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Abstract
What are the dominant motives behind China's increasing financial presence in Africa in recent years? In this article, the authors present new quantitative evidence on Chinese outward foreign direct investment flows to 29 African countries in the period 2003–2006. They find that Chinese foreign direct investment is attracted to countries with large natural resources, and more so the worse the institutional environment of host countries. This is problematic in terms of development impact, as Chinese investment feeds into the institutional dysfunctions of resource-rich countries. However, China is not different from other investors in this respect; exploiting resources and weak institutions appears to be the name of the investment game in Africa.
Acknowledgments
The authors thank Line Tøndel and Elling Tjønneland for valuable input.
Notes
Source: Calculations based on data from UNCTAD.
Note. White standard errors in parentheses.
***p < .01; **p < .05; *p < .10.
Note. White standard errors in parentheses.
***p < .01; **p < .05; *p < .10.
There are various estimates of Chinese aid to Africa and the figures depend partly on how one treats loans from China Exim Bank. The increasing role played by China is not, however, in question. See Chapter 6 in Brautigam (Citation2009) for a recent discussion about the size and measurement of aid from China.
See the preface on China's African policy (http://www.fmprc.gov.cn/zflt/eng/zgdfzzc/t463748.htm). A Forum on China-Africa cooperation was established in 2000 as a platform for a new type of China–Africa partnership with the explicit objective of supporting long-term stability, equality, and mutual benefit between the partners. China's African policy is based on independence and noninterference but requires that the African countries do not recognize Taiwan.
Kaplinsky and Messner (2008) distinguish six channels: trade links, FDIs, finance, institutions of global and regional governance, migration, and environmental spillovers.
China's imports from Africa in all major primary commodity categories, except ores and metals, have increased more than its imports from the rest of the world (Mayer & Fajarnes, Citation2008, p. 87).
China is the world's third-largest net importer of oil after the United States and Japan. In 2006, the EIA forecast that China's increase in oil demand would constitute nearly 40% of the world total increase in demand.
FDI from state-owned companies constitutes 73%-83% according to Cheng and Ma (Citation2008). For examples of private Chinese FDI in Africa, see Wang (Citation2007, p. 18).
Calculations are based on FDI data from UNCTAD.
All data are based on UNCTAD data of actual investments.
This is not to say that the data on actual FDI flows from UNCTAD are free of measurement error. Moreover, Kaplinsky and Morris (Citation2009) discuss four types of Chinese investment activities in Africa, suggesting not all of these are covered by the official investment data.
See Chakrabarti (Citation2001) or Blonigen (Citation2005) for reviews.
We have also run regressions using the log of Chinese FDI as the dependent variable, which does not qualitatively alter the results.
The t-tests of the linear hypotheses that the marginal effects of institutions and natural resources are equal to zero are rejected at resource levels above 0.13 and institutional levels below −0.78, respectively.