Chinese Outward Investment in Oil and Its Economic and Political Impact in Developing Countries

Abstract

Due to the rising demand for oil, China has been actively investing abroad in oil producing countries. This paper examines the impact of Chinese oil investment, focusing on the economic and political effects in the recipient countries in the developing world. By building on the existing FDI literature, I argue that the presence of Chinese oil investment may be helpful to the recipient countries ` economies but harmful to the quality of governance. The case studies of Sudan and Chad illustrate this dilemma. Using quantitative data on Chinese oil investment and on economic and political development, I find that in countries where Chinese oil investment is present, the economy is growing faster, but the level of corruption is heightened and the level of political accountability is reduced. Western oil investment also has a helpful economic effect, but does not carry a harmful political effect.