Impact of Chinese FDI Stock on Urban Development of South African Cities

Abstract

The relationship between Foreign Direct Investment (FDI) and the indicators of economic growth of the host country has been a much-debated issue among researchers and policymakers. However, there seems to be a positive response from host countries to FDI inflows as evident from a long history and growth of FDI over the recent years. In recent years, China has established itself as one of the biggest investors with its outward investment policies, especially in the African and Asian continents. Most of the recent investments by China have focused on the infrastructure development of the host country, specifically South Africa. The Chinese FDI stock in South Africa has been increasing each year from 44.7 million USD in 2003 to 5.4 billion USD in 2020. This report examines if there I s any positive impact of Chinese FDI Stock in the Urban Development of South Africa. An Urban Development Index (UDI) has been formulated for the study using Principal Component Analysis of six different indicators of Urban Development in South Africa. Multiple regression analysis is then conducted using UDI as the dependent variable, Chinese FDI Stock as the Independent Variable, and Total FDI per Capita as the Control variable. The study concludes that there is a significant positive impact of Chinese FDI Stock on the Urban Development Index of South Africa.