Africa: How Chinese Investment Is Contributing to Economic Transformation Across Africa

At the micro level, we find evidence that Chinese firms create thousands of jobs in Africa, most of them being for African workers. We see that Chinese firms build capacity of their African employees through the training of different occupations and tasks. We also find that African firms often learn from Chinese companies they interact with, especially through buyer-supplier relations. Many Chinese companies collaborate with their African partners to develop their expertise and bring them up to target standards. We find evidence that trade with China can help African firms acquire technology and equipment to break into new fields.

At the macro level, we find that Chinese investment has contributed to substantial diversification of African economies. Chinese firms operating in manufacturing and construction have played a crucial role in promoting development of these sectors, but have also opened up opportunities in the upstream and downstream activities, such as agriculture and services, that feed into their production process. Moreover, by contributing to developing infrastructure, Chinese companies help remove bottlenecks that prevent investment from taking place.

This is not to say that everything is seamless in China-Africa economic engagement. Many issues still require attention. For example, Chinese (and other foreign) companies create many jobs for African workers, but these are usually at lower ranks in the company – African workers rarely access top managerial positions. Chinese and African firms do engage in partnerships, but longer-term joint ventures, which would have the most beneficial effects, are all too rare. Building infrastructure is costly and, if not contributing to economic development, it can become a burdensome responsibility rather than an opportunity. Finally, we have to remember that African economies are incredibly diverse. The impact we discuss in our study appears in different countries across Africa, in various forms and to different degrees, and this impact depends on specific political and economic contexts.

One thing we can be sure about is that, overall, Chinese economic engagement does support economic transformation across Africa. What African countries need at this time, especially as they recover from COVID-19, is more – not less – investment, not only from China but also from other countries. To make sure that both the host country and investors gain from it, investments must create jobs, open up new sectors of the economy and comply with social and environmental standards. If ‘ traditional ’ investors were willing to go beyond their focus on extractives and financial services , and expand into agriculture, manufacturing and construction, African economies could benefit substantially and for a sustained future.

Linda Calabrese is a research fellow in the International Economic Development Group at the Overseas Development Institute and the Evidence and Policy Group China-Africa lead.

Xiaoyang Tang is an a ssociate professor in the Department of International Relations at Tsinghua University and Deputy Director at the Carnegie-Tsinghua Center for Global Policy.

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