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The Growing Presence of Chinese Investment in Africa: The Motivations and Implications

+. The Growing Presence of Chinese Investment in Africa: The Motivations and Implications. Danielle Daley & Hermila Yifter. +. 2. Introduction. As Chinese outward direct investment in African nations increase, we want to answer the following: What attracts Chinese investment?

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The Growing Presence of Chinese Investment in Africa: The Motivations and Implications

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  1. + The Growing Presence of Chinese Investment in Africa: The Motivations and Implications • Danielle Daley & Hermila Yifter

  2. + 2 Introduction • As Chinese outward direct investment in African nations increase, we want to answer the following: • What attracts Chinese investment? • Do polity and natural resources play a significant role in this attraction? • More importantly, how does Chinese investment affect economic growth?

  3. + 3 Road Map • We will discuss the background of China’s growing role as an economic world power, the world’s growing interest in Africa, and the Sino-African relationship. • We will then discuss our theory and hypothesis regarding how polity and natural resources influence China to invest and the implications on economic growth. • We will then discuss our methodology and explain our results. • Lastly, we will discuss the significance of our research and our future work.

  4. + 4 Background/Debate • To begin with, China’s growing economic leverage and political influence has been seen by many African countries as an alternative investment and trading partner in Africa’s growing presence in the world. • “strictly-business” style of cooperation vs. “conditions” • China's FDI in Africa is growing rapidly: it went from $20 million a year in the early 1990s, grew to $100 million in 2000, and reached up to $1 billion a year in 2006 • If China’s economy surpasses that of the United States’ economy, which its GDP growth rate suggests, then there is major possibility that it will “become a leading investor in Africa” (Klaver and Trebilcock, 169, 170).

  5. + • What factors does China consider when they decide to invest in specific African nations?

  6. + We hypothesize that polity plays no role in determining which African nation China invest in.

  7. + 7 Hypothesis: Polity • Sudan- Authoritarian Government ( Darfur Crisis) • Angola- Republic; Multi Presidential Regime • South Africa-Constitutional Parliamentary Republic • Algeria- Semi- Presidential Republic • Nigeria-Federal Republic

  8. + 8 Methodology: Polity • Not Statistically Significant

  9. + We hypothesize that natural resources “are at the core of China’s economic interests in Africa―or perhaps even tis overall interest in the continent” (Tull 465).

  10. + 10 Hypothesis: Natural Resources • “Africa’s resource rich countries are in a position to provide an ample percentage of China’s requirement.” (Tull 465)

  11. + 11 Natural Resources: Oil $360 Billion 13 Million 2020

  12. + 12 Natural Resources: Agriculture 7% 1,338,299,500 Mozambique Mawali

  13. + 13 Natural Resources: Precious Metals Copper & Cobalt Democratic Republic of Congo & Zambia South Africa & Algeria Iron Ore & Platinum

  14. + 14 Methodology: Natural Resources • Not Statistically Significant

  15. + We hypothesize that there is a positive correlation between increased Foreign Direct Investment (FDI) and GDP (per) capita.

  16. + 16 Hypothesis: Relationship between Chinese FDI & Economic Growth in Africa • “…aid and investment in infrastructure are bringing desperately needed capital to the continent” (Zafar 103). • Chinese government officials “have been cautious to stress that their foreign policy was not a sort of “charity” it is one based on “mutual benefit.” (Deborah and Adam Gaye).

  17. + 17 Hypothesis: Relationship between Chinese FDI & Economic Growth in Africa • ‘“the Chinese government is not only fulfilling its aid promises to Africa,” a Zambian policy-maker noted, “but it is also encouraging Chinese companies to invest in infrastructure development in Africa.”’(Isaac Idun-Arkhurst and James Laing 17). • Additionally, with Chinese increased investment in Africa, projects there were never completed, are being revived at a lower cost. • And more importantly, with China’s increased interest in the region, more and more nations are recognizing Africa’s potential in the future.

  18. + 18 Methodology: Relationship between Chinese Foreign Direct Investment & Economic Growth in Africa • Not Statistically Significant

  19. + 19 Conclusion • China is not influenced by the presence of natural resources or the type of government an African nation has. • What is the motive then? Are the lack of conditions and concern for regime healthy for the economic growth of an African nation? • Is China “ambulance-chasing”? • How will China’s role as the “alternate” influence future relationships among African nations and the West?

  20. + 20 Future Work • Limited Data- Relatively New Topic of Discussion • Exports and Imports • Explore other reasons why China is investing in Africa

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