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On the importance of Chinese investment in Africa

Author

Listed:
  • Ficawoyi Donou-Adonsou
  • Sokchea Lim

    (John Carroll University)

Abstract

With the growing presence of China in Africa over the last two decades, this paper investigates the impact of Chinese foreign direct investment (FDI) on economic performance in Africa, which we compare to that of the traditional economic partners of African countries, including the U.S., France, and Germany. Also, we explore whether China’s new relationship with Africa has somehow altered the preexisting relationship between Africa and its traditional partners. Our results, using the fixed-effects and instrumental variable approaches to 36 countries over the period 2003–2012, indicate that Chinese FDI improves income in Africa. We also find that the impact is more pronounced for U.S. and German investment. Moreover, there is evidence that Chinese investment crowds out U.S. investment in Africa, whereas France seems to be competing with China. These results imply that as the Chinese economy grows, the demand for resources has increased its intensive competition with the U.S. rather than with France.

Suggested Citation

  • Ficawoyi Donou-Adonsou & Sokchea Lim, 2018. "On the importance of Chinese investment in Africa," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 8(1), pages 63-73.
    • Handle: RePEc:afj:journ3:v:8:y:2018:i:1:p:63-73
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    References listed on IDEAS

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    2. Helena Barnard & Kenneth Amaeshi & Paul M. Vaaler, 2023. "Theorizing international business in Africa: A roadmap," Journal of International Business Policy, Palgrave Macmillan, vol. 6(4), pages 389-407, December.
    3. Emma Serwaa Obobisa & Haibo Chen & Emmanuel Caesar Ayamba & Claudia Nyarko Mensah, 2021. "The Causal Relationship Between China-Africa Trade, China OFDI, and Economic Growth of African Countries," SAGE Open, , vol. 11(4), pages 21582440211, December.
    4. Ehouma Jacques Allou & Bosede Ngozi Adeleye & Jianhua Cheng & Rehman Abdul, 2020. "Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure," African Development Review, African Development Bank, vol. 32(3), pages 499-510, September.
    5. MUGABE Roger & Liu Shulin & Byringiro Enock, 2021. "The Impact of ICT Investment and Diffusion on Economic Growth: Empirical Evidence from Rwanda," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 7(4), pages 23-36, October.
    6. Geonwoo Park & Heon Joo Jung, 2020. "South Korea’s outward direct investment and its dyadic determinants: Foreign aid, bilateral treaty and economic diplomacy," The World Economy, Wiley Blackwell, vol. 43(12), pages 3296-3313, December.
    7. Bayari, Celal, 2020. "The Neoliberal Globalization Link to the Belt and Road Initiative: The State and State-Owned-Enterprises in China [alternative title: Bilateral and Multilateral Dualities of the Chinese State in the C," MPRA Paper 104471, University Library of Munich, Germany, revised 21 Jul 2020.
    8. Kimiagari, Salman & Mahbobi, Mohammad & Toolsee, Tushika, 2023. "Attracting and retaining FDI: Africa gas and oil sector," Resources Policy, Elsevier, vol. 80(C).
    9. Fan, Qiufang & Liu, Jintao & Zhang, Tao & Liu, Haomin, 2022. "An Evaluation of the Efficiency of China’s green investment in the “Belt and Road” countries," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 496-511.
    10. M. John Foster, 2023. "A fresh view of China’s OFDI, its motivations and risks thereto," SN Business & Economics, Springer, vol. 3(1), pages 1-19, January.
    11. Marvellous Ngundu & Nicholas Ngepah, 2020. "Comparative Effects of Foreign Direct Investment from China and Other Sources on Africa’s Economic Growth," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(4), pages 382-408, November.
    12. Solomon, Edna Maeyen & van Klyton, Aaron, 2020. "The impact of digital technology usage on economic growth in Africa," Utilities Policy, Elsevier, vol. 67(C).
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    More about this item

    Keywords

    Foreign direct investment; Standard of living; Africa;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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