The Missing Link: Unique Determinants of Chinese FDI in Sub-Saharan Africa

Abstract

This paper investigates the key determinants of both Chinese FDI and FDI from OECD countries into Sub-Saharan Africa (SSA). The empirical evidence is based on a panel data of 11 Sub-Saharan African countries for 10 years (2003 – 2012) across 9 OECD countries and China. The central concern of this paper is two-fold: to examine the determinants of Chinese FDI in Sub-Saharan Africa and to find determinants only specific to Chinese FDI. Using the random effects model, my findings indicate that while Chinese FDI is not natural resource-seeking in SSA, it is both market-seeking and aid-seeking when investing in SSA. Chinese FDI is also observed to Granger-cause unemployment in SSA countries. Furthermore, both health expenditure and government expenditure for SSA countries are determinants only statistically significant for Chinese FDI.