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The effect of Chinese foreign direct investment on Africa's industrialization process

Eugene Misa Darko (School of Economics and Management, Southeast University, Nanjing, China)
Kangning Xu (School of Economics and Management, Southeast University, Nanjing, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 15 December 2022

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Abstract

Purpose

This study empirically investigates the long-run and interactive effect of Chinese foreign direct investment (CFDI) on Africa's industrialization process.

Design/methodology/approach

The authors employed industry and manufacturing value-added (% GDP) as the dependent variables and applied the two-step GMM and panel-corrected standard errors' (PCSE) techniques involving a panel of 49 African countries from 2003 to 2020.

Findings

The industry value-added (% GDP) results show that the presence of CFDI propels industrial productivity by contributing to value-addition in the short and long run. Moreover, the study shows that the magnitude of the CFDI effect on industrialization is pronounced in the short-run when it is associated with labor and natural resources. This result reveals efficiency-seeking behavior of CFDI and the CFDI-Africa industrialization nexus is not primarily resource-driven. More importantly, the authors found human capital, electricity and political stability, as primary factors that magnify CFDI's effect on industrialization in the short and long run.

Originality/value

This study is the first to use macro-level data to empirically investigate and find the significant effect of CFDI on Africa's industrialization in the long run. More importantly, the authors investigated channels through which CFDI magnifies industrialization in Africa in the short and long run.

Keywords

Citation

Darko, E.M. and Xu, K. (2022), "The effect of Chinese foreign direct investment on Africa's industrialization process", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-02-2022-0327

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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