Where Are Chinese Investments in Africa Headed?

12 Lug

by Denise Leung and Lihuan Zhou


Last week, China’s Premier Li Keqiang toured Africa for the first time since he took office in 2013. Li visited Ethiopia, Nigeria, Angola, and Kenya, meeting with numerous heads of state to discuss the developing relationship between China and Africa. He capped off his visit with a pledge for an additional USD$12 billion in credit and funding to boost economic development on the continent.

It’s important to look at this announcement in the context of China’s briskly growing profile in the region. While investment from more developed countries has remained about the same in recent years, China’s flows to Africa have increased significantly, fuelling excitement about development and concern about the effects on the environment and communities. As China’s impact increases, it can take steps now to make sure it sets a new standard for responsible lending and investment in Africa.

China’s Investment in Africa Is Growing

A look at recent statistics shows how rapidly the investment landscape in Africa has changed. According to Li, between 2014 and 2020, trade between China and Africa will double, and Chinese outward foreign direct investment (OFDI) stock (the total accumulated value of assets) to the continent will quadruple to $100 billion. Already, Chinese OFDI flows (the amount of investment in a given period) to Africa increased from $317 million in 2004 to $2.52 billion in 2012, or by nearly 8 times. Though traditional OFDI sources like the United States and Europe still compromise the majority of investment in Africa, China’s contribution is steadily and quickly increasing.

By 2012, China’s OFDI stock globally passed $531.94 billion, of which $21.73 billion, or 4.1 percent, was in Africa. In 2012, direct investment flows into Africa’s non-financial sectors reached $3.61 billion, with a year-on-year increase of 24.7 percent, while investment flows into the financial sector, such as banking, was -$1.10 billion (representing a loss, or decrease in value of assets). This indicates that investment in sectors with more significant potential environmental and social impacts— non-financial sectors such as mining and manufacturing—are rising more swiftly than the overall figures might indicate.

China is investing in a variety of sectors in Africa, and reaping a significant return on investment. More than 2,000 Chinese companies have invested in Africa, including in natural resource extraction, finance, infrastructure, power generation, textiles, and home appliances. According to McKinsey, the rate of return on foreign investment is higher in Africa than in any other developing region.

More than half of China’s African OFDI stock was in South Africa, Zambia, Nigeria, Algeria, and Angola. South Africa alone received more than 20 percent of China’s OFDI in Africa ($4.8 billion) by 2012, while it only took 6.5 percent ($58.9 million) a decade ago. China’s OFDI total stock in these top five African destinations significantly increased in the past decade, from only $317.2 million in 2004 to $11.2 billion in 2012, or by 35.5 times.

10 luglio 2014

Una Risposta to “Where Are Chinese Investments in Africa Headed?”

  1. enzo 12 luglio 2014 a 22:30 #

    poi ci si lagna che i cinesi sono dappertutto! e l’Europa che fa o ha fatto?


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