Chinese FDI, Digital Adoption, and Labor Productivity in the Democratic Republic of the Congo: Evidence from Annual Time-Series Data, 2005–2023

Abstract

This study examines the relationship between Chinese foreign direct investment (FDI), digital adoption, and labor productivity in the Democratic Republic of the Congo (DRC) over the period 2005–2023. The analysis is motivated by the increasing importance of Chinese investment in African economies and the growing role of digital transformation in shaping productivity outcomes. Using annual time-series data, the study evaluates whether Chinese FDI inflows are associated with labor productivity, measured by output per worker, and whether this relationship remains robust after accounting for digital and structural factors. The empirical strategy is based on ordinary least squares estimation and includes baseline, structural, macroeconomic, and robustness specifications.The descriptive findings show that labor productivity improved over the study period, while Chinese FDI inflows remained highly volatile. At the same time, internet use, mobile subscriptions, insurance development, and capital formation generally increased, indicating broader structural change in the DRC economy. The baseline regression suggests that Chinese FDI inflows are positively associated with output per worker. However, this effect weakens after additional structural variables are introduced. In the final model, internet use and gross fixed capital formation emerge as the most robust predictors of labor productivity, while Chinese FDI inflows and insurance penetration lose statistical significance. Robustness tests further show that Chinese FDI stock is positively associated with productivity, implying that the long-term accumulated presence of Chinese investment may matter more than short-term annual inflows.Overall, the results suggest that the productivity effects of Chinese FDI in the DRC are conditional rather than automatic and depend on complementary domestic factors, particularly digital adoption and capital formation.