Trends and Growth Potential of the Attractiveness of African Countries to Chinese Foreign Direct Investment

Abstract

China has become one of the leading sources of FDI in Africa. However, the distribution of Chinese FDI across African countries is concentrated. This suggests that some countries are more attractive than others. In this study, we aimed to estimate the attractiveness of African countries to Chinese foreign direct investment, identify trends in attractiveness, and estimate the potential to improve country attractiveness to Chinese FDI. Our analysis is based on annual data for Chinese foreign direct investment in 42 African countries for the period 2008-2022. We used Data Envelopment Analysis to generate efficiency scores that measure a host country's attractiveness relative to peers. Our analysis also identified potential to improve attractiveness based on input and output slacks for each country. The average efficiency score, based on variable returns-to-scale technology, was 84.8%, indicating that African countries are highly attractive to Chinese FDI. However, the efficiency scores fluctuated over the study period; only five countries had consistently high efficiency scores. These include Mauritius, South Africa, São Tomé and Principe, the Seychelles, and Zambia. Our analysis also reveals potential to enhance the attractiveness of African countries to Chinese FDI. Policy-makers should therefore benchmark their performance against peer countries to learn and assess the performance of their investment promotion strategies.