A Study On The Determinants Of Chinese OFDI To Selected African Countries

In this research work we sought to study the determinants of Chinese OFDI flow to African countries.We conducted panel data analysis for 36 countries covering the span of time(annual data)from the year 2003 to 2017.We began by running a static Fixed Effects(FE)model which,following results of the Durbin Watson static,it was necessary for us to go for the dynamic panel data model that was estimated by the Least Squares Dummy Variables.The study found that,the determinants of Chinese OFDI flow to Africa are mainly natural resources,market size,urbanization,infrastructure and Chinese FDI received in the past year.Also,it was found out that,host country institutional quality(especially control of Corruption and rule of law),economic instability(inflation)and trade openness have no significant influence on Chinese OFDI flow to Africa.Moreover,it was found out that Chinese OFDI is composed of both SOEs and POEs.While the resource-seeking Chinese OFDI flock to resource-rich African countries;their market-seeking counterparts mainly go to the African countries which have relatively bigger market size(higher GDP per capita).The practical implications of this study are twofold.For the African policy makers,since most Chinese OFDI to Africa is resource-seeking,they should formulate sound policies regarding natural resource extraction so as to obtain not only short-term benefits,but long term(sustainable)development for their(African)economies.More so,African governments should continue to formulate policies that are geared at increasing market size,improving infrastructure,and improving their investment climate so as to attract not only Chinese FDI but rather FDI from practically all over the world.For Chinese investors,Africa is a good destination for Chinese OFDI since there are abundant raw materials as well as markets for manufactured goods.Most importantly,the Chinese companies stand a better chance to win a number of infrastructure projects that are going on in the African countries.The majority of these projects are supported by the Chinese government.