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2011 China-Africa Investment Cooperation Symposium
Special> 2011 China-Africa Investment Cooperation Symposium
UPDATED: September 2, 2011
Booster for African Economy
China's investment is fueling African growth

Since 2000, driven by the Forum on China-Africa Cooperation, China's foreign direct investment (FDI) in Africa has been growing rapidly. In the face of the global financial crisis, which led to global FDI flows falling, China's investment in Africa has been on a steady, upbeat rise without any interruption. In 2009, China's direct investment in Africa reached $1.44 billion, of which non-financial direct investment soared by 55.4 percent from the previous year. Africa is among the fastest growing regions in terms of attracting China's investment. Some biased and misleading reports have impacted negatively on Sino-Africa trade, but facts proved that China's investment effectively makes up for the shortage of funds and optimizes the industrial structure in Africa.

Local resources

First, China's investment helps African countries convert local resources advantages into driving forces of social and economic development. Chinese enterprises actively involved in the development of African oil sector mainly include China National Petroleum Corp. (CNPC), China Petroleum & Chemical Corp. (Sinopec) and China National Offshore Oil Corp. (CNOOC). Their partners include both Africa's state-owned oil companies and other international oil companies. The investment by Chinese oil companies in this field has expanded the financial sources for African development, raised the value of such resources, and facilitated local infrastructure construction and economic development.

For instance, CNPC's oil and gas business in Sudan covers oil and gas exploration, storage and transportation, refining and sales of refined products, and assisted that country in establishment of a modern petroleum industry featuring integrated upstream and downstream operation, and employing the cutting-edge technologies, which helps transform the oil importing country Sudan into a crude oil, refined oil and petrochemical products exporter.

Industry structure

Second, China's investment further optimizes the industry structure of the African countries. Chinese companies have kept up their investment cooperation with Africa through such means as joint ventures, local procurement, and consigned processing trade, which has played an active role in filling in the vacancy of local industry, developing the production, and optimizing the industrial structure. A power plant in Ghana, a joint-investment of Shenzhen Energy Investment Co. Ltd. and the China-Africa Development (CAD) Fund, effectively alleviated the local power shortage. Sino-Ethiop Associate (Africa) Plc, the first medicinal capsules manufacturing plant in Ethiopia and even in the continent, not only have met the needs of Ethiopian pharmaceutical companies but also exported their drugs to some neighboring countries. The cotton-planting project in Malawi invested by the CAD created 300 jobs for local farmers, and significantly increased the cotton management and processing technology. The supporting facilities of cotton ginning, spinning and oil extraction have also effectively enhanced the local processing capacity.

Technological progress

Third, Chinese enterprises' increasing involvement on the continent effectively speed up the local technological progress. Chinese enterprises are the main driving forces for technology transfer through introducing advanced equipment and latest technology and process during the production and business while evaluating local situation. China Nonferrous Metal Mining (Group) Co. Ltd. (CNMC) brings advanced smelting technology to Zambia so as to increase its copper smelting capacity. A cement clinker automatic production line was introduced during the expansion project at the Twiga Cement Factory in Tanzania, which enabled the factory to become a pollution-free, low-energy consumption cement manufacturer with its production capacity ranking the first in the East African market. Besides, CNPC has trained a total of 16,000 Sudanese technicians and managerial talent for Sudan's oil industry. Apart from setting up two R&D centers and six training centers, till now Huawei Technologies, a hi-tech Chinese company, has trained over 12,000 telecom technicians for African countries.

Social responsibilities

Fourth, Chinese enterprises undertake social responsibilities on their own initiative in Africa. They actively participate in programs benefiting local people, help create employment and boost local economies. By the end of 2009, Chinese investment in Africa created over 300,000 jobs, of which 14,000 were provided for Nigerians in sectors including manufacturing, agriculture and mining. After the outbreak of the international financial crisis, in 2009 CNMC acquired Zambia-based Luanshya Copper Mines and Munali Nickel Mine on the brink of collapse, and helped facilitate the re-opening of the mines.

There are problems that have long plagued China's investment in Africa. For example, Chinese enterprises' overseas management capacity and localization process should be improved, and their cultural integration into local society also requires attention. With the development of Sino-Africa economic and trade relations, Chinese enterprises must take full account the diversity of the continent. While identifying the various economic characteristics of African countries, they will continue to make good use of advantages of their own so as to boost local economic development, deepen bilateral investment and cooperation, and strive toward mutually beneficial and win-win outcomes and common development.

The author is the research associate with China-Africa Research Center, Chinese Academy of International Trade and Economic Cooperation

(ChinAfrica VOL.3 February 2011)

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