What is China seeking from Africa? An analysis of the economic and political determinants of Chinese Outward Foreign Direct Investment based on Stochastic Frontier Models

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China Economic Review, ISSN: 1043-951X, Vol: 48, Page: 258-268

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Paulo Reis Mourao
Elsevier BV
Economics, Econometrics and Finance
article description
Chinese investment in the African continent is rapidly spreading. Unlike the Maoist proselytism that defined past diplomatic relations between China and a few African countries, the current distribution of current Chinese Foreign Direct Investment has economic motivations. However, our study also found that Chinese investors are attracted to the political and institutional particularities of each African country. Using Stochastic Frontier Models, it has been concluded that dynamic national markets with a large population and significant forest area are the most preferred for the allocation of Chinese Foreign Direct Investment in 48 African countries between 2003 and 2010. According to our results, the efficiency of this allocation can be maximized by increased political stability and regulatory quality, with government effectiveness being an additional factor required for this efficiency.