Assessing the moderating effect of natural resource rent on China foreign direct investment on economic growth in Africa

Abstract

In advancing sustainable economic growth, the affiliation between foreign direct investment and economic growth (EGR) has become increasingly prominent given the dual emphasis on attainment of sustainability development goals. The research evaluated the affiliation between China's foreign direct investment inflows (CFDI) and EGR in Africa. The research consists of 36 African regions for the period 2003-2023. The econometric model of Common Correlated Effect Mean Group, Driscoll and Kraay standard errors, and fully modified ordinary least square was employed to assess the affiliation between the variables and the direction of affiliation through the Durmitrus Hurlin causality test. The findings indicated that China's foreign investment inflow, human capital (HMC), and technological innovation (TINN) had a significant positive effect on EGR. However, trade openness (TRAD) and total natural resources rent (TNRR) had an inverse impact on EGR. Furthermore, total natural resource rents had a positive moderating influence on the affiliation between CFDI and EGR. The current research provides governments and institutions with the ability to develop policies on China's FDI inflows and natural resources to promote economic growth in Africa. By having bilateral cooperation, factors such as human capital, technological innovation, and trade openness will upsurge in the future.