Impacts of China’s Foreign Direct Investment in Sub-Saharan Africa

This paper examines the impacts of foreign direct investment, as well as China’s FDI on GDP growth of Sub-Saharan African countries from a macroeconomic perspective. By using the data from 44 Sub-Saharan African countries from 2003-2010, our GMM results show that neither China’s FDI nor FDI net inflow in SSA has significant effect on economic growth of SSA countries. The possible explanations about the insignificant results include crowding out effect of China’s FDI on domestic investment, the declining in outward FDI in traditional sectors and rising in service sector which ignored in the current model, and the types of sectors in which Chinese FDI has been concentrated. We also test other economic growth determinants of SSA countries based on growth accounting theory. Our results also show that capital stock per labor has persistent and significant positive impacts on SSA’s growth. In addition, capital per worker is another important determinant in growth