Powering Africa: China’s OFDI and energy poverty

Energy poverty, frequently defined as a lack of access to energy sources for essential services, is considered a major global challenge for sustainable economic growth and human well-being. Within the CES utility function and the Melitz heterogeneous-firm theory, this study estimates how China’s OFDI activities affect and alleviate energy poverty in African countries. With the help of the 1282,684 enterprise-country-year and 98,566 city-country-year pair observations from 2009 to 2021, this study reveals the following conclusions: (1) China’s OFDI can alleviate the energy poverty situation, with city-level OFDI aggregation generating a more stable effect than individual enterprise investments. (2) Regarding energy poverty dimensions, energy production has a more positive effect than energy accessibility and energy consumption. As for investment types, market-seeking OFDI shows a stronger improvement effect than resource- and asset-seeking investments. (3) Infrastructure construction has a better mechanism effect than technological upgrading. (4) In the institutional fabric, government efficiency and investor protection have a single threshold positive influence on the energy poverty reduction. This study adds to the expanding research on the real effects of cross-border investment by developing a normative theoretical link between OFDI and energy poverty. At the crossroads of sustainable development, bridging the energy poverty gap through international investments will be incredibly beneficial.