Sino–Africa Trade Flows: Effect of Interaction Between Africa’s Population Density and Governance

Investigating the determinants of trade flows has been the focus of extensive literature in international economics. Early studies focus on the effect of the distance between countries. However, answers to many important economic questions depend largely on the extent to which market size and stability affect supply and consumption. This paper augments the gravity model with the interaction between population density and governance. It uses a panel dataset of 51 African countries from 2000 to 2019 to investigate the impact of the interaction between Africa’s population density and governance on Sino–Africa trade flows. The main results reveal that China’s exports to Africa and Africa’s openness with China are directly proportional to the interaction between Africa’s population density and governance. However, China’s imports from Africa are inversely proportional to the interaction between Africa’s population density and governance. Also, results reveal the polarization of Sino–Africa trade flows, causing the revaluation of the Chinese Yuan. All other things being equal, concurrent improvement in Africa’s population density and governance is a significant factor leading Africa to depend more on imports from China and reduce Africa’s exports to China. This paper suggests that the effectiveness of international trade policy reforms is conditional on implementing efficient mechanisms to balance global population density with improvement in good governance.