfaro. “Foreign Direct Investment and Growth: Does the Sector matter?”).

A questions immediately arises relative our study and which we would like to answer is:

-What role does China-Africa trade relationship play in African countries economic growth?

 

-What is the contribution of Chinese outward FDI to host African countries economic growth?

 

II-2.The aim and Objectives

 

The need for base-line studies to assess the changing future impact of China on Africa and to the extent that trade links are an accurate reflection of the wider impact of China on Africa.

 

The main aim of this research is to understand the role of China in the economic growth process of African countries trough its trade relationship with those countries.

In order to achieve this, the key objectives are:

-See the Africa’s Position in International Trade.

-Present the statistics (data) on the Chinese net export with Africa.

-Measure and analyze volume and composition of trade between China and Africa.

-Measure the impact of the trade relationship on African countries trade balance.

-To examine the contribution of Chinese FDI on African countries economy.

-To determine whether FDI and ICT exerts different effects on African countries economic growth.

 

II-3.Expected finding

 

Since imports and FDI bring additional competition and variety to domestic markets, benefiting consumers, and exports enlarge markets for domestic production, benefiting businesses. Trade exposes domestic firms to the best practices of foreign firms and to the demands of discerning customers, encouraging greater efficiency. Trade gives firms access to improved capital inputs such as machine tools, boosting productivity and providing new opportunities for growth for developing countries.

We would expect to observe greater spillover effect through Chinese trade relationship with Africa on Africa economic growth. We also expect that Chinese FDI flows to Africa will tend to have a positive effect on African countries economic growth.

 

III-Literature context and issues:

China first became involved in Africa during the cold war, when it made friends and did business in parts of the world overlooked by the West and the Soviet Union. Its investment is paying off now in oil and raw material imports and markets for manufactured goods.

Since the 1960s, China has been rather consistent in offering assistance to African countries in agriculture, heavy industries, and infrastructure development. In recent years, Sino-African trade has enjoyed particularly rapid growth. As Paul Mooney reports, many African leaders, regarding China as a reliable friend who has suffered the similar imperialist aggression by Western powers, welcome investment and development teams from Beijing. Furthermore, the Chinese have not used their economic power to place political pressure on Africa. Skepticism, however, does exist. Some African scholars think that China is simply relaying the European colonial torch of purchasing raw materials from the continent and selling value-added products back, creating an unfavorable trade balance for Africa.

But “The Chinese are much more prone to do business in a way that today Europeans and Americans do not accept paying bribes and bonuses under the table. The researcher think that it will be much easier for some African countries to work with Chinese companies, rather than American and European companies, which are becoming more and more restricted by the publish what you pay initiative and others calling for better transparency” ( www.Catholicrelief.org).

While acknowledging such drawbacks, other Africans have welcomed the opportunity to diversify the continent’s external partnerships. They also appreciate the absence of explicit political or economic policy conditions on China’s part, in contrast to the sometimes heavy-handed approach of certain Western powers.

As to illustrate the landscape Macharia Gaitho, managing editor of the Kenyan daily Nation, commented  “As long as China is so willing to invest in Africa, we must not miss out on the bounty,” “But we must engage with our eyes wide open.” because : Charity and international aid will not solve Africa’s problems, but economic reform and growth can.(Allafrica.com)

 

China’s burgeoning relationship with Africa is alarming not only because it has facilitated Chinese energy and weapons dealings, but also because it is competing with U.S.–African trade. The China–Africa Cooperation Forum (CACF) was founded in 2000 to promote stronger trade and investment relations between China and African countries in both the government and private sectors.

 

In recent years, Beijing has identified the African continent as an area of significant economic and strategic interest. America and its allies and friends are finding that their vision of a prosperous Africa governed by democracies that respect human rights and the rule of law and that embrace free markets is being challenged by the escalating Chinese influence in Africa.

The love affair with China, however, may be sour as well as sweet. For countries that do not sit on oil or mineral deposits, higher commodity prices make life harder. Even for producers there are risks. A recent report by the World Bank argues that Africa’s new trade with China and India opens the way for it to become a processor of commodities and a competitive supplier of cheap goods and services to Chinese and Indian consumers. But another report, from the OECD (2005-2006), a club of industrialized countries, argues that China’s appetite for commodities may stifle producers’ efforts to diversify their economies. Oil rigs and mines create few jobs; it points out, and tends to suck in resources from other industries. And if Africa is to escape its vulnerability to the capricious movements of world commodity prices, it must start to export more manufactures. On this the World Bank adds its own warning: China and India must end their escalating tariffs on Africa’s main exports.

China is also bringing irresistible “some say unfair” competition to Africa. All over Africa Chinese traders can now be seen selling cheap products from the homeland, not just electronics but plastic goods and clothes.

The Chinese government has also actively promoted their own brand of economic development and reform model to African countries, encouraging government counterparts in several countries to visit China and learn from their experience. China’s efforts to encourage African governments to fashion their economic systems after their own is an important indication of the soft power that China hopes to ultimately project in Africa.

China’s soft power gambit can also be seen in its heavy investments in Africa’s educational systems, both by sending teachers to Africa and providing scholarships to African students from across the continent to study in Chinese universities. Between the start of the educational exchanges in the mid-1950s and 2000, 5,582 African students had enrolled in Chinese universities. These students typically spend two years learning Chinese, then study technical subjects, particularly engineering disciplines. Currently, about half of African students are pursuing advanced degrees. This support for education improves China’s image in many countries, builds grassroots support in local communities and a better understanding of China among the educated elite.

IV-Methodology and Hypothesis

 

The trade performance of individual countries tends to be a good indicator of economic performance since well performing countries tend to record higher rates of GDP growth. The majorities of developing countries has joined the World Trade Organization (WTO) and have taken initiatives aimed at opening their economies.

But the net effect of trade openness on economic growth has been and remains a subject of controversy.

Two issues are at the center of the debate: theoretical elaboration and empirical investigation.

On the theoretical side, since the time of Adam Smith through Ricardo and Solow, trade has been shown to allow a country to reach a higher level of income since it permits a better allocation of resources.

Imports bring additional competition and variety to domestic markets, benefiting consumers, and exports enlarge markets for domestic production, benefiting businesses.

But the benefits of international trade for economic growth and development are difficult to understate.

In models of endogenous growth, trade can impact upon growth by allowing access to the innovative products of other countries. Since most LDCs do little if any innovation it is primarily through trade with developed countries that they profit from higher levels of technological development. Also Foreign Direct Investment is viewed as a major stimulus to economic growth in

developing countries.

We will predict manufacturing imports of China to a sample of African countries over a 12-year period (1995-2007). To predict such imports we will use a variety of measures of trade, China FDI, the GDP and GDP per capita of the importer and exporter.

With computer programs such as SPSS, Eviews, Matlab and SAS the study will consist on quantitative analysis using secondary studies. The sample will consist on some African countries. This particular sample will be chose based on the availability of data for each of the variables need in the project for the countries in question

 

In order to analyze the China’s role in Africa economic growth the analysis will first applies numerical measures to evaluate the evolution the trade performance index of individual countries and the index of overall, after we will adopt the empirical studies on intra-industry trade (IIT); the level of IIT in an industry is usually quantified by the Grubel and Lloyd index (1975). We follow the same fashion in this study. The index of IIT in an industry is generally defined as:

  

In the equation, refers to unit value of exports, while  refers to unit value of imports at time t.

 

IV-1.Time-series data analysis

 

Hence there are several preliminary steps to using time-series data in econometric analyses.

In many cases, particularly with macroeconomic data, it is reasonable to conclude, on the basis of theoretical considerations and by looking at a plot of data against time that a variable is or is not growing. Such growth could occur via a deterministic time trend, or it could occur because the annual change in the variable is equal to a constant.

 

Initially it is essential to determine the form in which the data can be used for any subsequent estimation; in many instances using macroeconomic data in their levels leads to serious econometric problems. Time-series data typically contains a trend, which must be removed prior to undertaking any estimation. The traditional detrending procedure separates the trend from the cyclical component of the series. This procedure is appropriate for trend stationary (TS) time-series. However, many macroeconomic time-series are difference stationary (DS). DS type time-series are nonstationary and they contain unit roots. The DS type sequences must be differenced prior to any meaningful econometric estimation. If ordinary least squares (OLS) estimation techniques are applied to undifferenced DS type sequences, resulting error terms are serially correlated. This renders any subsequent hypothesis tests unreliable.

 

IV-2.Econometric Techniques:

 In order to examine the hypotheses, suitable econometric models are required.

Since the objective of this research is to test the Granger-causality of several variables, the test should be based on the appropriate multivariate times series models (could be VAR ?vector autoregression? or VECM ?vector error correction model?).

The examination procedures conducted in this paper is that, firstly, unit root test at the levels and first differences are conducted to determine whether each variable is stationary or non-stationary. Secondly, the Engle-Granger residual-based test tests the existence of cointegration among the variables for each country. Thirdly, if a cointegration relationship does not exist, VAR analysis in first difference is applied, however if the variables are cointegrated, the analysis continues in a cointegration framework. Finally, the Granger-causality test is conducted based on the chosen analytical framework.

 

Figure 3: depicts the methodology heuristics.

 

Therefore, the overall methodology is as follows:

- test if the system is stable, using the unit root tests

- if there are unit root tests on the series of variables, apply cointegration tests

- if cointegration is found, then obtain the VECM representation of the system and apply causality tests on this representation

- if there is no cointegration, simply differentiate the variables to obtain the VARD (vector autoregressive representation on differences) representation and apply causality tests of VARD representation

- if the systems is stable, the use of the simple, initial VAR representation for causality tests.

Some methodological problems still have to be solved. These regards how we should collect and represent the data, which should be the autoregressive order of the system, what variables the stochastic model should comprise.

 

IV-3.Aggregate Production Function

Observing from theory the possible growth promoting roles of both FDI and Trade, our data analysis is modelled in an aggregate production function (APF) framework. The standard APF model has been extensively used in econometric studies to estimate the impacts of FDI inflows and trade on growth in many developing countries. The APF assumes that, along with “conventional inputs” of labour and capital used in the neoclassical production function, “unconventional inputs” like FDI and trade may be included in the model to capture their contribution to economic growth. The APF model has been used by Feder (1983); Fosu (1990); Ukpolo (1994); Kohpaiboon (2004); Mansouri (2005); and Herzer et al (2006) among others.

Following Herzer et al (2006), the general APF model to be estimated is derived as:

                                             1

Where  denotes the aggregate production of the economy (real GDP per capita) at time t, and  are the total factor productivity (TFP), the capital stock, and the stock of labor, respectively. According to Lipsey (2001), the impact of FDI on economic growth possibly operates through TFP (A). Moreover, from the Bhagwati’s hypothesis (Bhagwati, 1985), any gains from FDI on TFP will surely be dependent on the volume of trade of a particular host country. Since we want to investigate the impacts of FDI inflows (FDI) and trade variables on economic growth through changes in TFP, we assume therefore that TFP is a function of FDI, M, X and, other exogenous factors. Thus:

                                              2

Combining equations (2) with (1), we get:

                                               3

 where  and are constant elasticity coefficients of output with respect to the  and From equation (3), an explicit estimable function is specified, after taking the natural logs of both sides, as follows:

                                               4

 where all coefficients and variables are as defined, c is a constant parameter, and  is the white noise error term. The sign of the constant elasticity coefficient  and ?are all expected to be positive. Equation (4) represents only the long-run equilibrium relationship and may form a cointegration set provided all the variables are integrated of order 1, i.e. I(1).

 

From equation (4) Y is defined as real GDP per capita; FDI is the value of foreign direct investment flows; X is the value of the current country export to China and M is the value of the current country import to China; L is measured as the volume of the total labor force; since a time-series on the capital stock is not directly available for African countries, K is proxied by the real value of gross fixed capital formation (GFCF). This proxy for capital stock has been used in many previous studies. See Balasubramanyam et al., (1996), Kohpaiboon (2004), Mansouri (2005) among others.

 

IV-4.ARDL Model Specification

 

In this Section, the Autoregressive Distributed Lag (ARDL) bounds testing approach proposed by Pesaran, et al. (2001) will be used to examine the dynamic relationship between FDI, import and export for the 8 African countries. As pointed out by Narayan and Narayan (2005), the bounds test which is based on the estimation of an unrestricted error correction model (UECM) has several advantages over the conventional type of cointegration techniques. First, the standard Wald or F-statistics used in the bounds test has a non-standard distribution under the null hypothesis of no-cointegration relationship between the examined variables, irrespective whether the underlying variables are I(0), I(1), or fractionally integrated. Therefore, the bounds test obviates the uncertainty associated with pre-testing for unit roots as it does not require the information for the order of integration of the variables. Otherwise, the ARDL approach can be applied whether the regressors are I(1) and/or I(0). This means that the ARDL approach avoids the pre-testing problems associated with standard cointegration, which requires that the variables be already classified into I(1) or I(0) (Pesaran et al, 2001). If we are not sure about the unit root properties of the data, then applying the ARDL procedure is the more appropriate model for empirical work. Second, it is more robust and is the more statistically significant approach to determine the cointegration relation when applied on a small sample study compare to Engle and Granger (1987) or Johansen type of cointegation methods that require large data samples for validity. Third, the short as well as long-run parameters of the model could be estimated simultaneously. Fourth, once the orders of the lags in the ARDL model have been appropriately selected, we can estimate the cointegration relationship using a simple ordinary least square (OLS) method. The UECM used in the present study has the following form as expressed in the below Equations.

 

On the basis, the conditional VECM of interest can be specified as:

                                                     5

 where ?are the long run multipliers,  is the drift, and  are white noise errors.

 

IV-5.Bounds Testing Procedure

 

The first step in the ARDL bounds testing approach is to estimate equation (5) by ordinary least squares (OLS) in order to test for the existence of a long-run relationship among the variables by conducting an F-test for the joint significance of the coefficients of the lagged levels of the variables, i.e., ?against the alternative

.We denote the test which normalize on Y by

. Two asymptotic critical values bounds provide a test for

cointegration when the independent variables are I(d) (where ): a lower value assuming the regressors are I(0), and an upper value assuming purely I(1) regressors. If the F-statistic is above the upper critical value, the null hypothesis of no long-run relationship can be rejected irrespective of the orders of integration for the time series. Conversely, if the test statistic falls below the lower critical value the null hypothesis cannot be rejected.

Finally, if the statistic falls between the lower and upper critical values, the result is inconclusive. The approximate critical values for the F-test were obtained from Pesaran and Pesaran, 1997, p.478).

In the second step, once cointegration is established the conditional  long-run model for  can be estimated as:

                                                6

 Where, all variables are as previously defined. This involves selecting the orders of the  model in the six variables using Akaike information criteria (AIC).

In the third and final step, we obtain the short-run dynamic parameters by estimating an error correction model associated with the long-run estimates. This is specified as follows:

                                                  7

 Here ??and  are the short-run dynamic coefficients of the model’s convergence to equilibrium, and ??is the speed of adjustment.

 

IV-6.Growth model

 

The purpose of the empirical analysis is to determine whether FDI exerts different effects on a country’s growth. Following Borensztein et al. (1998), Carkovic and Levine (2002), and Alfaro et al. (2003), we want to look at the direct effect of FDI on economic growth using cross-section regressions with 8 Sub-Saharan African countries for the time period 1995-2006.

Initially, as a benchmark, we calculated the impact of overall FDI inflows on economic growth based on the following equations:

                                                      8

 We pursue this analysis and test the direct impact of FDI had on the growth of two different countries sample divided as importers countries and exporter’s countries.

Growth here is the GDP growth.

 

Hypothesis:

1-  are positive.

2-The correlation between GDP and ICT is high.

3-The correlation between GDP and FDI is low.

4-there are no correlation between ICT and FDI.

  

Reference

 

1.Blomstram, Magnus, Steven Globerman and Ari Kokko.2000.The Determinants of Host Country Spillovers from Foreign Direct Investment,” CEPR Discussion paper No.2350

2. Branstetter, Lee G. 2001. “Are Knowledge Spillovers International or International in Scope? Micro econometric Evidence from the U.S. and Japan,” Journal of International Economics 53:53-79

3. Coe, D. and Helpman, E. (1995)”International R&D Spillovers”, European Economic Review, 39, 859-887.

4. Coe, David, Helpman and A. W. Hoffmaister.1997 “North-South R&D Spillovers,” Economic Journal 107: 134-149.

5. Xinhua He, Yongfu Cao: “Analysis and Forecast of World Economic Situation (2005-2006); Yellow Book of International Economy.

6. Xinhua He, Yongfu Cao: “Analysis and Forecast of the World Economy in 2006-2007”; Yellow Book of International Economy.

7. Grossman, G. M. and Helpman, E. (1991)“Innovation and Growth in the Global Economy”, MIT Press, Cambridge, MA.

8. Harry G. Broadman: “Africa’s silk road”; China and India new Economic Frontier.

9. Kao, C. (1999). “Spurious Regression and Residual-Based Tests for Cointegration in Panel Data”, Journal of Econometrics, 90, 1-44.

10. Kao, C. and Chiang, M.H. (1998) “On the Estimation and Inference of a Cointegrated Regression in Panel Data”, Working Paper, Center for Policy Research, Syracuse University.

11. Keller, W. (1998) “Are International Spillovers Trade-Related? Analyzing Spillovers among Randomly Matched Trade Partners”, European Economic Review, 42, 1469-1481.

12. Krishna, Pravin. 2003. “Are regional trading partners ‘natural’?” Journal of Political Economy

111: 202-226.

13. Liu, zhiqiang. 2002. “Foreign Direct Investment and Technology Spillover: Evidence from China” Journal of Comparative Economics 30:579-602.

14. SSB (State Statistical Bureau of China), Statistical Yearbook of China, Statistical Publishing House.

15. SSB (State Statistical Bureau of China), China National Science and Technology Committee, China Statistical Yearbook on Science and Technology, Statistical Publishing House.

16. OECD study, The Rise of China and India: What’s in it for Africa?

“Bottom of the barrel: Africa’s oil boom and the poor”, Catholicrelief.org.

17. Yuqing Xing. “Foreign direct investment and China’s bilateral intra-industry trade with Japan and the US” Bank of Finland, BOFIT, Institute for Economies in Transition. Discussion Papers 1.2007.

18. Laura Alfaro. “Foreign Direct Investment and Growth: Does the Sector matter?” Harvard Business School. April 2003.

19. Davidson, R. and MacKinnon, J.G. (1993) Estimation and Inference in Econometrics. New York: Oxford University Press, pp. 320, 323.

20. Gujarati, D. (2004). Basic Econometrics. 4th ed. New York: McGraw Hill, pp. 638- 640.

21. Stata (2003). Cross-Sectional Time Series. College Station, Texas: Stata Press, pp. 10, 62, 93, 224.

22. Testing Export-led Growth Hypothesis in Kenya: An ADRL Bounds Test Approach Mohan, Ramesh and Nandwa, Boaz. Bryant University, 03 November 2007.

 

 Links

-(Xinhua He, Yongfu Cao: “Analysis and Forecast of World Economic Situation (2005-2006))

-( Xinhua He, Yongfu Cao: “Analysis and Forecast of the World Economy in 2006-2007”)

-The main difference between these two types of time-series variables is the fact that TS type variables return to the deterministic trend function, whereas no such tendency exists with the DS type of time-series variables. Nelson and Plosser (1982) and McCallum (1993) provide a more detailed explanation of this point.

- A time-series variable is weakly stationary if its mean, variance, and covariance are finite, and if all of these are independent of time. If the variance increases over time, then the time-series becomes explosive. Given this fact, such time-series variables should not be used for hypothesis testing. For a further explanation of this point see Stock and Watson (1988), among others.

- Most of the variation in the data is across country, reflecting conditions that change slowly.

 

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