The transformed relevance of economic freedom in Africa and influence from Chinese FDI : A fixed effects panel data study from 2009 to 2019

Sammanfattning: During the last 20 years there has been a rapid increase of Chinese foreign direct investment (FDI) in Africa. Through examination of published research, we discover that Chinese FDI does not appear to clearly follow traditional assumptions of FDI. Especially in relation to economic freedom. This uncertainty, combined with lacking empirical research and limited available data in the region, led us to the aim of this work. We have set out to examine whether economic freedom is a determinant of Chinese FDI in Africa. For this purpose, a biennial panel data study for the years 2009 to 2019 was constructed. Fixed effects models using indices for economic freedom and relevant control variables are employed. The results show that economic freedom as defined by the Fraser Institute has a negative effect on Chinese FDI. Further, high levels of regulation reduces Chinese FDI. These findings stand in contrast to traditional theory on FDI determinants.