Abstract
Since the establishment of the Forum on China-Africa Cooperation back in 2000, Chinese investment in Africa rapidly increased. Almost two decades later, the economic partnership between China and African countries is facing both opportunities and challenges. This paper studies the impact of cultural distance on FDI, in the specific context of China-Africa cooperation. We employ generalized least squares regression analyses to estimate the impact of cultural distance on Chinese Outward FDI in 40 African countries from 2003 to 2015. Our results indicate that cultural distance has a significant negative impact on Chinese investment in Africa. Furthermore, distance in two of the four cultural dimensions has a bigger impact on FDI: Masculinity/Femininity and Uncertainty avoidance. We conclude that from China-Africa perspective, cultural distance creates additional barriers to Chinese investment.
Highlights
The rise of China as a new power, bringing hope to other developing countries on one hand, and challenging the position of developed countries on the other, is probably one of the underlying reasons why there are tensions around the world
Our results indicate that cultural distance has a significant negative impact on Chinese investment in Africa
Distance in two of the four cultural dimensions has a bigger impact on Foreign Direct Investment (FDI): Masculinity/Femininity and Uncertainty avoidance
Summary
The rise of China as a new power, bringing hope to other developing countries on one hand, and challenging the position of developed countries on the other, is probably one of the underlying reasons why there are tensions around the world. In this challenging international environment, the economic cooperation between China and African countries is facing multiple challenges and opportunities at the same time. As a key area of this cooperation, Chinese investment in Africa rapidly increased. Chinese investment stock has even exceeded 30 billion US dollars, 60 times that of 20001
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