Do Foreign Direct Investments affect Exports? The case of China’s involvement in the African economy

Abstract: China has over the last decades clearly increased its foreign direct investments (FDI) in Africa. This has gained public attention and the question has been raised whether China’s growing investments could be harmful for the local African economy. This study examines if China’s FDI in Africa has affected the African countries’ total product export. This is analyzed more in detail by investigating both the African primary export sector and the manufacturing export sector. Finally, it is examined if resource-rich African countries have experienced particular effects on its product export from China’s FDI. This is analyzed by using panel data for 31 African countries in the period of 2004-2015. In conclusion, the results show that Chinese FDI in Africa has contributed to the African countries’ total product export by promoting both the primary and manufacturing exports. Furthermore, the results show the same effect on resource-rich and non resource-rich African countries. The findings contradict the beliefs that China’s FDI in Africa would be harmful for the African countries in terms of product export.