Chinese Industrial Investments in Africa: Do Chinese Entrepreneurs use Cheap African Labor and Raw Material to Export on Favourable Terms to Europe and the USA? (Working Group “Industrial Development”)

The Working Group on Industrial Development operates in line with the last two General Conferences by focusing on the impact of the new presence of China in Africa and on the possibilities for African countries to industrialize. We would like to discuss the impact of Chinese industrial investments in Africa and the new objective of using cheap African labor and raw materials to export to Europe and the USA.

Chinese companies have invested in a broad range of sectors in Africa during the last decade. Important investments are often concentrated in China-Africa friendship zones, modelled on the Special Economic Zones (SEZ) in China, where China can influence the conditions for investment. SEZs have been promoted as a means of attracting Chinese investment in a limited number of countries in Africa. These have been selected for their interconnectedness with other countries in the region, or their location close to Europe and China (Ethiopia for example). The SEZ have been presented as replicating the spill over effect of SEZs on domestic and regional economies as found in China during the 1980s.

The question arises whether investments in SEZ are linked to export, or to local demand and under which investment regime they take place. There is usually an agreement to create such Special Economic Zones, and sometimes investments are part of an overall agreement to cooperate. The basis for Chinese investments needs to be studied to better understand issues concerning competition and cooperation with local producers, the labour and environmental impact of these investments and their effects on poverty reduction.

Chinese investments in Uganda and Zambia for example are a combination of state-owned enterprises at the national, provincial and municipal levels, as well as private sector investments. Programs targeting investment in developing countries can be motivated by a number of different factors. For private investors motivations include the expansion of production capacities in order to explore new markets, locally or abroad.

In light of the increasing tendency among donor countries to engage in clustering of economic activities it would be desirable to better understand the underlying motivations for investing in SEZ in Africa and the local impact of these investments. Research should also look at competition between Chinese and local companies and assess the linkages between Chinese and local enterprises in a given area.

China is not alone in stepping up its investments in Africa. Western and other emerging countries have also been increasing their investments on the continent. For that reason papers on experiences of other (emerging) economies would also be welcomed.


Meine Pieter van Dijk and Arne Sverrisson