SPILLOVERS OF CHINESE FOREIGN DIRECT INVESTMENT IN AFRICA: AN EMPIRICAL PERSPECTIVE

Abstract

In the last decade, there has been a continuous rising of China`s involvement in terms of investment and trade relation in Africa. Against this backdrop, this study examined the spillover effects of Chinese FDI inflows on African economic growth over the period of 1990 to 2018 within the framework of Autoregressive Distributed Lag model and Bounds test. This study utilized secondary data from UNCTAD investment report and World Development Indicator. Consequently, the results from this empirical study indicate that the past economic growth rate has a significant positive impact on the present economic growth rate in Africa. Further evidence shows that Chinese FDI inflow has a significant positive relationship with the rate at which the African economy is growing. However, gross capital formation has an insignificant negative relationship with economic growth rate. In the same vein, the openness of the economy has a significant negative relationship with economic growth rate. Consequently, the following recommendations are made based on the discovery in this study; the policy makers in African countries should embark on sustainable partnership with Chinese investors. Also, policy makers in Africa should give a preferential treatment such as free visas and less bureaucratic processes to Chines investors, this would facilitate sporadic inflows of investment from China.