An empirical analysis on the determinants of Chinese foreign direct investment in Africa

The aim of this thesis is to examine the determinants of Chinese foreign direct investment (FDI) in Africa from 2003 to 2020. In this context, the main motivation of the study is to determine how five different institutional quality indicators that represent the institutional quality of FDI recipient African countries affect Chinese FDI. The research is based on a panel data analysis of 38 African countries using Chinese FDI stocks as the dependent variable. The findings of the study indicate that the effect of market size on FDI is positive and statistically significant in all models. The fixed effects estimation results indicate that the natural resource ownership variable has a positive effect on Chinese FDI to African countries, while infrastructure development variable has a negative effect on Chinese FDI. When we examine the effects of institutional quality on FDI, the effect of political stability and rule of law variables on Chinese FDI to Africa found to be positive and statistically significant in the model estimated by the fixed effects estimator. The interaction term included in the model has a negative and statistically significant effect on FDI. This indicates that the effects of institutional quality and natural resource ownership on FDI are interdependent. Keywords: China, Africa, Foreign Direct Investment, China-Africa Economic Relations, Institutional Quality