Departing from Classic FDI Models

New data reveals a surprising link: China's historical aid in Africa during 1956-1999 significantly influenced contemporary investments by Chinese firms across the continent between 2000 and 2015. This challenges conventional thinking about foreign direct investment (FDI) determinants.

The Social Capital Argument

Our analysis suggests that past aid programs built social capital in Africa, creating valuable assets preferred by modern investors. Even though China's historical aid was likely politically motivated, it had substantial long-term commercial benefits.

Key Findings

• A statistically significant positive relationship exists between historical Chinese aid and current investments across multiple African countries

• This connection holds despite the political origins of China's initial engagement strategy

• The findings provide new insights into how governments can leverage past interventions to shape future economic outcomes

These results highlight a non-economic pathway through which states influence investment patterns—by establishing long-term relationships that transcend immediate commercial calculations. They offer fresh perspectives on understanding China's evolving foreign policy and economic strategies.