The impact of institutional quality on Chinese foreign direct investment in Africa

A.G Ross, Maktoba Omar, Anqi Xu, S. Pandey

Research output: Contribution to journalArticle

Abstract

The purpose of this paper is to analyse the impacts of the host country institutional environment on Chinese foreign direct investment in Africa. As one of the few papers to explicitly address the role of institutions on China–Africa foreign direct investment, our results highlight that countries who are able to provide a politically stable environment and control levels of corruption exert the greatest effects on Chinese foreign direct investment. After controlling for firm level motivation, the findings also reveal that as Chinese economic development evolves so does the apparent strategic direction of their investment patterns with greater attention now being given to investment quality and return on investment, rather than simply acquiring and extracting natural resources. From a policy perspective, the findings suggest three areas of development to promote increases in, and the sustainability of Chinese investment in Africa. First, the implementation of mechanisms to better control levels of corruption. Second, the promotion of long-term political stability to reduce investor uncertainty, and third, increased investment in supply-side initiatives to boost host country productivity to reflect the changing nature of Chinese investment patterns in Africa.

Original languageEnglish
Pages (from-to)572-588
Number of pages17
JournalLocal Economy
Volume34
Issue number6
DOIs
Publication statusPublished - 1 Sep 2019

Keywords

  • Africa
  • Beijing consensus
  • China
  • foreign direct investment
  • geo-political foreign direct investment
  • governance
  • institutions
  • outward foreign investment

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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