EXPLORING CHINESE-FINANCED INFRASTRUCTURE AND ITS IMPACT ON THE REAL GDP PER CAPITA GROWTH OF SUB-SAHARAN AFRICAN COUNTRIES

Open Access
Author:
Asghar, Raza Mohammed
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Brian Davis, Thesis Supervisor
  • Brian Davis, Honors Advisor
  • Robert A. Novack, Faculty Reader
Keywords:
  • finance
  • infrastructure
  • china
  • africa
  • economics
  • gdp
  • real gdp growth
  • investment
  • global
Abstract:
Following the decade-long trend of Chinese-financed infrastructure in sub-Saharan Africa, economists have evaluated the impact that such deals have on the economic and social development of the region. Existing literature shows that there are mixed effects of China’s involvement in the subcontinent. Supporters cite China’s ability to disburse funds and begin construction of hard infrastructure at a pace unmatched by traditional donors like the OECD and the United States. Meanwhile, critics argue that China is unethically operating in the region, looking only to expand its own workforce and construction capacity at the expense of unstable African nations. This paper focuses on how several explanatory variables such as dollar amount of investment and governance ranking of a country affect that country’s four-year, real GDP per capita growth. The results of the two linear regressions suggest varied results. Overall, Chinese-financed infrastructure results in more economic growth in countries that have strong governance. In addition, unofficial, non-concessional Chinese investment results in greater economic growth. However, when considering the size of the investment, large amounts of unofficial aid are detrimental to a country’s real GDP per capita growth. Connecting the regression results with present literature, the paper concludes with recommendations for China and external financiers looking to fund infrastructure in sub-Saharan Africa.