Impact Beyond Borders: Analyzing the Spatial Spillover of Chinese Investment on Poverty Alleviation in Africa

Amidst a significant global political shift and the Belt and Road Initiative, China’s foreign direct investment (CFDI) in Africa has surged. Yet, its impact on poverty alleviation remains contested due to a neglect of spatial interdependence in prior research. This study examines the spatial spillovers of Chinese FDI on African poverty in a sample of 39 countries from 2003 to 2022. Through the use of spatial econometric models, the study concludes that (1) CFDIs from neighboring countries contribute positively and significantly to poverty alleviation; (2) human capital development from proximate countries significantly influences the CFDI–poverty reduction nexus of the host country; (3) estimates from the marginal effect demonstrates that African countries are increasingly interconnected, with poverty levels in one country being influenced by the determinants of poverty in neighboring countries; and (4) the empirical results provide strong evidence of significant spatial spillover effects of poverty in the region. The study recommends that African governments implement policies to enhance cross-border trade and investment cooperation to facilitate the diffusion of knowledge and technology from CFDI. Establishing or supporting regional clusters, such as special economic zones, coupled with robust local capacity-building initiatives embedded within FDI agreements, is also important.