Econometric Analysis of the Determinants of China’s FDI in Oil/Minerals Exporting Countries in Africa

Abstract

The unprecedented rise in China’s Foreign Direct Investment (FDI) stocks to resource-endowed countries in Africa from the beginning of the new millennium has generated considerable debate on the motive. Most of the existing studies on the determinants of China’s bilateral foreign investment in Africa are qualitative. While the quantitative analyses studies are limited due to data availability. We use longer time span disaggregate FDI data to empirically examine the extent to which exports, institutional quality and other explanatory variables determine China’s FDI in oil/minerals exporting African countries. We find out that, of all the exports variables, oil and agricultural exports, facilitate most of China’s foreign investment. Moreover, the institutional quality variable (political instability) has an overall negative and significant impact on FDI. This indicates that a strong political stable region has a discernible effect on Chinese FDI.