Chinese outward foreign direct investment in Africa. Its determinants and the impact of the One Belt, One Road initiative.

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Author: Elisabetta Di Vito; [2019]

Keywords: Business and Economics;

Abstract: In the past two decades, African countries have become the destination of increasing investments of Chinese multinational enterprises. This phenomenon is supposed to be strengthened under China’s One Belt, One Road, a strategy announced in 2013 with the aim of stimulating commercial relations among Asia, Europe, and Africa. Research, however, has not kept up with these developments. This study attempts to fill such gap by empirically studying the factors that determine Chinese investment in African countries, and by investigating the impact of the One Belt, One Road on the amount of such investments. The hypotheses are tested by analysing 51 African countries through the use of panel data regression. The results obtained indicate that Chinese investors are attracted by host countries’ natural resource endowment and market size, and are dissuaded by the presence of a high rate of inflation, while no evidence was found for political risk. Regarding the One Belt, One Road initiative, no effect was observed for Africa as a whole, but a regional analysis reveals its positive impact on investment inflows in the Northern and Eastern regions, which might be justified by the advantageous geographic position of these regions.

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