Determinants Of Chinese FDI In Southern Africa

The existing literature shows that in this new world economy mainly driven by globalization,developing countries especially those in Africa have shown less competitiveness in attracting Foreign Direct Investment(FDI).While there is some literature on the determinants of FDI in Africa,there is greater emphasis on general FDI and little attention has been paid to investigate determinants of Chinese FDI in Southern Africa and Southern Africa in Particular.The lack of scholarly investigation of determinants of Chinese FDI to Southern Africa provides an important rationale for focusing on this region.This study attempted to address this lacuna by investigating the main determinants of Chinese FDI in Southern Africa.After a critical assessment of available literature,the study focused its attention on Market Size,Natural resource endowment,political institutions and macro-economic stability as the main variables.The study employed a quantitative method in order to better profile these main determinants.In order to get a balanced sample;this paper employs rate of exports,residual debt,rate of labour force,telephone line(per every 100 people)and rate of rural land for host country,as control variables.This study provides panel data evidence on the determinants of Chinese Foreign Direct Investment(CNFDI)for a sample of 9 Southern African countries over the period from 2003 to 2012.Using panel data estimation techniques,the study identifies a number of factors that affect Chinese FDI flows to Southern Africa and these are market size(per capita GDP),natural resource endowment,political stability,and exchange rate volatility.The study therefore,recommended that governments in southern Africa needed to grow their economies to expand markets,encourage extensive exploration of minerals and ensure a stable and more secure political environment,among others,in order to attract more FDI from China.