Institute of Development Studies

Understanding Chinese Investment and its impacts in East Africa

4 June 2010

Dr Jing Gu is to lead on a new project 'Understanding Chinese Investment and its impacts in East Africa.' The project team will collate data and compile case studies from Kenya and Ethiopia and includes consultants from China and Africa - from Addis Ababa University, University of Nairobi and China-Africa Business Council.

'This new project gives us the chance to explore the potential contributions of private and state owned Chinese investments to the domestic economies,' noted Dr Gu. 'We intend to do this by focusing explicitly on domestic linkages and linkage effects.'

This project continues from previous research led by Jing Gu on the implications of Chinese investment in Ghana, Nigeria and Madagascar. Dr Gu explained that expanding the research to the East Africa countries will substantiate the work already done.

Dr Gu predicts that 'Chinese investment in Africa will continue to grow, in turn presenting new challenges for policymakers in Africa and China.' The longer-term goal is to build capacity and networks to ensure that China addresses the implications of how it is changing Africa's development landscape and to consider how Africa can continue to benefit from this relationship.

Chinese Entrepreneurs

'Previous research shows that Chinese private sector investment in Africa is not driven by Chinese government policy and Chinese political interests, they are more focused on new market opportunities,' continues Dr Gu. 'Chinese enterprises operating in Africa are not overly concerned about the investment climate issues but they do identify serious day-to-day issues relating to infrastructure.' This helps to explain why Chinese entrepreneurs often invest in climates that many in the West would avoid.

Africa has high expectations about the impact of China's investment for its industrial development, however Gu highlights that her initial findings suggest that Chinese firms source few inputs locally.

New areas of research

Considering these high expectations from Africa, Gu explained that the team intend to expand their research and look into the question 'what do African politicians and NGOs expect to get from China?'

Furthermore, gender related issues in this area of research have so far been overlooked. Gu hopes to widen the net, exploring 'how gender related issues are understood and addressed among Chinese and African policy makers and Civil Society Organisations and Chinese investors?'

Methods

The researchers will employ a variety of methods for the research using qualitative and in-depth techniques. 'Arranging and achieving interviews with Chinese firms in Africa is extremely challenging,' states Dr Gu, 'yet the project depends on in-depth interview work with Chinese investors in Ethiopia and Kenya.' While this is a challenge for the team, it is essential to delve further into the tendencies of Chinese investors and how differing national investment climate can impact their decision to invest.

By collecting and collating data from the Ministry of Commerce in China, Chinese Chambers of Commerce and Ethiopian and Kenyan Investment Promoting Agencies, the team hopes the results will provide further detail about the level and destination of Chinese FDI.

This project is funded by the Department of International Development China. By improving awareness of China's investment intention in Africa, the team hopes to develop and support the growing relationship between China and Africa.

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