The Effect of Chinese Foreign Direct Investment on African Countries

Abstract

How are African countries affected by the inflow of Chinese foreign direct investment? The aim of this paper is to explore the dynamics between Chinese FDI and measures of economic growth in recipient African nations, namely capital stock, unemployment, life expectancy, and educational attainment. The results show no statistically significant relationships between these variables, controlling for GDP growth as well as country and year fixed effects. To account for such a lack, the analysis then moves towards a study of offshore bank account trends. The findings suggest that surges in Chinese FDI are linked to 4.5% increases in haven deposits for the receiving countries within the same year, in opposition to no surge in non-haven centers.