Drivers and Motives for Chinese Outward Foreign Direct Investments in Africa

Abstract

The authors set out to empirically test the degree of Chinese investments in Africa by systematically examining the explanatory value of existing theoretical motivations for foreign direct investment (FDI) for the period of 2003–2009. All else equal, the authors find that African countries enjoy a higher likelihood of Chinese outward FDI than the rest of the world. Moreover, they find that Chinese firms invest in African markets for market-seeking, natural resource–seeking, and strategic asset–seeking motives; hence, the motives for Chinese FDI in Africa seem to match those of Western firms’ investments in global markets.

Key words:

• Chinese OFDI
• emerging markets
• internationalization
• psychic distance
• psychic distance stimuli

Notes

Note. Dependent variable: Chinese OFDI; t-values in parentheses.

†p < .10, *p < .05, **p < .01, ***p < .001.

In the present article, both of the terms China and Mainland China refer to the People's Republic of China (PRC). In this article, the PRC excludes the special autonomous regions of Hong Kong and Macau as the Republic of China Taiwan is referred to as a separate economy.

The definition of FDI in this article draws on UNCTAD; hence, FDI is an investment involving a long-term relationship and reflecting a lasting interest and control by a firm in an enterprise resident in a foreign country (UNCTAD, 2005).