Comparing the Determinants of Western and Chinese Commercial Ties with Africa

Image: Flickr, Richter Frank-Jurgen
Image: Flickr, Richter Frank-Jurgen

In recent decades, China has risen to prominence in the global economy with breakneck speed. For example, its foreign direct investment outflows have increased more than 250—fold since 1990 and its bilateral trade volume increased by a factor of 24 between 1992 and 2015.

Many have hypothesized that Chinese firms undermine the global drive to promote good governance in developing countries, and in Africa in particular, by targeting poorly governed countries for commercial ventures. This paper tests that hypothesis. It is the first to explicitly compare the determinants of Chinese and western commercial activities through quantitative modeling. It finds that governance quality among African countries plays a positive role in predicting their commercial activity, in terms of their foreign direct investment inflows, exports, and imports—with both western countries and China. It also finds that governance outcomes among African countries does not impact their commercial ties with China and the west differently. Out of the four governance indicators presented in the paper, only corruption controls systematically impact Chinese commercial activity differently than that of the west— western firms engage less than their Chinese counterparts with countries that suffer from higher corruption levels.

1 Jul 2019