Unpacking the competitive relations among Chinese business actors in Africa

ABSTRACT

Chinese outward foreign direct investment (OFDI) in Africa has attracted much discussion on the competitive relations between Chinese companies and their foreign or local counterparts. There is however limited research examining the increasingly competitive relationships among Chinese business actors themselves and the complex implications of their activities for African economic development. Existing studies often either treat Chinese actors as a homogeneous entity pursuing a collective, state-directed agenda or emphasize the collaborative networks among Chinese business groups during their transnational entrepreneurial expansion. This paper aims to fill this gap by investigating the nature and consequences of intra-Chinese competition in Africa. It draws upon a critical reading of multidisciplinary literature in international businesses, management studies and economic geography, an extensive review of empirical cases across Africa, as well as field research in Ethiopia and Nigeria. Findings shed light on the competitive interests, logics, and strategies of Chinese overseas actors in construction, telecommunications, manufacturing, and retail sectors, and identify the challenges associated with managing intra-Chinese competition and fostering positive economic impacts in Africa.

KEYWORDS:

• outward foreign direct investment
• overseas business
• competitive strategies
• economic development
• China-Africa relations

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. While Lee’s discussion of “encompassing accumulation” is anchored in the empirical case of Chinese state-owned enterprises, a recent study by Chen (2021) has found that certain high-profile Chinese private companies also pursue “profit optimization” instead of “profit maximization” to gain political influence in the host African country.

2. Spatial fix enables multinationals to lower production costs by relocating production sites, resulting in new investments in certain locations while leading to disinvestment in others. The organizational fix involves reconfiguring the production process on a global scale to leverage the competitive advantages of different places, resulting in globally integrated yet distinct economic spaces. Finally, the technological fix pertains to advancements in transportation and communication technologies, which nevertheless create technological disparities among firms and regions.

3. It is challenging to use specific search strings to identify a highly relevant pool of empirical cases because few studies in China-Africa literature explicitly focus on inter-firm relation. We started with a literature database of 1,078 papers that the lead author accumulated over the past eight years, and used text strings of “competition”, “inter-firm relations,” and “inter-firm competition” to identify literature with relevant discussions. We then searched the same keywords with added strings of “China-Africa,” “Chinese investment in Africa,” and “Chinese FDI in Africa” in Google Scholar to identify additional articles that were not captured in the existing database. The lead author reviewed all published articles to compile the empirical materials discussed in the paper.

4. The Export-Import Bank of China has offered ZTE about US$3.9 billion since 2000 for Information Communication Technology projects in 16 African countries, whereas Huawei has received about US$2.9 billion since 2004 for projects in 22 African countries (Tugendhat 2020).

5. The lead author’s field research in Ethiopia, however, found conflictual opinions among Chinese telecommunications managers on this issue. Some contended that the ownership status makes no difference since Chinese banks and telecom clients are market-oriented actors, while others believed that ZTE holds a stronger competitive edge given its government affiliation.

6. For example, in Ethiopia, ZTE offered a 1,000-engineers training plan to Ethio Telecom for free in 2010 as part of its US$1.9 billion national telecommunications development project. It later opened an information and communication technology (ICT) college in Addis Ababa. Huawei, similarly, signed a contract with Ethio Telecom in 2017 to open a local training center. In Nigeria, Huawei established various programs, including a 1,000 Girls in ICT program and a ICT for Change program.

7. Construction companies need to obtain a support letter from ECCO to bid for local projects. In cases of seeking financial support from Chinese banks, a letter of sponsorship is also required from the Chinese embassies or ECCO (A. Y. Chen 2009)

8. The table aims to draw broader patterns and allow for comparisons across sectors. However, it by no means offers a whole picture of intra-Chinese competition, especially considering the limited amount of empirical evidence provided in the literature. It also worth noting that the host country contexts in African countries are crucial in companies’ initial market entry strategies, and largely shape the level and types of competition Chinese business actors may face over time. The focus on intra-Chinese competition should not decrease the conceptual and substantial importance of the contextual complexity, fluidity, and institutional agency in host African countries.

9. For example, Tang (2019) and Xia (2019) show that limited market size in Tanzania’s plastic sector and Ethiopia’s construction material sectors have pushed investors to diversify investment to other subsectors.