Effect of Chinese Foreign Direct Investment on Development in Sub-Saharan Africa

Abstract

Chinese foreign direct investment (FDI) in Sub-Saharan Africa (SSA) has grown rapidly over the past two decades, sparking debate over whether it meaningfully supports economic development or instead fosters enclave projects with limited local benefits. This thesis offers a comprehensive econometric analysis of Chinese FDI in SSA using both country-level and industry-level data, extending through 2022. We investigate how Chinese capital influences key outcomes—ranging from short-term infrastructure and trade gains to longer-run indicators like GDP growth, export complexity, and industry-specific spillovers. Despite prior assumptions that Chinese FDI might concentrate in resource-rich, weak-governance contexts, our regressions find no robust link. Moreover, using multiple measures of Chinese FDI across industry-specific analyses and event study designs, we find largely null or marginal effects on local outcomes, including only limited evidence of positive spillovers in the Construction industry. These findings suggest that Chinese FDI alone rarely drives transformative growth, highlighting the need for strong institutions, complementary policies, and sectoral integration to unlock potential advantages of Chinese investment in SSA.