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What data really says about China’s investment in Africa? Implications for Europe

What data really says about China’s investment in Africa? Implications for Europe. Alicia Garcia Herrero Senior Fellow, Bruegel Joint work with Jianwe XU Non-resident fellow Bruegel May 2018. Roadmap.

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What data really says about China’s investment in Africa? Implications for Europe

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  1. What data really says about China’s investment in Africa? ImplicationsforEurope Alicia Garcia Herrero Senior Fellow, Bruegel Joint workwithJianwe XU Non-residentfellow Bruegel May 2018

  2. Roadmap 1. We look into the universe of Chinese investment and finance and compare it with Europe • Direct investment • Mergers and Acquisitions • Greenfield investment • Project finance • Focus on sectoral composition an job creation

  3. Africa receives very little FDI even when compared with other emerging regions

  4. China has been increasing its FDI into Africa but much more its lending (especially into project finance)

  5. As investor, other countries, especially European are more important

  6. Even if China’s investment into Africa is small compared to its lending, still relevant as share of total investment in Africa, especially for M&A • Note: the total value of the M&As in Africa for 2016 - 2018 are sourced from The UNCTAD World Investment Report.

  7. The EU’s importance is true especially for greenfield. M&A is very volatile for all

  8. Sectoral distribution all points to the importance of resources or infra real estate

  9. This is true even for project finance

  10. In China’s greenfield investment creating new jobs in Africa? Not really many • For the past five years, 99,000 jobs were created. On average, one million dollar greenfield investment created only 1.78 jobs in Africa over the past five years, much smaller than the average job creation per million dollar for greenfield investment from China overseas (=2.24 for the past five years) • Most of the jobs were created in Ethiopia, followed by Nigeria and South Africa. The fewest jobs, given the amount of investment, have been created in Egypt.

  11. Greenfield investment in the traditional sector creates more jobs • While real estate sector accounts for half of China’s greenfield investment in Africa, it only contribute to 9% of the jobs created. Most of the jobs are still linked to the traditional sectors such as textile and metals. • Excluding the real estate sector, one million dollar investment create 2.85 jobs in Africa(in line with job creation by China elsewhere, excluding real estate)

  12. All in all • China has become a large investors in Africa but Europe isstill the largest. This istrueboth for M&A and greenfieldinvestment • Greenfield investmentis more relevant for China (as well as EU and US). • But project finance (lending) is the lion share of China’sfinancialinvolvement in Africa • The sectoral composition of China’sinvestmentisveryconcentrated in resources and infra/real estate. This istrueeven for greenfieldbut also for project finance. • It should not besurprisingthenthat not many jobs are beingcreated out of China’sinvestment in Africa. • Movingforward, China’sinvolving in productive/job-creatingsectorswouldclearlybewelcome for a continent with the mostrapidlygrowing population.

  13. Thank you!

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