Out of China, into Africa: Tracking the ways of private Chinese investment

Out of China, into Africa: Tracking the ways of private Chinese investment

By Katherine Kidder

Best Defense office of Communist Chinese capitalist studies

China’s growing role in Africa over the past decade-or-so has raised some eyebrows. Questions surrounding China’s motives for investment abound: Are they purchasing U.N. votes? Simply extracting natural resources? Expanding the rhetoric of revolution, as it did in the 1960s?

Yet most of these questions presuppose state-led investment in Africa. Xiaofang Shen, a visiting scholar at the Johns Hopkins University SAIS China Studies Program and former investment climate specialist at the World Bank, said in a recent talk at SAIS that the more notable increase over the past decade has been the rise in Chinese private-sector investment on the continent.

Pre-2001, Chinese private investment in Africa was negligible; by the end of 2011, there were 879 private companies and OFDI projects registered with the Chinese Ministry of Commerce. Contrary to the image of state-led extraction, Chinese entrepreneurs focus their energies mainly on manufacturing and service industries. They increasingly are forging relationships with local management, and aware of the value of learning local customs, religions, and languages.

So, what does this mean for the West? Interestingly enough, Chinese private investment in Africa may be a hat tip to Western models of development and governance: Xiaofang Shen’s study finds that going overseas to do business was much easier for up-and-coming Chinese entrepreneurs than starting a business in inland China.

Most of China’s industry grew up in the 1980s and 1990s, with little-to-no regulation. By contrast, many African laws (at least on paper) were copied and/or imposed by the West through such mechanisms as Structural Adjustment Programs (SAPs). As a result, Chinese entrepreneurs find African processes more conducive to business, from obtaining licenses and navigating the bureaucratic process to trusting that the food they eat for lunch is safe. African governments face higher incentives to improve infrastructure and devote resources to political stability and regulatory efficiency in order to attract capital — precisely the same goals reflected in SAPs.