ABSTRACT
The chapter investigates the effect of growing Chinese engagements in Africa on value-added manufacturing and industrial growth in Africa. More specifically, the chapter investigates first, the effects of China’s investments, trade, loans, and financing of infrastructure in Africa on manufacturing and on overall industrial sector growth in Africa. Second, the chapter examines the potency or effectiveness of Chinese activities on industries within a different enabling policy and institutional context (such as political stability, government effectiveness, and control of corruption or rule of law). Using data from 40 African countries that span from 2003 to 2016 and applying an autoregressive distributed lag model and a pooled mean group estimator, the study reveals a range of interesting findings. The study finds generally that Chinese activities, such as exports, FDI, and infrastructure contracts in Africa have a positive impact on industry growth but only in the short run. In the long run, however, Chinese activities have a repetitive negative influence on manufacturing and industry GDP growth. Further, the negative impact becomes more pronounced in the context of weak institutions, inadequate government effectiveness, and corruption. These findings suggest that without a stronger institutional and governance framework, Africa cannot benefit from China’s growing influence on the continent.
