Chinese investment in East Africa: History, status, and impacts

ABSTRACT

This paper investigates the development trajectory of Chinese investments in two East African countries and their implications for technology transfer. It traces the transformation of Chinese economic engagements with Africa since the early independence era. Most Chinese investments were established in the past decade, except for a few aid-driven investments created in the 1970s and those made by the first wave of Chinese expatriate entrepreneurs to East Africa in the 1990s. These recent investments have concentrated in construction-related industries, export-oriented garments industry, plastic recycling and reprocessing, and agro-business. In terms of technology transfer, there are local training efforts and signs for intra-industry spillovers. Large-scale Chinese investments or development projects have established formal training programs with explicit localization targets and are more likely to collaborate with government agencies or vocational training institutes. Moreover, horizontal and vertical spillovers have also taken the form of the development of sub-contracting, local supply, distribution networks, and imitation by local firms. Nevertheless, those industry-level spillovers are less systematic due to the limitations of local investors’ financial and technological capacity.

KEYWORDS:

• China-Africa relations
• technology transfer
• foreign investment
• economic development

Acknowledgements

This paper is based on a multi-year research project sponsored by the China-Africa Research Initiative of Johns Hopkins University with a grant from the Department of International Development of the UK government.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. 统计公报 2003; 2018.

2. UNCTAD’s World Investment Report 2019.

3. Chengqi Wang, Ziliang Deng, Mario l. Kafouros, Yan Chen, Reconceptualizing the spillover effects of foreign direct investment: A process-dependent approach, International Business Review, Vol 21(3), June 2012, Pages 452–464.

4. There is some discrepancy between statistics of the Chinese government and that of the Kenyan government. The Chinese statistics shows the value of Chinese investment stock in Kenya to be $25 million in 2003, while the Kenya statistics provided by the KenInvest was 11 million USD by 2003.

5. 我大使馆就肯尼亚副总统亲自出马反华向肯政府提出最强烈抗议, People’s Daily, 22 August 1967; Brief Introduction of China-Kenya Bilateral Relationship, Chinese Embassy in Kenya, http://ke.chineseembassy.org/chn/sbgx/t513269.htm.

6. Estimates provided by the Chinese Chamber of Commerce in Tanzania.

7. Estimates provided by the Chinese Chamber of Commerce in Kenya.

8. Interviews with management at Sunda Kenya in 2017 and 2019.

9. World Bank data of SSA textiles and clothing exports, https://wits.worldbank.org/CountryProfile/en/Country/SSF/Year/LTST/TradeFlow/Export/Partner/by-country/Product/50-63_TextCloth.

10. Kenya plastic bag ban comes into force after years of delays, BBC (Aug 278, 2017), https://www.bbc.com/news/world-africa-41,069,853.

Additional information

Funding

This work was supported by the John Hopkins University School of Advanced International Studies (SAIS), China-Africa Research Initiative (CARI).

Notes on contributors

Ying Xia

Ying Xia received her S.J.D. from Harvard Law School. Her doctoral thesis examines the socio-legal implications of Chinese investment in African countries. During her study at Harvard, Ying was also awarded the Yong K. Kim ’95 Memorial Prize for her work on the connections between China’s environmental campaign and the international trade in waste. She also received an LL.M. in international law and an LL.B. from Peking University. Ying’s research interest includes environmental law, international law, and law and public policy, with a focus on experience from developing countries.