China's Foreign Direct Investment in Africa: Nurturing Sustainable Development or Exploitative Ventures?

Abstract

Chinese foreign direct investment [CFDI] in Africa is a controversial topic. There are some who believe that China’s economic involvement in Africa is crucial for economic growth within the region, while others fear potential ulterior motives associated with the investments. Regardless, Chinese enterprises spot a lot of potential in investments in Africa and the investments are expected to grow further over the years. The objective of this research paper is to analyze the impact of CFDI on economic growth and social development. By examining panel data covering CFDI stock, GDP per capita, and SDI Scores, 40 African countries are studied over the time period from 2007 to 2021. Our findings suggest that CFDI has a direct and an indirect impact on GDP per capita and the investments are thus believed to result in economic growth within the continent. The indirect impact occurs through the positive effect that Chinese FDI has on African SDI Scores. In conclusion, our results address the research gap regarding the relationship between CFDI, economic growth, and social dimensions of selected African societies.