China's FDI in Africa

Observers view the expansion of China’s relationship with African countries not only from its perspective as a multifaceted endeavour but also from the nuances extant in the academic and non-academic professional circles. The factors underlying the relationship have created debates across diverse academic disciplines including trade and finance, development, Peacekeeping and global security, diplomacy as well as in the areas of geopolitics and technology transfer. These discussions and debates emerged after China’s aid and investments in Africa increased with incredible annual surges; thus
attracting global attention. Drawing on the background of those discussions, this study aims to contribute to the ongoing debate by producing the perceptions (pros and cons) of individuals unrelated to official voices and state policies with regard to China’s exploitations of African resources and the oft cited Chinese policy of ‘no strings’ attached.
Keywords: China-Africa relations, development, FDI, ‘no strings’, US, West

This paper investigated the determinants of China's FDI flow towards Africa's oil/minerals exporting countries from 2003 to 2017 using the UN-Comtrade Harmonized System (HS) nomenclature trade data and UNCTAD China's FDI data to examine the extent to which sector trade, institution and other variables determine China's FDI. The econometric approach employed for the outlined model is random effects, generalized least squares and instrumental variable two-stage least squares. For the trade variables, the findings indicate that oil/minerals have higher magnitude and a positive significance to support the effect on the FDI flow. In other words, China's FDI flow in Africa is inclined towards the extractive sector. Furthermore, the institutional quality finding is negative and significant to justify the upsurge of Chinese investment in weak politically stable regions.