China’s Outward Direct Investment in Africa

Abstract

This working paper was written by Yin-Wong Cheung (University of California, Santa Cruz), Jakob de Haan (De Nederlandsche Bank), XingWang Qian (SUNY, Buffalo State College) and Shu Yu (University of Groningen).

We examine the empirical determinants of China’s outward direct investment (ODI) in Africa using an officially approved ODI dataset and a relatively new OECD-IMF format ODI dataset. China’s ODI is found responding to the canonical economic determinants that include the market seeking motive, the risk factor, and the resources seeking motive. It is also affected by the intensity of trade ties and the presence of China’s contracted projects. A host country’s natural resources have an impact on China’s decision on how much to invest in the country rather than on whether to invest in the country or not. China’s drive for Africa’s natural resources is mainly a recent phenomenon and, probably, became prominent after the “Going Global” policy adopted in 2002.

Keywords: Market Seeking, Resources Seeking, Risk, Trade Relationship, Contracted Projects, Going Global Policy, Energy Procurement

JEL Classification: F21, F36, O53