The Impact Of Chinese Foreign Direct Investments On African Economies

This paper examines the impact of Chinese foreign direct investment(CFDI)on Africa’s agriculture industry.The paper also investigates the relationship between agriculture and economic growth.Annual panel data from 15 African countries: Ghana,Mauritius,Mozambique,Tunisia,Morocco,Nigeria,Uganda,Cameroon,Democratic Republic of Congo,Gabon,Senegal,Egypt,South Africa,Zambia,and Rwanda are used to test the significance of China’ FDI inflows on agriculture value added-to-GDP ratio and the relationship between economic growth and agriculture value added-to-GDP ratio in Africa from 2003 to 2020.Control variables include factors such as gross fixed capital formation,inflation rate,trade liberalization,and population.The research utilizes many approaches for inference.Specifically,we employ Pedroni’s(1999,2004)panel cointegration technique;Pesaran et al(1999)MG,PMG and DFE technique;Juodis,Karavias,and Sarafidis(2021)Granger noncausality approach and Kao and Chiang’s(1999)DOLS approach;the FMOLS approach.The panel cointegration test demonstrates that cointegration exists in our dataset.Interestingly,empirical findings of the panel ARDL model and the two-step system GMM model indicates that CFDI inflows have a positive and statistically significant influence on Africa’s agriculture value added-to-GDP ratio.Unsurprisingly,the results also show that there is a positive relationship between real GDP growth rate and agriculture value added-to-GDP ratio.The robustness check from the DOLS and FMOLS estimators backed the empirical results of the panel ARDL model.The empirical findings also demonstrate that there is significant Granger non-causality from China’s FDI to agriculture and from economic growth to agriculture.This suggests that an increase in Chinese FDI inflows will increase agricultural value-added and economic growth in Africa.As a result,this study concluded that the agriculture industry is essential to Africa’s economic growth.Measures to attract more Chinese FDI aimed at increasing agricultural productivity are urgently needed.The study’s findings will contribute to the economic development literature by addressing an important but understudied research context: agricultural development through a foreign direct investment to support job creation and overall economic growth,focusing on the African agriculture industry.As a result,the study recommends that African countries develop their agricultural sectors to be more exportoriented,putting them in a position to make the best value for export,not the raw material,but the semi-finished material or even a much more refined material.This can potentially impact our economic development and attract more FDI significantly.