Chinese investment in Africa
Accounts of Chinese investment in Africa tend to be polarized. On the one hand, the Western media frequently portrays the Chinese as ‘resource-grabbers’ hungry for resources but giving no consideration to human right or environmental standards. On the other hand, advocates of Chinese investment see it as a boon of industrialization in Africa.
In reality, the new Chinese presence offers a mixed picture, demonstrating the importance of local conditions as a determinant of the impact of FDI. Research by the Johns Hopkins SAIS China-Africa Center shows that Chinese investment in Africa is relatively diversified, with significant shares in construction, manufacturing and agriculture, as well as mining and oil extraction.
However, even the manufacturing investment is not necessarily transformative. In countries such as Ghana, Madagascar and Nigeria, most investment just seeks to take advantage of uncompetitive markets, and there is little transfer of capabilities to locals. Backward and forward linkages also fail to materialize. The evidence suggests that this is due to the dearth of local capabilities and the low educational levels of most local workers, which in combination lead to low ‘absorptive capacity’, together with cultural and linguistic differences.
Ethiopia is the only African economy where efficiency-seeking Chinese investment has taken hold. Chinese firms have invested in Ethiopia with a view to exporting, principally in the textiles, garments, and leather and leather products sectors, but also in other industries such as automobiles and bone china. Key to Ethiopia’s success in attracting efficiency-seeking investment is cheap labour, improving infrastructure, cheap electricity, political and economic stability, and the government’s commitment to an FDI-led industrialization strategy.
 For a review of this literature, see Dercon, Lippolis and Peel (2018) – “What Should be the Role of FDI in African Development Strategies?”, Background Paper for Programme on Rethinking African Paths to Industrial Development. Blavatnik School of Government and Centre for the Study of African Economies, University of Oxford
 World Bank (2012) – Chinese FDI in Ethiopia: A World Bank Survey, Washington, DC: World Bank