The battle for Africa: The effect of the “One Belt One Road” initiative and Chinese foreign direct investment on African economic growth

Abstract

This research paper empirically investigates the relationship between Chinese FDI and GDP per capita in African countries that participate in the One Belt One Road initiative. With the use of a dynamic panel data model on a sample of 54 African countries from 2006 to 2020, this paper finds that participating in the OBOR initiative significantly increases Chinese FDI in all years of joining. However, no significant results have been found regarding the effect of CFDI on an OBOR country’s growth. Additionally, the study finds that the FDI value contribution by Chinese state-owned enterprises towards OBOR countries is larger compared to privately owned enterprises. Lastly, this study investigated the effect of natural resources on Chinese FDI, finding no significant results. From a managerial perspective, this study suggests that managers should take into consideration the cultural and institutional differences between China and African countries when engaging in FDI. The review of the literature and the study results suggest that further research is needed by broadening the models used to see how the OBOR strategy evaluates and how certain factors influence the African countries.