Analysis of Sino-Tanzania Trade Relations: The Gravity Model Approach

Abstract

Abstract This paper explores the bilateral trade relations between Tanzania and China by examining the trend, intensity, and the determinants of the Tanzania exports to China from 1988 to 2018. It augments the traditional Gravity Model of bilateral trade and employs the dynamic Autoregressive Distributed Lag and Error Correction Model techniques. In general, the two partners have witnessed a tremendous trade increase over time. Empirically, the influence of Tanzania’s economic size and foreign inflows on exports are significant in the short and long run. Specifically, the effect of the economic size is positive throughout, while foreign capital is positive in the short run. On the other hand, the estimated coefficients of the population, exchange rate, and relative distance are significant only in the long run. This study recommends expanding the national income and strategic FDI attraction, among others, to enhance Tanzania’s export capacity and eventually trade with China and the globe.