Research from the London School of Economics and Political Science has shown that Chinese investment in Ethiopia has contributed to the country’s economic growth in the medium term, while pointing at ideological biases as the possible root for anti-Chinese investment sentiment.
The paper, titled ‘The Impact of Chinese FDI in Africa: Evidence from Ethiopia‘, by Riccardo Crescenzi and Nicola Limodio, signals a heterogenous outcome from Chinese investment in Ethiopia, with both winners and losers among domestic companies, but an overall positive effect.
Companies operating in the same sector as the Chinese foreign investors were affected, as well as competitors, but on the other side of the coin, suppliers to the foreign companies benefited and expanded, the report highlights.
To substantiate the positive outcome of Chinese investment in Ethiopia, the authors also analyse the effect of Chinese FDI through the study of satellite night lights, ultimately showing that “in the medium run the positive effects of Chinese FDI outpace the negative effects”.
The report’s findings lead the authors to state that there are “some doubts on the fierce and oftentimes ideological debate around Chinese presence in Africa” and hopes that “this empirical contribution offers grounds for a fruitful, evidence-based discussion, and subsequent refinement of guidance surrounding optimal trade and investment policies”.