Does Chinese Loan Impede Economic Growth in Sub-Saharan Africa

This study examined the impact of Chinese loan on economic growth in sub-Saharan Africa (SSA) between 2000 and 2023. It employed varied methodologies such as Levin Chu co-integration method, causality technique, Generalized Method of Moment (GMM) and Panel autoregressive distributed lag estimating techniques. The estimated result shows that Chinese loan has a statistically significant and positive impact on economic growth in SSA. This result held, even when the study controlled for some intervening variables such as institutional quality, human capital, structural changes, gross fixed capital formation, natural capital, IMF and the World Bank loans. The findings are also robust after controlling for fixed effects, sample selection bias, reverse causalities, and other endogeneity issues. Finally, the OLS, estimated result shows that the increasing impact of Chinese loan was hardly affected by country specificity of the unobserved heterogeneity. The study recommends that SSA rely on Chinese loans for their infrastructural development. As institutional quality positively relates to growth, SSA should enhance their institutional quality as it stimulates economic activities and accelerates economic growth. The SSA government should also strengthen their human resources and exchange rate to boost economic growth in SSA.