Do Foreign Investments Promote Export Diversification in a Host Country? Evidence From China's Investment in Africa

Aliyu Buhari Isah

Review of Development Economics, 2026, vol. 30, issue 2, 1400-1417

Abstract: The heavy reliance of many African nations on a few export products (typically primary products) for export earnings often creates significant development challenges. China's participation in Africa has been steadily growing, presenting both opportunities and risks for the continent's economic progress. This study aims to analyse the impact of China's investment outflows on export diversification in a panel of 34 African nations between 2003 and 2019. By applying the instrumental variables estimation technique, this study finds that, although Chinese investments have continued to expand both in terms of destinations and sectors of various African countries, they have no significant influence on the export diversification of the host African countries. The study further finds that countries' absorptive capacities, including domestic investment, financial development, human capital, infrastructure, and institutional quality, greatly influence export diversification. However, there is significant cross‐country heterogeneity in the effect of these variables, depending on whether a country is a high recipient or low recipient of Chinese investments. Based on these findings, some important policy implications have been discussed.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/rode.70065

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:30:y:2026:i:2:p:1400-1417

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is currently edited by E. Kwan Choi

More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().