Sustainable Development in Africa: The Contribution of Chinese Investment and Trade to Environmental Goods

ABSTRACT Drawing on green growth and technology transfer theories, this paper investigates the impact of Chinese investment and trade on the Comparative Advantage in Environmental Goods (CAEG) index in Africa, utilizing a panel data set of 30 African countries over 25 years. Employing robust econometric identification strategies, our findings reveal that Chinese investment and import significantly enhance the production and consumption of environmental goods, particularly in the renewable energy sector. Notably, the positive effects are more pronounced for direct investments compared to trade. The study also demonstrates that the endowment of natural resources amplifies the beneficial impact of Chinese investment and trade on the CAEG index, while institutional quality does not show a significant differential effect. These results are validated through the Two‐step System Generalized Method of Moments to address potential endogeneity concerns. The findings underscore the critical role of foreign investment, particularly from China, in advancing sustainable development in Africa.