Do Chinese Infrastructure Loans Promote Entrepreneurship in African Countries?

Image: Flickr, Tim Lam
Image: Flickr, Tim Lam

This paper examines the impact of Chinese economic infrastructure loans on entrepreneurship for a sample of African country recipients.

A panel dataset spanning the period 2006-2018 is used to conduct the empirical analysis. Consistent with the hypothesis that Chinese economic infrastructure loans promote entrepreneurship by reducing infrastructure related costs and by enabling business opportunities, the findings demonstrate that African countries with a higher percentage of economic infrastructure loans in gross domestic product have greater entrepreneurship in the form of new business startups. In addition, the results also demonstrate that new firm creation is significantly lower in African countries with greater regulation-driven barriers to entry, poor institutional quality, and restricted access to private sector credit.

1 May 2021