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The impact of institutional quality on Chinese foreign direct investment in Africa

Author

Listed:
  • Andrew G Ross

    (Edinburgh Napier University, UK)

  • Maktoba Omar

    (Coventry University, UK)

  • Anqi Xu

    (George Watson’s College, UK)

  • Samikshya Pandey

Abstract

The purpose of this paper is to analyse the impacts of the host country institutional environment on Chinese foreign direct investment in Africa. As one of the few papers to explicitly address the role of institutions on China–Africa foreign direct investment, our results highlight that countries who are able to provide a politically stable environment and control levels of corruption exert the greatest effects on Chinese foreign direct investment. After controlling for firm level motivation, the findings also reveal that as Chinese economic development evolves so does the apparent strategic direction of their investment patterns with greater attention now being given to investment quality and return on investment, rather than simply acquiring and extracting natural resources. From a policy perspective, the findings suggest three areas of development to promote increases in, and the sustainability of Chinese investment in Africa. First, the implementation of mechanisms to better control levels of corruption. Second, the promotion of long-term political stability to reduce investor uncertainty, and third, increased investment in supply-side initiatives to boost host country productivity to reflect the changing nature of Chinese investment patterns in Africa.

Suggested Citation

  • Andrew G Ross & Maktoba Omar & Anqi Xu & Samikshya Pandey, 2019. "The impact of institutional quality on Chinese foreign direct investment in Africa," Local Economy, London South Bank University, vol. 34(6), pages 572-588, September.
    • Handle: RePEc:sae:loceco:v:34:y:2019:i:6:p:572-588
    DOI: 10.1177/0269094219882329
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    2. Essiane, Patrick-Nelson Daniel, 2020. "De l'Ancienne Economie Institutionnelle à la Nouvelle Economie Institutionnelle: une introduction à quelques débats [Old Institutional Economics and New Institutional Economics: an Introduction to ," MPRA Paper 102858, University Library of Munich, Germany.
    3. Oro, Oro Ufuo & Alagidede, Imoptep Paul, 2021. "Does petroleum resources or market size drive foreign direct investment in Africa? New evidence from time-series analysis," Resources Policy, Elsevier, vol. 71(C).
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    5. Enoch Kwaw-Nimeson & Ze Tian, 2023. "Institutional Quality, Foreign Direct Investment, and Regional Integration: Empirical Evidence From CEN-SAD," SAGE Open, , vol. 13(1), pages 21582440221, January.

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