China’s Outward Foreign Direct Investment and the Ghana’s Export Performance

This paper examines the impact of Chinese outward foreign direct investment (COFDI) on Ghana’s sectoral export performance using panel data of eight sectors for the period 2000–2023. This study, contrasted to previous studies that have largely depended on cross-country evidence, provides sector-level evidence for Ghana and also explores the mechanisms through which COFDI may affect exports by testing the mediating roles of productive capacity and human capital, and the moderating role of institutional quality. To mitigate the small number of sectoral clusters, we use a fixed-effects panel model with a cluster-robust and Webb wild cluster bootstrap inference, as well as dynamic specifications and additional robustness checks.
Results suggest that when statistical dependence is taken into account, COFDI does not have a strong independent effect on sectoral export performance. Rather, the degree of trade openness emerges as the most powerful predictor of export performance. The mediation analysis indicates that COFDI does not enhance exports via sectoral productive capacity or human capital. Likewise, institutional quality does not usually enhance the COFDI-export relationship, but rather, political stability has a significant moderating effect that is opposite to the theoretical expectations. In addition, we find no evidence that COFDI has stronger export effects in service-oriented sectors than in capital-intensive sectors. These findings suggest that Chinese investment in Ghana is still largely domestic market and resource-based orientated rather than export platform production. The study contributes new evidence to the debate on FDI-led export growth in Sub-Saharan Africa by integrating mediation and moderation analyses within a sector-level framework. The study further emphasizes the need for policies that enhance domestic productive capabilities and export competitiveness rather than relying on foreign investment inflows alone to spur export transformation.

Chinese Outward Foreign Direct Investment, Export Performance, Sectoral Analysis, Ghana, Institutional Quality, Absorptive Capacity

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