Driving economic growth in African countries: Do Chinese OFDI sectors matter?

Abstract

BackgroundRecent years have witnessed a growing interest among academics and policymakers in understanding the mechaninsms through which Chinese outward direct investment (OFDI) impact economic growth in Africa.MethodThis study utilzes a dataset spanning 41 African countries from 2005 to 2020,employing panel‐corrected standard error (PCSE) and quantile regression.ObjectiveThis study explore the mechanisms through which Chinese OFDI stock contributes to economic growth in Africa,with a particular focus on financial development and transport infrastructure.ResultsThe results indicate a significant and positive impact of the interaction between Chinese OFDI stock and both financial development and transport infrastructure on economic growth. The subregional analysis reveals varying correlations across regions, while the quantile regression analysis demonstrates a stronger effect on economic growth as we move to higher quantiles.ConclusionThe study underscores the importance of enhancing infrastructure and financial sector development to attract more Chinese OFDI and maximize its positive impact of economic growth in African nations. Hence, we recommend that African countries improve the infrastructure and financial sector of their country to attract more chinese OFDI and also enhance its effectiveness on their economic growth.