This research examines the efficiency and
influencing aspects of China’s Foreign Direct Investment to Ghana using
quarterly time series data from 2003 to 2020. To achieve the objectives of the
study, a stochastic frontier model in which technical inefficiency impacts are
specified to be a function of Economic Index variables is estimated using the
generalized maximum likelihood approach. The mean technical efficiency of the
Chinese FDI to Ghana is 0.80. The correlation analysis reveals apart from GDP
per capita of China and Ghana, all other variables correlate positively with
Chinese FDI to Ghana. The results from stochastic estimates show all frontier
determinant factors are significant influencing factors of China’s FDI to Ghana
except Ghana’s GDP per capita. However, Ghana’s GDP, and China’s GDP per capita
had negative influence on China’s FDI to Ghana while China’s GDP, natural
resource rents to GDP and Ghana’s GDP per capita had positive impacts on
China’s FDI to Ghana. The analysis reveals that China’s overall performance to
Ghana is semi-highly efficient. The study
suggests expansion and attractive pricing policies, and natural resource
conservation program be put in place by the Ghanaian and Chinese government to
attract more Foreign Direct Investment while preserving natural resources.
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