State-Directed Investment and Path Dependency: Analysing the Determinants of Chinese FDI in Africa in the BRI Era
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Authors
Nayonikaa Singhaal
Wassim Guerfali
Issue Date
2026
Type
Language
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Abstract
This study examines determinants of Chinese foreign direct investment in Africa over 2005-2021, focusing on corruption's role and the Belt and Road Initiative's (BRI) transformative impact. Using dynamic panel System GMM estimation on data from 53 African countries, we test "grabbing hand" versus "helping hand" hypotheses regarding corruption. Our findings reveal Chinese investment follows fundamentally different patterns than Western FDI. Corruption shows no statistically significant relationship with Chinese capital flows in either pre-BRI (2005-2012) or post-BRI (2013-2021) periods. Traditional determinants like market size, trade openness and economic freedom exhibit weak or insignificant effects. The most striking finding is powerful path dependency emerging post-BRI: lagged FDI coefficients transform from insignificant pre-BRI to 0.392 (p<0.01) post-BRI, indicating initial investment presence became the dominant predictor of future inflows. Natural resource abundance shows no significant relationship with Chinese investment, challenging extractive engagement narratives. These results suggest Chinese investment operates through strategic, government coordinated logic rather than market-seeking or institution-sensitive frameworks governing Western FDI. Policy implications: African governments seeking Chinese investment should prioritize establishing initial engagement and BRI integration rather than governance reforms or market liberalization attracting Western donors. Corruption reduction appears unlikely to increase Chinese capital inflows, while path dependency creates compounding advantages for countries securing initial investments.