Tracing the Legacy: China’s Historical Aid and Contemporary Investment in Africa
International Studies Quarterly, Forthcoming
55 Pages Posted: 4 Feb 2019
Date Written: November 2018
Abstract
In this article we depart from the classic model of foreign direct investment (FDI) determinants and examine the effect of socio-historical factors on FDI. We argue that past foreign aid projects confer social capital that constitutes specific resources available to investors in the present, increasing their preferences for host countries in which their home country has accumulated more social capital. We use new data on China’s historical aid in Africa to test these contentions, uncovering a positive, significant connection between China’s historical aid program in Africa (1956-1999) and contemporary (2000-2015) investments by Chinese companies. While China’s historical aid may have been politically driven, it has had important long-term consequences for its commercial investors. More broadly, these findings suggest a socio-historical explanation of the puzzle of why Chinese foreign investments deviate from conventional FDI patterns.
Keywords: Foreign Aid, Foreign Direct Investment, China and Africa
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